10 Reasons Baby Boomers are Delaying Retirement

Financial insecurity is causing many older workers to hold on to their jobs.

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Many baby boomers are reconsidering when they will be financially able to retire. Nearly half (46 percent) of workers age 50 and older now plan to retire later than they did two years ago, according to a Towers Watson survey of 3,099 full-time employees in the private sector. And most baby boomers don’t think simply delaying retirement a year or two will be enough to significantly improve their retirement finances. Many of the survey respondents plan to work between 3 and 5 years longer (28 percent) and even over 5 years (31 percent) later than they initially planned to. Here are the reasons older employees say they are now aiming to work longer.

Health care coverage. Most baby boomers plan to delay retirement to keep the health care coverage provided by their employer (69 percent). It can be especially pricey for people over 50 to buy individual insurance policies or pay for COBRA continuation coverage through their former employer. Over two-thirds of older workers plan to time their retirement around Medicare eligibility at age 65.

[See 10 Costs That Could Increase in Retirement.]

Health care costs. Many people over age 50 are also worried about high health care costs in general (62 percent). Your use of health care and your out-of-pocket expenses are both likely to increase as you age.

401(k) declines. Stock market dips can be devastating to those on the verge of retirement. Some 61 percent of workers over 50 are delaying retirement to give their 401(k) more time to recover. Many baby boomers have also increased their monthly savings (38 percent) and adopted a less risky investment strategy (27 percent) over the past year. Yet, over half (55 percent) of baby boomers think they need to save more than they do now to set up a comfortable retirement income.

Cost-of-living increases. Baby boomers fear that the cost of basic necessities will continue to climb in the future (58 percent). To protect themselves, many workers over 50 are paying off debt (67 percent) and cutting back on daily spending (53 percent). Just over three quarters of older workers also plan to spend less in retirement than they do now.

The ability to work. In order to delay retirement you have to enjoy good enough health to keep going to work each day. A third of baby boomers say they want to work as long as they are physically able to.

[See Most Millionaires Don’t Plan to Retire.]

Pension cuts. Many employers have frozen their traditional pension plans. This means that workers will get to keep the pension benefits they have already earned, but their future earnings will not be factored in. Not having your final, and likely highest paid, years factored into your pension can result in a smaller payout. Some 29 percent of private-sector workers say they are delaying retirement to cope with a smaller than expected pension payout.

Lower pay increases. An easy way to save for retirement is to redirect part of each raise you get into a retirement savings account. However, annual raises have been reduced and eliminated at some financially struggling companies. Some older workers (20 percent) are delaying retirement because they expect to get lower pay increases in the future.

Home value declines. Selling your home and moving into a smaller abode in a less expensive part of the country can be a quick way to boost your nest egg. Some people also tap their home equity to help finance retirement using a reverse mortgage. When home values fall, both of these retirement strategies are worth less. Some 21 percent of workers over 50 say they have decided to delay retirement because their home declined in value.

[See 6 Secrets to Staying Employed After Age 50.]

Supporting family members. Sometimes people delay retirement to help support other family members (19 percent). Timing retirement with your spouse can also be important. Some 5 percent of baby boomers are delaying retirement because their husband or wife also plans to work longer.

Longer life expectancy. As life expectancies continue to increase, many people need to save enough to finance several decades of retirement. About 8 percent of workers over 50 now think they will live longer than they initially expected to when they were younger.