Is Retirement Really a Fading Goal?

We say we will spend less and work longer but what will we actually do when the economy recovers?

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If you like getting hit with a hammer, then keep reading the dour retirement surveys that lots of investment firms and think tanks have been conducting. They all pretty much say the same thing: This recession is a game-changer, and has put retirement out of reach for millions of Americans. If you want to track a related thematic reprise, it's that the horde of baby boomers nearing retirement has decided to eschew the materialistic life in favor of more meaningful pursuits.

[See Is This High Tide for Senior Finances?] These views are reinforced by the continuing recession and weakness in housing markets. If the economy is beginning to recover, it's doing so without creating jobs. And consumers are squeezing the dollars they still have, leading to increases in the personal savings rate and declines in outstanding consumer credit. The retail shopper has such a weak pulse that analysts regularly put a mirror under her nose to see if she's still breathing. Government deficits are soaring even as safety net programs gasp for resources. And, of course, did I mention the jobless recovery? It all adds up to a bleak portrait of our future.

Or does it?

Since 1991, the Employee Benefit Research Institute (EBRI) has published an annual consumer confidence survey that polls people on a broad range of issues about retirement, their investments, and their view of the future. Not surprisingly, the conventional wisdom on this year's survey fits comfortably in the pack of gloomy outlooks. Released in April, it found that the percentage of Americans who are very confident about funding their retirement had fallen to 13 percent—the lowest since the question was first asked in 1993—down from 16 percent in 2008 and a record-high 27 percent in 2007.

Still, the age at which people expect to retire has changed little, and there continues to be a telling gap between when people say they will retire and when they actually do stop working. Only 49 percent of the people surveyed this year said they were planning to retire at the age of 65 or younger, but 84 percent of the retirees surveyed actually had retired by the time they were 65. Certainly, unforeseen problems —illness and job loss top that list—account for a lot of this gap. But it's also likely that people want to retire as soon as they can, and they will find ways to do so in any type of economy.

The EBRI survey is conduced by Mathew Greenwald & Associates, a Washington polling and communications firm that does a lot of work in the retirement space. Company founder and CEO Mathew Greenwald says today's attitudes are certainly real and accurate, but he thinks they will change a lot as the economy improves.

"The real issue is, 'How big a deal is this downturn?'" he says. "The Great Depression marked people for 50 years," he notes. "My father still doesn't invest in equities." As for the long-term impact of this downturn? "Mild," Greenwald says, based on the survey and focus-group work he's done, and on many years spent trying to take the consumer's pulse.

"I think people will absorb this," he says of the current recession. "Certainly, some people were greatly affected and traumatized. But most people have not been broadly or deeply affected. So when the market comes back, you may see a bit of a shift in [investors] asset allocation, but not too much change beyond that."

[See A New Role for Stocks in Retirement Funds?]

"We asked people [in the recent survey] if they changed the date at which they expect to retire, and 28 percent said yes," Greenwald says. "But we also ask them every year what date they plan to retire, and this date changed hardly at all."

As for baby boomers ascending en masse to embrace a monastic mountaintop existence, he laughs. Baby boomers are not only in a class by themselves, they are their own asset class, and have leveraged their lives for 40 years. Greenwald notes that the 1960s featured widespread mistrust and rejection of materialistic lifestyles, but those views changed with a vengeance once baby boomers entered the work force.

"I think the baby boomers became the most materialistic generation ever," he says, "and I don't think that's changed a great deal. I've even interviewed the parents of baby boomers, and they say they're frugal but their kids are not. . . . I don't see any rejection of materialism."

What Greenwald and virtually every other retirement researcher do see is a debt-laden generation that has saved way too little for retirement. The recession has made nest eggs even smaller, although 401(k) balances have recovered nicely this year, particularly for people who are still contributing new money to the plans. And despite higher savings rates, there is no compelling evidence that today's angst about the future will translate into long-term behavioral changes, or into a new commitment to plan for retirement needs.

"It's a massive problem," Greenwald says. Based on savings and investment patterns, he and many other forecasters see a future that could include millions of destitute baby boomers.

[See Don't Ignore Likelihood of Long-Term Care.]