When Should I Retire?

That is the big question, isn't it? It is such an individual decision, complicated by many factors.  Dear Abby got the nuances of the issue in her September 4th column, where she was asked by a reader why older workers keep working to the detriment of younger workers. Of course, Dear Abby (or her daughter to be more accurate) understands when an answer isn't clear cut. In fact the question of if or when to retire is one that draws the classic law school answer: "it depends."

As we posted on this subject previously, the New York Times ran a special on retirement and there are a number of calculators and other information available to help someone decide the if and when of retirement.

As Dear Abby noted in her answer to the young correspondent,

Many older people work longer these days not to live lavish lifestyles, but to survive.

Unless you have a crystal ball that enables you to see what seniors have in the bank, it’s presumptuous to say someone should retire. Many seniors are unprepared financially to do so through no fault of their own. And while you may think now that you’ll take a reduction in pay when your sons are out of college, it remains to be seen if that will be feasible for you when the time comes.

 AARP featured the Dear Abby column in a September 9, 2013 blog post by Carole Fleck. The post concisely offers up a discussion of  older workers' situations, cites some good studies, including one about the impact on younger workers' job opportunities when older workers remain employed. The post also suggests that the financial picture of many of those older workers isn't that rosy.

A recent chartbook by Monique Morrissey and Natalie Sabadish was published by the Economic Policy Institute (EPI): Retirement Inequality Chartbook: How the 401(k) revolution created a few big winners and many losers. The chartbook examines the impact from the shift from defined benefit to defined contribution pensions to augment Social Security (remember that three-legged stool?)  The overview of the report notes that a large number of elders in the U.S. are relying on 401(k)s instead of defined benefit pensions of a few decades back and goes on to explain that this report weighs the effect of moving from defined benefits to defined contributions "by examining disparities in retirement preparedness and outcomes by income, race and ethnicity, education, gender, and marital status."  The overview concludes on page 7 with an "uh-oh" assessment:

The trends exhibited in these figures paint a picture of increasingly inadequate savings and retirement income for successive cohorts and growing disparities by income, race, ethnicity, education, and marital status. Even women, who by some measures appear to be narrowing gaps with men (in large part because men are faring worse than they did before) are ill-served by an inefficient retirement system that shifts risk onto workers, including the risk of outliving one’s retirement savings. The existence of retirement system that does not work for most workers underscores the importance of preserving and strengthening Social Security, defending defined-benefit pensions for workers who have them, and seeking solutions for those who do not."

A pdf of the chartbook is available for download here. (And there is a nifty interactive feature available, too--see page 7). While we're at it, take a look at Ross Eisenbrey's "snapshot" from August 14, 2013, Social Security Is the Only Reason Most Americans Can Afford to Retire, noting that despite the use of 401(k)s, Social Security is the go-to program for retirement savings.

While we are on the subject, Employee Benefit Research Institute (EBRI) publishes Fast Facts.  The September 17th, 2013 Fast Facts was on whether an employee could delay retirement. Referring their Retirement Confidence Survey (RCS), the Fast Fact  notes that the RCS continually shows that a significant number of workers retire sooner than they intended, with most doing so for undesirable reasons.

So back to the if and when questions about retiring:  the when question may never be answered if the answer to the "if I can  afford to retire" question is no.