Denial is Not a Retirement Plan

Planning to keep working indefinitely is not a sound retirement strategy.

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It’s no secret that Americans are financially unprepared for retirement. It seems that every day a new study is released illustrating the sorry state of our national retirement readiness. The Transamerica Center for Retirement Studies just released another one. It appears that Americans are listening to the constant warnings and have devised a new retirement plan: working. According to the Transamerica study, 54 percent of survey respondents expect to continue working past the age of 65. And 39 percent of current employees plan to work past the age of 70 or not retire at all. Planning not to retire is not a retirement plan.

[See Why Pessimism is Good For Your Retirement.]

Unfortunately, this strategy is not just limited to those nearing retirement age. Half of the respondents in the survey were younger than 45. Over 70 percent of this age group agreed that they could foresee working until they reach 65 and still not have enough saved for retirement. This fear doesn’t seem to have sparked action among the youngest workers though. The majority (55 percent) of members of Generation Y, born between 1983 and 1991, have not begun to save at all for retirement, according to a Scottrade retirement survey.

A successful retirement plan requires a solid savings strategy and a diversified investment approach. Many people have learned the hard way that depending only on the equity in your home is not a dependable retirement approach. Investing all your money in the stock market or in cash is also not a diversified strategy. Relying solely on the income from a job to fund your golden years is just as dangerous. But according to the Transamerica study, only 13 percent of those who plan to work past age 70 have a backup plan in the event that they are unable to work as long as they would like to.

[See The Workers Most Likely to Delay Retirement.]

Some 13.7 million Americans who would like to be working are not able to find jobs right now. And the majority of these unemployed workers are not facing the additional burden of possible age discrimination. In addition to the fact that finding or keeping a job may be difficult in retirement, for many Americans, working into our 70’s may simply not be physically possible.

It’s understandable that the recession and resulting stock market turmoil have worked together to increase anxiety about retirement. Some retirement savers are shying away from investing in the stock market as a result. Some individuals may have stopped contributing to retirement accounts all together for fear of losing more money. Unfortunately, there’s no such thing as a risk-free retirement plan, even if that retirement plan includes not retiring at all.

[See How to Recession Proof Your Retirement Savings.]

There’s nothing wrong with working as long as you want to or with generating a little extra retirement income by continuing to work past traditional retirement age. But relying on a paycheck to fund retirement is simply an exercise in denial, not a viable plan to carry you through your golden years.

Sydney Lagier is a former certified public accountant. Since retiring in 2008 at the age of 44, she has been writing about the transition from productive member of society to gal of leisure at her blog, Retirement: A Full-Time Job.