By JANE BRYANT QUINN
About two years from now, the first trickle of Baby Boomers hits early-retirement age. In the years after that, the trickle will become a flood.
When they leave their jobs, who will be left to mind the store? Younger Boomers will move up.
But behind the Boomers lies a small generation, the Baby Bust. The number of workers aged 25 to 34 will shrink by nearly 9 percent in the decade ending in 2006, according to the Bureau of Labor Statistics.
Even now, there aren’t enough hands and brains to fill all the positions available. As older Boomers bail out, the shortage of workers is going to get worse. That is, unless companies offer incentives to get skilled, middle-aged employees to stay.
Right now, employers are subsidizing their own brain drain, says Dennis Coleman, a principal in the consulting firm PricewaterhouseCoopers in Teaneck, N.J. Most retirement plans motivate workers to retire young.
A few companies, however, are designing plans aimed at retaining valued older people. Coleman expects many others to follow, once they see the light.
Just because people quit their regular jobs doesn’t mean they’ll go fishing. The majority of Boomers want to work part-time, according to a survey by Roper Starch Worldwide for the American Association of Retired Persons. Nearly one in five wants to start a new business.
The AARP divides Boomers into five different groups:
? Enthusiasts: (13 percent of the total) These are the only people who don’t intend to work. They look forward to quitting, think they’ll have enough money and don’t want to lift a finger, ever again.
? Self-Reliants: (30 percent) This group has the highest income and education level, and is saving money aggressively. They intend to work at least part-time after retirement age, not because they have to but because their work is fun.
? Traditionalists: (25 percent) They’re a little less affluent, but still doing OK. They expect to keep working at least part-time, both for pleasure and the extra income.
? Anxious: (23 percent) They earn less than the average Boomer, and can afford to put only a little money aside. They believe they’ll have to keep working, perhaps full-time.
? Strugglers: (9 percent) This group earns the least and is saving virtually nothing. They’re mostly female (64 percent), and more likely to be single, separated or divorced. Retirement isn’t even on their radar screen.
Employees who can’t afford to retire will stay on the job as long as they can. But it’s different for workers with good pensions or fat retirement plans. They’ll quit, grab their money, and supplement it with a part-time salary from another firm.
To retain these people, a few companies are trying something different. It’s called “phased retirement,” and takes various forms. For example, workers might retire, then be hired back for part-time or temporary work.
They might be allowed shorter workweeks or workdays for a few years, at a lower rate of pay. They might go on a part-time schedule, with a less-demanding job.
In a new survey of nearly 600 employers by the consulting firm Watson Wyatt Worldwide, 16 percent reported making some use of phased-retirement options. Nearly half believe that these options will become more common in their companies.
More than one-quarter showed interest in implementing phased retirement over the next two to three years.
The principal reason for offering these new options is to retain skilled workers, Watson Wyatt consultant Laurie Graig told my associate, Dori Perrucci. Unfortunately, the structure of most pension plans makes it awkward to offer a menu of phased-retirement options.
Under current regulations, you can’t take retirement payments from your 401(k), if you’re still an official employee. You can’t get your monthly pension, either.
But corporations can change their pension designs to make phased retirement more appealing. As this issue heats up, I’d also expect Congress to weigh in. Washington could rewrite the pension regulations to make it easier for employers to offer older workers phased-down jobs.
In the future, “Talented seniors will need to be courted, not discouraged,” Coleman says. There’s going to be a struggle for scarce human resources. Employers should face the issue now.
How much do you have to save each month to have enough money to retire?
To answer this question, a growing number of people are turning to retirement calculators. You might use a calculator that you find on the Web. Or you might pay a broker or planner to run the numbers for you.
I have bad news. You could miss your target by a mile, even if you invest exactly as you’re told.
I also have good news. A new Web calculator offers better estimates than you’ve probably had before. There are no guarantees. But you should at least test this service called Financial Engines (www.financialengines.com) against any savings target you’re using now. You might find that you’re running a greater risk with your future than you thought.
In concept, retirement calculators are pretty simple. You (or your planner) enter your age, salary, pension if you’ll have one, and current investments; also, the percentage of salary you’re saving, a retirement age and the future income you’d like to have. You’re usually supplied with a Social Security estimate.
Then you click a button and poof, the calculators tell you yes, your plan will work, or no, you’ll fall short. They reach that conclusion by forecasting what your current investments are likely to earn.
If you’ll fall short, you make changes in the plan say, a later retirement age or a lower income goal. Eventually, you’ll find a mix that the calculator says will work. It’s an estimate, of course. But you think it will be close.
Think again. Most calculators give you a single answer “save $xxx a month.” Or maybe a “best case” and “worst case,” so you can pick something in between.
But in real life, there are millions of possibilities. Some investors will earn much more than the calculator forecasts. Others will have to settle for less.
What are your chances of landing in the richer group?
Most people think that the best way to improve their odds is to put more money into stocks. Indeed, that’s what the typical calculator shows.
But markets sometimes go down or go nowhere for long periods of time (yes, kiddies, it’s really true). Stocks raise your odds of doing well. But they also raise your odds of missing your retirement goal maybe by a mile.
That’s what most calculators don’t show. You cannot tell how much risk you’ve taken on.
Enter Financial Engines. It’s the brainchild of Nobel Prize-winning economist William Sharpe and uniquely among Web calculators gives you a feel for your investments’ chance for success.
The math behind the calculator is literally too sophisticated for words. Think of it as a racetrack tote board and you’re the horse. On the board (the Web site), you’ll see the odds that you’re going to win. If the odds are poor, you can recast your plan and try again.
All this for free.
Syndicated columnist Jane Bryant Quinn can be reached in care of the Washington Post Writers Group, 1150 15th St., Washington D.C. 20071-9200.