The Great Retirement Rethink

For Americans planning for retirement, the past decade has been dreadful. Standard & Poor’s 500-stock index has lost an annualized 0.4 percent since 2000, compared with its average annual gain of 9.7 percent since 1926, according to data compiled by Bloomberg and Morningstar’s Ibbotson Associates. With bond yields near record lows, investors are finding that their fixed-income holdings are throwing off much less cash. No wonder only 23 percent of working Americans say they are very confident they will have enough money to cover basic living expenses in retirement, compared with 42 percent last year, according to a survey released in October by Sun Life Financial.

There’s no easy way to make up the lost ground. Indeed, the best way to rescue your retirement may be to delay it, according to Christine Fahlund, senior financial planner at T. Rowe Price. For those who are able to keep working, the benefits are clear: You will be adding to your savings, rather than drawing on them, and you may benefit from market gains as well. Moreover, the money you accumulate will need to support you for fewer years. Here’s an example: A 55-year-old is earning $100,000, saving 15 percent of that for retirement, and has accumulated a $450,000 nest egg. A five-year delay in retirement to age 70 could add about $10,000 a year to that person’s income in retirement, according to T. Rowe Price’s calculations. It’s an option that more people are seeing as necessary. In the Sun Life survey, 61 percent of working Americans said they will need to work at least three years longer than they’d planned, compared with 43 percent in 2008.