Workers who haven’t saved enough to retire comfortably have three choices: work longer, save more, or reduce your standard of living in retirement. When workers on the verge of retirement who have lost money in the stock market were given these three choices, most said they would delay retirement and continue to save rather than cut costs, according to a recent Center for Retirement Research at Boston College study.
[See 10 Key Retirement Ages to Plan For.]
These three choices were posed to workers between ages 45 and 59 who had accumulated at least $50,000 in retirement savings before the downturn, but then lost 10 percent or more of their retirement assets. Over half (51 percent) of the survey respondents said they would save more and work longer to recoup their losses. Just over a quarter (28 percent) of the baby boomers said they will only work longer and 16 percent plan to exclusively ramp up their retirement savings. Only 5 percent of the survey respondents said they would learn to get by with less money in retirement.
Some costs can be eliminated upon retirement, including commuting costs and work clothes. Paying off your mortgage can also give a big boost to your retirement prospects. But other costs may grow in retirement, such as out-of-pocket medical expenses and travel costs.
[See The Baby Boomers Turn 65.]
Previous research from Boston College found that many households actually increase their spending on the verge of retirement, especially after their children leave home. Per-person spending increases by an average of 51 percent in the years after the children move out, according to the analysis of 5,000 households between 2001 and 2007.
[See 11 Retirement Resolutions for 2011.]
Most baby boomers aren’t planning to cut costs in retirement. Only 15 percent of baby boomers turning 65 in 2011 plan to downsize to a smaller home in retirement, according to a recent AARP survey of 801 adults born in 1946. A few baby boomers even plan to move into a bigger home (3 percent) or purchase a second home (4 percent) in the coming years. To finance their desired lifestyle, over half (56 percent) of the employed boomers surveyed say they plan to continue to work until their late 60s or later.
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