They grew up during a time of cultural change, and now are being forced to redefine retirement at midlife.
The 77 million Americans in the Baby Boom generation face an economic storm: The Wall Street meltdown trampled their retirement nest eggs more than any other group. After losing jobs during what they thought would be some of their peak earning years, many are struggling to get back into the workforce. Health care costs are rising, and declining home values mean they might not be able to count on home equity to guarantee an easier retirement.
"This generation will be sobered by their experience," says John Coyne, president of Brinker Capital, an investment management firm. "They may not have as extravagant a vision of retirement as they did last July."
The confluence of events has an even bigger impact on a subset of the Baby Boomers known to analysts as the Sandwich Generation. Those Boomers are putting money toward their children's college education and their aging parents' long-term care, as well as their own retirement savings.
The reality is sinking in: Baby Boomers, born from 1946 to 1964, are planning to work longer, save more money and spend less, to reach any semblance of the retirement they once envisioned. According to AARP:
•35% of those ages 45 to 54 have stopped putting money into their 401(k), IRA or other retirement accounts.
•25% said they have prematurely withdrawn funds from their retirement accounts.
•56% have postponed a major purchase.
•24% have postponed plans to retire.
"Today, I see myself working until I drop," says Kyril Wickenberg, 59, of Savannah, Ga.
The pain of unemployment
It may not be so easy.
When 1,097 Americans 45 and older were surveyed last December, 9% of them said they had lost their jobs in the past 12 months, and 31% of workers that age said that it is very likely that jobs will be eliminated this year, according to AARP's 2009 report.
Baby Boomers also are out of work longer than younger Americans. Last year, they were out of work 22 weeks on average, compared with 15 weeks for the 20- to 24-year-old age group, according to the Bureau of Labor Statistics.
They may find it hard to get a new job because they've had higher salaries. And that means they may have a higher threshold before they're willing to take another job, says Maria Heidkamp, a senior project manager at the John J. Heldrich Center for Workforce Development at Rutgers University.
But they also may be rusty about applying for a job, and their skills may be out of date, she says.
Wickenberg is out of work. He says he's lost several jobs in information technology because his employers thought his work could be done more cheaply outside the USA. Eventually, the periods of unemployment lengthened because companies seemed to prefer young college graduates.
"I got depressed and anxious," Wickenberg says. "I just saw my money slowly flittering away."
In 2005, he took a minimum wage job at a car rental firm, which allowed him to keep up with bills and not use his retirement savings. After 3½ years, he lost that job.
He's now gone back to college to get a bachelor's degree in information technology. He hopes that the four-year degree, combined with 35 years of experience in the field, will give him an advantage over younger graduates.
Even workers who thought they had planned perfectly and saved enough for their retirement are refocusing.
"I envisioned that I would be working in my corporate gig until age 67," says Albert Feliu, 48, who lives in Lilburn, Ga., with his wife and two children. He had a pension plan, and he made the maximum contribution to his 401(k) plan.
"Short of this financial mayhem, I was on a fairly good track," he says. "I saved money and lived within my means. I was the poster boy for what American middle-aged people should be doing."
Last December, he was laid off from his job as a senior project manager at AT&T. His wife continues to work full time, but she has reduced her 401(k) contribution. Their daughter is a senior in high school, and college tuition is a big concern.
Feliu is worried about his career. He's teaching an online class for the Keller Graduate School of Management of DeVry University.
"I'm working just to be able to pay for my health care costs out of current dollars and not have to take it from my retirement savings," he says. "Right now, it's kind of a batten-down-the-hatches type of mode."
Cash management change
Middle-class Boomers have few options for improving their retirement goals. If they maintain their current standard of living and don't cut costs, three out of five will outlive their financial assets in retirement, according to a new report from Americans for Secure Retirement, a coalition of more than 40 organizations.
"I hope that the silver lining is bringing everyone back to reality," says Harold Evensky, a financial planner in Coral Gables, Fla. People are not living on an extraordinary gravy train, he says, and they can't use their houses as ATMs any longer. And they can't count on buying a new refrigerator just because they want one, as opposed to when they need one.
Barbara Gaillard, 52, who lives in Seattle, and her husband, Alex, 51, have canceled their health club membership, reduced charitable contributions, and borrow books from the library rather than buy them.
"We rarely eat out now," she says. "We have done a lot of minimizing."
A growing number of Boomers are seeking help from credit counselors. Among that age group alone, 399,217 went to the National Foundation for Credit Counseling for assistance last year, up from 321,710 in 2007.
"Instead of people in their early 30s, which used to be the average, more people in their late 40s and early 50s are coming to us now," says Dave Jones, president of the Association of Independent Consumer Credit Counseling Agencies. "That increase is unprecedented."
Life changes are becoming a focus, along with retirement-expectation changes.
"People are stepping back and asking themselves truly, 'How much is enough?' " says Sheryl Garrett, a financial planner in Kansas City, Mo. It's more of a movement to simple living than just a temporary spending cutback. "People are taking ownership of what they can control."
Randal Walker, 50, was laid off from his job as a national sales and operations manager at a computer repair company in April 2008. His wife, Christina, lost her job 45 days later. At the time, they lived in Long Beach, where they owned their home. After being unemployed for nearly a year, they moved to Glen Ellyn, Ill., where they both have new jobs. Given the downturn in the housing market, they've rented their California home rather than trying to sell it.
Walker feels fortunate to have a position as a regional manager of a medical company. But the experience has changed him.
"I spend money differently," he says. He now tries to shop at mom-and-pop stores, because he would rather help support their business than a corporation's. He eats out less and rents a movie rather than going to a theater.
Walker says that he had a clear plan for retirement before he lost his job. "But I don't have a clue anymore."
Wrapped up in here and now
While the economic crisis has forced Baby Boomers to rethink retirement, there may be a positive result.
Many Boomers are so busy dealing with their daily lives, from monthly bills and vacation plans, to doctor appointments and children's college hopes, that they seldom considered their futures. And they often believe that life sort of ends with retirement.
The financial crisis has forced them to look ahead. In reality, they will live much longer and be healthier than their parents' generation. And retirement may be filled with much more than playing golf or cards.
Retirees get married, they move, and some even have children, says James Richardson, a financial planner in Raleigh, N.C.
"In many cases, people feel more productive if they continue to work during retirement," he says. "That was true even before the financial crisis."
Christine Neilson, 58, a teacher in Indialantic, Fla., had planned to retire at 62. Now, she expects to work until she is 65 or 66 because her salary has been frozen for two years, and her retirement savings have taken a nose dive.
"We have to look at retirement differently," she says. "They always say that if you are going to work in retirement, do the things that you love to do. So I'm not going to complain. I love teaching."
Baby Boomers such as Neilson may change retirement. "They may re-create themselves so that they can do something that is productive and still earn a paycheck," Garrett says.