Toiling away in the cubicle day after day, it can sometimes seem as if work will last forever. It's almost as if the very concept of retirement is just meant to taunt us by seeming so out of reach.
But believe it or not, that day will arrive. For baby boomers, it looks like it might come a little bit later than it did for the generation born before WWII.
A new paper released by the Center for Retirement Research at Boston College looks at the retirement expectations held by boomers and compares them with the pre-war generation. Their conclusion: "The recent uptick in average retirement ages appears to be the leading edge of a new long-term trend." In other words, get comfortable in that cubicle, because you'll be staying just a little bit longer.
The chief reasons are changes in employee benefits that remove the incentives for boomers to retire sooner rather than later. The paper examined survey data, comparing the responses of boomers and those of the pre-war generation when asked whether they expected to work full-time after the age of 62 and after the age of 65.
The study found that the No. 1 factor causing boomers to postpone their retirement concerned reductions in retiree health insurance offered by employers. A new accounting requirement implemented in the early 1990s started this trend, but the researchers see it continuing with the rising cost of health care. The few employers who don't end their retiree health benefits will probably pass more or all of the cost on to their former workers.
A second large factor is the decline in traditional pension plans. Workers with pensions stay at their jobs until they earn their maximum pension benefits and then retire, quickly calculating it's not in their financial interest to stay.
But fewer and fewer workers have traditional pensions. They have defined contribution plans, like 401(k)s, which they can keep contributing to as long as they remain at work. It seems workers who have defined contribution plans stay at their jobs an average of two years longer than those with traditional pensions.
Combine these two factors with the fact that boomers tend to be more educated and less likely to work manual jobs, and you've got a recipe for more work and less retirement.
Is it bad to put off retirement? It can be in your financial interest to work a few extra years. It means accumulating larger Social Security benefits, to a point, and it can give soon-to-be retirees more time to build their savings reserves and plan the transition away from work. It also reduces the number of years that your retirement funds must pay your living expenses. Of course, it also means less time you have to finally use entirely as you please.
The trends underlying this phenomenon serve as fair warning to us all, because neither shows any sign of abating. The answer is not to resign yourself to spending the rest of your life behind four half-sized, fabric-covered, cartoon-laden cubicle walls. The answer is to start now and build your own retirement means by learning everything you can about how to prepare for that distant day when you leave the cubicle forever. Take control and start now.
Even if you think you're getting a late start, dive in immediately. You can't travel back in time to fix all your financial (or other) mistakes, so seize the day. Examine the size of your retirement contributions and figure out how and where to add more. Starting immediately means you'll have more of that magical financial ingredient known as time -- time to watch your savings grow and compound.
Then think about where it's best to invest your hard-earned retirement cash. If you're a long way from retirement, you might be looking for a promising small-cap company to invest in. Heck, I'll even start you with two ideas: sports apparel maker Volcom
If you're looking for something broader, go as far as a total stock market or S&P 500 index fund -- Vanguard Total Stock Market (VTSMX), with a 0.19% expense ratio, is a good place to start your search. It's invested in more than 3,760 companies but has predictably hefty exposure to the biggest companies, such as PepsiCo
Finally, consider taking our Rule Your Retirement newsletter for a free spin. It will help you calculate the size of the nest egg you should be amassing. Then start dreaming about the day that you'll finally wave goodbye to the working world.