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2/27/2012 9:47:00 AM
End of pensions forcing delay in retirements
Dan Halbig, a barber at Goodman's Barbering & Styling in Owensboro, Ky., accepts money from Lou Drawdy of Owensboro after cutting his hair on Friday. Halbig, 69, and his wife still work full-time beyond the traditional age of retirement since they both still love their jobs. JASON CLARK / Evansville Courier & Press
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Dan Halbig, a barber at Goodman's Barbering & Styling in Owensboro, Ky., accepts money from Lou Drawdy of Owensboro after cutting his hair on Friday. Halbig, 69, and his wife still work full-time beyond the traditional age of retirement since they both still love their jobs. JASON CLARK / Evansville Courier & Press

Susan Orr, Evansville Courier & Press

—Sally and Dan Halbig of Owensboro, Ky., are great-grandparents who enjoy traveling — they're looking forward to an Alaskan cruise this year to celebrate their 50th wedding anniversary.

But on an average day, the Halbigs spend their time doing what they've done for years — working full-time.

Sally, 67, is secretary to the president at Brescia University. Dan, 69, is a barber.

Sally said the couple would be all right financially if they quit working now. But, she said, they both enjoy their jobs — and the income.

Because they still work, Sally said, they can afford to do things for their grandchildren and great-grandchildren. They can also do more traveling and home repairs without worrying about dipping into their nest egg.

"I like the choices that it gives," she said.

They're part of a growing trend: Americans who, for a variety of reasons, remain in the workforce beyond the traditional age of retirement.

According to the U.S. Bureau of Labor Statistics, the percentage of people age 65 and older in the workforce remained fairly steady in the 1980s and 90s.

In 1980, 12.2 percent of people age 65 and older worked full- or part-time. That percentage dropped as low as 10.4 percent in 1985, and stood at 11.9 percent in 1999.

Since 2000, though, that number has risen. Last year, 16.7 percent of people age 65 and older were still in the workforce.

One driver of this trend, local financial planners said, is the shift away from pensions to 401K or IRA savings accounts.

With a traditional pension, workers count on receiving a fixed payment. But with a 401K, for instance, the amount available in retirement is subject to a lot of variables. Employees control some of the variables, such as how much they contribute, but the payment in retirement depends on the financial performance of the chosen investments.

"We've seen a fundamental shift from employer responsibility to employee responsibility for retirement," said Mike Wiederkehr, vice president of financial planning for Old National Bank's wealth management group.

Wiederkehr said most of his clients are executives, business owners, heirs to an inheritance and others with relatively high net worth.

But even these clients, Wiederkehr said, are often delaying retirement.

"People are wanting now to work longer and save more, try to get that base (of savings) up higher," he said.

The typical client years ago expected to retire in their early 60s, Wiederkehr said, but that age has crept up to the mid-60s now.

The recent financial crisis and stock-market uncertainty put a damper on retirement plans, Wiederkehr said. A worker expecting a pension isn't necessarily spooked when the stock market goes down — unlike the worker with most of his savings in a 401-K.

Vectren is one local company that has seen a trend toward delayed retirement.

Between 2004 and 2009, the average retirement age for a Vectren employee was 61.5, said company spokeswoman Chase Kelley. In 2010 and 2011, the average age rose to 62.5.

It's difficult to speculate on the reason for the increase, but Kelley said the company believes it's related to economic conditions.

Brad Ford, president of Vineyard Financial, deals with a less affluent clientele than Wiederkehr, but he said his clients are also expressing uncertainty about retirement.

Ford said his clients have investable assets ranging from about $100,000 to $3 million, with an average of about $500,000.

The Halbigs are among Vineyard's clients.

Ford said about 30 percent of his clients who consider themselves "retired" are still working part-time, "some of them because they're bored, a lot of them because they need the income."

Clients with pensions are increasingly likely to opt for a lump-sum payout rather than monthly payments, Ford said. One reason for this choice, he said, is retirees are fearful that companies will choose to reduce pension payments in the future.

"Quite a few of the pensions today are underfunded," Ford said.

Another reason people are uneasy about retirement? Workers responsible for their own retirement accounts may lack confidence that they have enough money, or they may have made poor financial decisions, planners say.

"They are retiring later, and they are more conservative with it. In my opinion, it has a lot to do with the fact that a lot of employees are not professional money managers," Ford said.

For instance, a basic investment rule says someone close to retirement should have most of his savings in low-risk investments. But someone who set up a 401K account years ago and hasn't changed his asset mix might have a lot of money in riskier accounts, Ford said.

Christy M. Hayes, an investment associate with Merrill Lynch Wealth Management, agreed the trend toward 401K plans has made her clients less confident about retirement.

Hayes said her new clients commonly lack an understanding of when — or even if — they can afford to retire.

"They are confused and they are very uncertain about what their retirement's going to look like," Hayes said.

Knowing how much is in your 401K, Hayes said, is only a start. To feel confident about retirement, savers also have to know how much they need to live on, and how much they can afford to withdraw from savings each year.

The key, she said, is to start planning now.

"It's never too early."

Hayes said she enjoys helping clients develop retirement plans — but once a person has retired, there's not much she can do to help.

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Editor, John C. DePrez Jr.; Executive Editor, Carol Rogers; Publishers: IBRC and IAR

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