Nearly Four in 10 Higher Ed Employees Delaying Retirement

College and university employees are delaying retirement these days, according to findings from an ongoing TIAA-CREF Institute tracking study to measure the impact of financial market developments on retirement planning.

Conducted in March 2009, the study of investors age 50 and older reveals that nearly four in 10 (37%) say they have delayed their planned date of retirement (up from 33% a month earlier and from 28% in October 2008).

At a recent TIAA-CREF Institute Fellows Symposium entitled “Managing Risk in a Market Meltdown” the Institute presented these latest results.

Varying views on evaluating financial preparedness for retirement were discussed.  While traditional media report only about a quarter of baby boomers will be prepared financially for  life after they retire, a growing line of research indicates that the baby boom generation may be better prepared than conventional wisdom suggests.

Speaker Thomas Rietz, associate professor of finance at The University of Iowa, posed the question of how the risk should be presented to individuals investing for retirement. Rietz explained that people do seem to understand the concept of investment risk and to care about it, but need an environment that makes the risk they face more salient to the outcome they will achieve. His research indicates that the right information presented the right way has the ability to create such an environment and improve the choices made by investors. Rietz raised the possibility of laying out for investors the entire distribution of investment outcomes, not investment returns.

With more campus employees postponing retirement and uncertainty about the future, higher education leaders are examining new ways to manage employee retirement patterns, including:
• Early retirement incentive programs with clear goals and targets
• Coverage of healthcare expenses during retirement. TIAA-CREF recently introduced a potential solution, The Retiree Healthcare Savings Plan, a voluntary employer-sponsored defined-contribution savings account that offers a tax advantaged way for employees and retirees to accumulate funds to pay for future medical and health expenses.
• Increasing employees’ base salaries or giving instructors fewer courses to teach in exchange for an irrevocable declaration that they will retire within a certain time period
• Allowing faculty who reach 70 to continue being a member of the intellectual community; e.g., senior faculty members stop drawing a salary but retain their office, participate in seminars and teach courses
• A pay-for-performance system that allows rookie faculty to earn more than tenured faculty if requirements are met
• Buying back tenure from older faculty members with a lump sum cash payment
• Offering online communities for retirees. For example, TIAA-CREF created www.myretirement.org last year – one example of providing individuals with an outlet to talk with other retirees about financial issues as well as travel, family and living in retirement.