Where are the Baby Boomers going?

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The economic downturn has changed the retirement plans of 52% of OSCPA members age 60 and older who responded to a statewide survey in May. More than half (54%) of the respondents plan to delay retirement for one to five years. Nearly a third (31%) said they have greater uncertainty and are unable to predict when they would retire. After retiring from their current position, more than a third (36%) plan to work part-time, seasonally or as a consultant.

The delay in retirement among OSCPA members is reflective of employment trends overall. "We have seen a trend of people approaching retirement age that have either made the decision to work longer than they planned to five years ago or are uncertain about when they will be able to retire. In either case, they are remaining in permanent positions when they can or pursuing consulting opportunities to generate income," said Eugene Lodato, division director, Robert Half Management Resources, Cleveland.

COMMON CONCERNS

An overwhelming 81% of survey respondents whose retirement plans have changed cited the decline in their retirement investment portfolio as a reason. "With the value of their assets diminished, many professionals have no choice but to remain in the workforce," Lodato said.

Concern about committing to a fixed income after retirement (37%) and spiraling health care/medical expenses (29%) also ranked high among OSCPA members' top concerns. "It's more difficult than ever to measure future inflation. The very element of surprise in economic activity has made all retirees fearful of committing to something as binding as fixed income," said Janice Worthington, president of Worthington Career Services, OSCPA's career coach of choice. "This downturn came very quickly and created much damage. As we take measures to recover, the lesson learned has been to prepare as much as possible for future unknowns."

The design of employer-sponsored pensions is another major factor in determining a retirement date, according to a Congressional Research Service (CRS) report issued in September 2008. The trend among employers is toward defined contribution plans that typically pay a lump-sum benefit--and away from defined benefit pension plans that offer a monthly annuity for life, CRS reported. In addition, more people may continue to work until they are eligible for Medicare at age 65 due to the declining percentage of employers who offer retiree health insurance, the CSR report predicted.

"Without question, many Baby Boomers must continue working," Worthington noted. "This economic downturn is unlike any other for several reasons--it's the 'perfect storm' on three fronts. First, regarding asset value in preparation for retirement, accounts have been significantly devalued and, depending on age, there might not be enough time to recover the losses. Second, assets in the form of real estate have declined. Finally, as if there weren't enough challenges, Boomers are now caught up in the tailwind of layoffs. Choice has given way to necessity."

Nearly half of the survey participants (45%) report that their employer supports their changes in retirement plans. However, 35% indicated that their employer is unaware of changes in their retirement plans.

Employers are also in survival mode, according to Worthington. "Their interests lie in what's best for the P&L. At times they welcome the retirement of a high-priced executive but at the same time companies are fearful of losing decades of experience," she said.

PHASED RETIREMENT

According to the CRS report, employers may encourage some near-retirees to remain on the job, perhaps on a part-time basis. Several approaches to "phased retirement" are acceptable under current law. The CRS report defines "phased retirement" as a process that combines reduced hours of work with receipt of pension income. This can include job sharing, reduced work schedules and rehiring retired workers on a part-time or temporary basis. The Pension Protection Act of 2006 (P.L. 109-208) allows pension plans to begin paying benefits to workers who have not yet separated from their employers at the earlier age of 62 or the pension plan's normal retirement age, which is usually age 65. It would require a change in federal law, however, to allow employers to pay partial pension distributions to workers who have reached the pension plan's early retirement age.

According to Lodato, "Previous research had shown that the retirement of the Baby Boom generation would lead to a vast shortage of experienced workers." The U.S. Census Bureau forecast a significant shift in the demographic profile of the U.S. workforce as the Baby Boom generation (born between 1946 and 1964) approaches retirement. For example, between 2005 and 2025 the number of people who are 25 to 54 years old will grow by 5 million, while the number of people between the ages of 55 and 64 will grow by 11 million. This trend could affect economic growth, the Census Bureau predicted, because labor force participation begins to fall after age 55.

Now that many workers may be remaining in the workforce, the acute shortage of tenured workers may not be as pronounced as previously forecast. "Retaining these workers would benefit employers as their highly valued skills would remain available to an organization or firm," Lodato said.

"The impact of delayed retirement on our company would probably benefit the firm. It is always ideal to have additional resources available," said HR Coordinator Jacquelyn Morgenstern, Ciuni & Panichi, Inc., a C&P Advisors company, Cleveland.

"I think delayed retirement has impacted the overall workforce in that qualified workers are now saturating the market between those graduating from college and those who are not yet ready or are unable to leave the workforce. There are definitely benefits to both groups and the challenge is to train those generations on how to work together successfully," Morgenstern said.

GREATER FLEXIBILITY FOR "RETIRED" CPAS

Maintaining an active CPA license gives OSCPA members more options in retirement according to 70% of OSCPA survey respondents. "With a CPA license there is more flexibility regarding employment options than with most professions," Worthington agreed. "CPAs serve as mentors, part-timers and seasonal workers. They are very capable of working virtually, which may be most compatible with their semi-retirement plans. While the prospective retirees must keep-up on technology, the status of the CPA designation symbolizes someone proficient in the field."

According to Lodato, "Many retirement-age professionals choose to become consultants instead of retiring. Although they are not required for all consulting engagements, licenses such as CPA, CIA and CISA are desired by clients and sometimes required for certain projects. Having these and other certifications creates more opportunities."

Will more CPAs extend their working lives longer than they originally planned? Perhaps. CPAs and OSCPA members, however, are better positioned than most to continue contributing their professional expertise well past any fixed age or retirement date.

By Kimberly Scher, APR

Kimberly Scher, APR, is vice president, communications for The Ohio Society of CPAs. She can be reached at kscher@ohio-cpa.com or 800.686.2727, ext. 347.

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