Three-quarters (76 percent) of older workers (aged 50 to 64) cited the decline in the value of their 401(k) accounts as the most important reason why they are planning to postpone their retirement, followed by the high cost of health care (63 percent) and higher prices for basic necessities (62 percent). Of this group, more than half (54 percent) also indicated that they will work for at least three years longer than previously expected. The Watson Wyatt survey was conducted in February 2009 and includes responses from more than 2,200 full-time workers.
"The economic crisis has affected many workers' retirement plans and nest eggs, but those nearest to retirement have been especially hard hit," said David Speier, senior retirement consultant at Watson Wyatt. "Older workers do not have the time to offset declining retirement account values, either by recouping their investment losses or significantly increasing their savings rate. For many, the only choice is to delay retirement."
The survey also found that workers who participate in a defined contribution (DC)-only plan are more likely to delay retirement than those with a defined benefit (DB) plan. Only approximately a quarter (26 percent) of those with DC plans, including 401(k)s, plan to retire before the age of 65, compared with 41 percent of those with DB plans.
"Retirement programs are meant to assist with an orderly transition of a company's workforce, but with older workers staying on the job longer, employers will be faced with challenges such as inflated benefit costs and hiring issues," said Lisa Canafax, senior retirement consultant at Watson Wyatt. "DB plans provide predictable benefits and offer workers incentives to retire at a certain age, whereas DC plans could encourage workers to work longer just when companies are trying to reduce the size of their workforce. The time is ripe for employers to take a close look at their existing retirement program to make sure it meets the needs of both workers and employers."
