Even the affluent are delaying retirement

As baby boomers continue to reel from the recession, even the affluent admit that saving for retirement is a struggle.

By Carl O'Donnell

Mar 26, 2014 @ 12:01 am (Updated 2:53 pm) EST

As baby boomers continue to reel from the recession, even the affluent admit that saving for retirement is a struggle.

Only 28% of affluent investors are highly confident that they can generate enough income in retirement to cover all of their expenses. In response, the average respondent is delaying retirement until 68, according to a study conducted by Market Strategies International.

The study, released Monday, revealed several drivers of this trend. The first was the demise of pensions. Among affluent investors in the study– who possess an average of $623,000 in investible assets – only 22% are relying on a pension as their primary source of retirement income. This is a steep drop from current retirees, 39% of whom are relying on a pension.

"Prior generations had steady jobs with pensions so there's a certainty of collecting a paycheck each week," said Michael Solari, principal at Solari Financial Planning. "Baby boomers have had to figure out how much to save, how to invest and how to budget expenses. Even if they do it right, there's no guarantee that they'll collect the same paycheck each week."

Other major drags on retirement security are increasing longevity and the prospect of unexpected medical costs. Both of these fears have been exacerbated by the rising cost of health care, said Linda York, vice president of Cogent Reports at Market Strategies International.

Respondents’ biggest fear, however, is that their retirement savings are insufficient to maintain a decent standard of living over the rest of their lives, Ms. York said. This has only been worsened by historically low interest rates, which reduce the cash flow that any given investment can generate.

Baby Boomers are also in the unlucky position of being the "sandwich generation," said Laurie Burkhardt, a wealth manager for Modera Wealth Management. This means that the generation is saddled with the task of helping college-age children and elderly parents, at a time when both tuition and health care costs are soaring.

"A lot of my clients in their 60s are trying to save for retirement but have these line items on their budget saying ‘money for Mom’ and are still supporting the kids in some way as well," Ms. Burkhardt said.

The other major piece of the retirement puzzle is the lingering effect of the Great Recession. Ms. Burkhardt said that most – but not all – of her clients took her advice and rode out the bear market until the big upswing in 2013 brought investments back into the black.

But about 33% of affluent investors don’t have advisers, according to the survey. Many of those who chose to go it alone only recently returned to the market, said Robert Hockett, president of Cambridge Wealth Counsel. Individual investors tend to buy at the peak and sell at the trough of economic cycles, severely cutting back on returns

Perhaps the simplest way that the Great Recession effected retirement is that many baby boomers responded to tighter incomes not by spending less, but by cutting back on savings.

"I see more and more affluent families coming to me saying that when things got tight during the Great Recession they cut back too much on saving and not enough on spending and as a result plan on pushing back retirement," said Trent Porter, founder of Priority Financial Planning.