May 15, 2006 

Four out of 10 retired workers left their jobs sooner than they had planned, usually because of health problems or the loss of employment, according to the report by McKinsey & Co., which was based on a national survey of 3,086 people.
The survey also found that 45% of people who are currently employed planned to keep working past age 65. But among the retirees polled, only 13% said they had done so.

The findings raise fresh concerns about Americans' ability to afford a comfortable retirement. With more companies abandoning or freezing their pensions, many people say they plan to work longer to build up their nest eggs.

The reality "is quite sobering," said David Hunt, a senior partner at McKinsey. "Our research clearly shows that many people — and more than a few public policymakers — who are betting on simply working longer to compensate for a lack of current savings are setting themselves up for a rude awakening and a significantly poorer standard of living in retirement than they had expected."

Ask Rolf Marsh. The computer programmer was 60 when he got a surprise tap on the shoulder from IBM Corp.

Marsh had planned to work five more years to qualify for higher pension payments, then retire to enjoy a new phase of life, including visits to friends in Britain and other travels with his wife.

"I guess I was blind to the handwriting on the wall," said Marsh, who lives near Spokane, Wash. "I didn't think it was going to happen."

Now 63, Marsh has been frustrated in his attempts to prolong his career. "I looked for work when I first got out — basically, there's very little up here in Spokane — and the jobs I applied for I didn't get. My feeling was it was because of age."

Marsh estimates that his pension is less than half what it would have been had he remained longer in the job. To boost his income, he signed up for Social Security earlier than planned, further scaling down his retirement pay. Eventually, he and his wife took in an elderly boarder for whom his wife cares to make ends meet. "It's been difficult," he said.

The McKinsey survey included retirees, for which it had a 3.2-percentage-point margin of error, and people who are not retired, for which the margin of error was 2.4 percentage points. It was conducted in March and April among people 40 to 75 years old.

Among those who retired earlier than they expected, 47% cited health reasons and 44% pointed to job loss. The remaining 9% said they had to care for an ailing family member.

Workers with less than $50,000 in assets were most likely to be forced out of their careers because of health problems. Those who had more than $1 million pointed to job loss as the greatest reason for retiring.

For many, there is no way to see a forced retirement coming.

"They get laid off. They have health issues that prevent them from working," said Sandra Timmerman, director of the MetLife Mature Market Institute in Westport, Conn. "The company merges. A spouse gets sick. A parent gets sick. The job becomes more pressured." 

At the same time, Timmerman said, workers face the need to maintain their careers to set aside money for retirement. "I think we're seeing the realization on the part of people that they ought to extend their work life longer than in the past," she said.

It is a realization brought on by the changing landscape for retirement security. Many employers no longer provide traditional pensions with guaranteed monthly payments. Instead, they offer 401(k) savings plans, and it's up to the workers to salt away enough money to last them in old age.

Just last week, Fidelity Investments reported that 83% of workers believed they were not saving enough for retirement, up from 78% last year. The mutual fund company also said 31% planned to postpone retirement to keep getting health benefits.

The oldest members of the vast baby boom generation turned 60 in January. Members of this generation often cite the need to boost their retirement savings as a reason to keep working, McKinsey's Hunt said.

"Many of the boomers we interviewed, especially those in their early 50s, believe that they will be able to afford retirement by continuing to work — and often put off the sacrifice of saving today with this in mind," he added.

John Rother, executive officer for policy and strategy at AARP, the seniors' advocacy group, said the findings underscored the fact that many who expect to stay on the job will have an uphill battle.

"We know that people who lose jobs in their 50s and early 60s have a very difficult time finding new employment," Rother said.

For much of the 20th century, the trend was toward earlier retirement as America became more prosperous and Social Security kept the elderly solvent. In recent years, however, the retirement age has edged upward, said Joseph F. Quinn, a Boston College dean and expert on retirement trends.

Better health, laws against age discrimination and a phaseout of Social Security penalties for working past retirement age have enabled people to stay employed longer, he said.

McKinsey's data do not mean that the trend toward a later retirement age is changing, experts say. But the facts counsel caution to those who discount the challenges of working into their late 60s or beyond, and they suggest that many who assume they will work late in life may be mistaken.

"This kind of information," Rother said, "is clearly not what the boomers expect."