Fred Edgar, a 61-year-old unemployed product marketing manager, spends his days scouring the Internet and networking with former co-workers to find work. Laid off from Honeywell last October, the Dighton, Mass., resident needs to rebuild a retirement nest egg that lost more than 50% its value over the past four years. He's already pulled out $35,000 to keep himself afloat.
"All these things I planned for and paid into have taken a beating, and I'm worried there will be nothing there when I need it if I don't get hired soon," Edgar said. "It's not a place I thought I'd be at this point in my life. It's spooky."
Edgar isn't the only one spooked. Millions of aging baby boomers on the cusp of retirement not only lost their jobs in the Great Recession but also saw their savings eviscerated. Remaining in the labor force longer than planned is their only option for replenishing what they lost.
Yet workers in their late 50s and older face bleak job prospects. During previous downturns, unemployment among people 55 and older was lower than for other age groups, which some economists attributed to older workers' greater experience as well as union seniority rules. Earlier generations in this demographic group had compelling incentives to retire and not work, thus potentially lowering the unemployment rate. Mandatory retirement at age 65 or earlier was a given in most industries until age-discrimination laws were enacted. And, more important, when workers did approach retirement, they were confident that their defined-benefit pensions and Social Security benefits would suffice. Now, defined-benefit pensions have been replaced by less-secure 401k's, which fell prey to the 2008 stock market crash.
The shift from defined-benefit pension plans to defined-contribution plans encourages workers to continue working. Under a defined-contribution system, the longer a person works, the more he or she can save. Most pension plans, on the other hand, cap the payout after a person works a certain number of years. "Why would you want to tell someone, 'You worked 30 years . . . no matter what you do afterward it doesn't help your pension, so you might as well retire,'" asked James Sherk, a senior policy analyst in labor economics at the conservative Heritage Foundation.
The death of the gold-watch retirement
Unemployment at the peak of the current downturn for workers 55 and older, now 6.8%, was 40% higher than it was at the height of the last major recession in 1982, according to the Bureau of Labor Statistics.
One reason for the rise: A greater proportion of older workers has remained in the workforce. Early retirement -- once considered part of the American Dream -- is losing ground. The workforce participation rate for individuals 55 and older grew to 40.2% in 2010, up from 39.4% in 2008 and 29.4% in 1993, according to Census Bureau data. Relatively recent changes in Social Security law may account for the dramatic increase.
Since 1939, earnings-test laws have precluded people from collecting their maximum Social Security benefits if they earn more than a certain amount. In 2000, a law passed under President Bill Clinton removed limits on the amount people who had reached full retirement age -- then 65 and now 66 -- could earn before their Social Security checks were reduced. But the law left in place rules that workers ages 62 to 64 get their benefits reduced $1 for every $2 they earn above $14,160 a year.
The sharp decline in retirement assets from the 2007-08 stock market plunge has also contributed to older workers remaining in the job market. Defined-benefit pensions have gone from covering 80% of private-sector workers in 1985 to only 20% in 2008.
