Less income, longer lives. That's one way of summing up the retirement conundrum facing the U.S.
A new survey from HSBC sheds light on how Americans are dealing with this retirement stress. The news -- here’s a shocker -- is not all bad.
Yes, a 13-year-old today has a 50/50 chance of living to 101, according to some demographers. As Bloomberg.com's new special report on the Future of Retirement explores, that sort of extreme longevity would overturn much of the standard retirement advice.
And, yes, Americans need to save more for retirement at a time they have less ability to do so. As the Census Bureau revealed this week, 2012's median household income of $51,017 barely budged from the previous year. After adjusting for inflation, we're earning $5,063 less than we did in 1999.
Yet here's one shred of optimism salvaged from HSBC's survey of more than 1,000 Americans: Despite shrinking paychecks, disappearing pensions, volatile markets and falling home values, 55 percent of retirees say they were adequately prepared for retirement. That does leave 44 percent not fully prepared, but most of them think they can make up lost ground. Less than one-fifth of retirees say making up their shortfall is hopeless. (For a glimpse of how retirees around the world are set for retirement, see this infographic.)
Not only that, 56 percent of retirees expect to leave an inheritance. Authors of the HSBC report warn that retirees might not be as well-prepared as they think, nor as able to be as generous as they had planned, after the costs of health care and long-term care take their toll. Still, Boston College's Center on Wealth and Philanthropy estimates that north of $41 trillion could transfer to charities and younger generations by 2055.
HSBC’s survey suggests that those lucky enough to get a windfall could be smarter about how to deploy it. Among the working-age recipients of inheritances surveyed, 47 percent said it didn’t make preparing for retirement easier. One theory: People who get inheritances come from well-off families, and often they spend the extra cash to keep up with lifestyles to which they've become accustomed.
For those who can't expect hand-me-down wealth, there's another retirement strategy, one that's mentioned more and more these days: working longer. "Most people just don't have the financial resources to stop working full-time in their 60s," says actuary and consultant Steve Vernon, a research scholar at the Stanford Center on Longevity.
The idea is to "semi-retire" -- working part-time and making just enough cash to keep from touching your nest egg for a few years or tapping Social Security before you’d get the maximum benefit.
Delaying full-scale retirement can pay off enormously when you're worried about outliving your money. Some in their mid-60s say they're quite happy with part-time work. One man is teaching what he learned in his careers. One woman found retirement boring and entered into a new career in her 60s.
According to HSBC, the younger you are, the more you take the prospect of such work in stride. Workers aged 45 to 54 are a third less likely to be planning to "semi-retire" than their younger co-workers. Among those between the ages of 25 and 34, 43 percent plan to semi-retire. Those who plan to work for a while aren't gloomy about the prospect: More than half say they're doing so because they "would like to keep active and keep my brain alert."
Plotting longer careers won't solve all or even most of our planning problems. If the strategy is to use part-time work as a bridge to retirement, employers will need to play along and provide those opportunities. Just 22 percent of current retirees say they were given the option to scale back work before they retired.