How Recession Is Redefining Retirement

by: Michael Panzner

As hard as it might be for some to believe, the notion of retiring at the age of 65 or thereabouts is a fairly recent phenomenon.

In the United States, according to a 1999 New York Times article, "The History of Retirement, From Early Man to A.A.R.P.," the roots of the movement largely trace back to the Great Depression, when high levels of unemployment stirred efforts to encourage older workers to lay down their tools and allow those who were younger to take their place.

Under the circumstances, some might find it ironic -- or, perhaps, tragic -- that a similarly calamitous economic environment has spawned, as USA Today reveals in "For Boomers, Recession Is Redefining Retirement," a reversal of that decades-long trend.

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."

Meanwhile, a post at the New York Times' You're the Boss blog, "Recession Driving Start-Ups," highlights another interesting sign of the times: the expanding ranks of elderly entrepreneurs.

self-employment

Source: Calculated from data on the Bureau of Labor Statistics Web site.

Self-employment rate by age in December 2008 and April 2009.

In the past couple of weeks, I have been contacted by reporters who were writing stories about the growth in the number of young entrepreneurs. Given the bleak job market facing young people, I guess it isn’t too surprising that attention is turning to youth entrepreneurship as we enter the summer job season.

But is it really young people who are shifting toward entrepreneurship during the recession? In search of an answer, I compared self-employment rates by age groups in December 2008 and April 2009. As the table shows, the numbers don’t suggest a big rise in entrepreneurship among young people over those months. Self-employment rates rose among people 16 to 19, but fell among those 20 to 24.

On the other hand, self-employment rose sharply among those 65 and older during that same period — almost two percentage points, from 16.3 to 18.2 percent. While the self-employment rate has been higher among people 65 and older for a while, the gap between the self-employment rate for the 65-plus age group and the next highest group (55 to 64) has grown.