Finance

Planning to delay retirement may not rescue you from poor savings

Published

9 months ago

September 17, 2024

Alistair Berg | Digitalvision | Getty Images

Planning to work longer is a popular escape hatch for Americans who feel they’ve saved too little to support themselves in old age.

About 27% of workers intend to work in retirement because they need to supplement their income, according to a new CNBC and SurveyMonkey survey. They polled 6,657 U.S. adults in early August, including 2,603 who are retired and 4,054 who are working full time or part time, are self-employed or who own a business.

While working longer is among the best ways to shore up one’s nest egg, the plan may backfire, according to retirement experts.

CNBC Retirement Survey: 44% of workers are 'cautiously optimistic' about reaching retirement goals

Workers may not be able to work into their late 60s, early 70s or later due to an unexpected health complication or a layoff, for example.

“It sounds great on paper,” said Philip Chao, a certified financial planner and founder of Experiential Wealth, based in Cabin John, Maryland. “But reality could be very different.”

If workers lose those wages, they’d have to figure out another way to make their retirement savings last.

Workers often retire earlier than planned

A nonexistent ‘escape valve’

Americans generally use a later retirement age “as an escape valve which doesn’t necessarily exist,” Chao said. “But saying it and doing it are two totally different things.”

It could ultimately be a “very dangerous” assumption, Chao said.

Many people who retired earlier than planned, 35%, did so because of a hardship, such as a health problem or disability, according to the EBRI survey. Another 31% of them retired due to “changes at their company,” such as a layoff.

It sounds great on paper. But reality could be very different.

Philip Chao

founder of Experiential Wealth

More than half, 56%, of full-time workers in their early 50s get pushed out of their jobs due to layoffs and other circumstances before they’re ready to retire, according to a 2018 Urban Institute paper. Often, such workers earn substantially less money if they ultimately find another job, the paper found.

Of course, some people exit the workforce early for positive reasons: More than a third, 35%, of people who retired earlier than anticipated did so because they could afford to, EBRI found.

There are benefits to working longer

Working longer — for those who can do it — is a financial boon, according to retirement experts.

For one, workers can delay drawing down their savings; that keeps their nest egg intact longer and may allow it to continue growing via investment profit and additional contributions. Workers can also delay claiming Social Security benefits, which can boost how much they receive.

Some people continue to work longer because they like it: About a quarter, 26%, of workers said they want to work in retirement, and 17% of retirees continue to work in some capacity because they enjoy it, according to the CNBC retirement survey.

Americans may also get non-financial benefits from working longer, such as improved health and longevity. However, research suggests such benefits depend on how much stress workers experience on the job, and the physical demands of their labor.

Working longer also appears to be more of a possibility for a growing share of older workers.

“A shift away from a manufacturing economy to one primarily focused on delivering services and information facilitates working to an older age,” Jeffrey Jones, a Gallup analyst, wrote.

Finance

Stocks making the biggest moves midday: WOOF, TSLA, CRCL, LULU

Published

2 days ago

June 6, 2025

Business Finance News

Finance

Swiss government proposes tough new capital rules in major blow to UBS

Published

2 days ago

June 6, 2025

Business Finance News

A sign in German that reads “part of the UBS group” in Basel on May 5, 2025.

Fabrice Coffrini | AFP | Getty Images

The Swiss government on Friday proposed strict new capital rules that would require banking giant UBS to hold an additional $26 billion in core capital, following its 2023 takeover of stricken rival Credit Suisse.

The measures would also mean that UBS will need to fully capitalize its foreign units and carry out fewer share buybacks.

“The rise in the going-concern requirement needs to be met with up to USD 26 billion of CET1 capital, to allow the AT1 bond holdings to be reduced by around USD 8 billion,” the government said in a Friday statement, referring to UBS’ holding of Additional Tier 1 (AT1) bonds.

The Swiss National Bank said it supported the measures from the government as they will “significantly strengthen” UBS’ resilience.

“As well as reducing the likelihood of a large systemically important bank such as UBS getting into financial distress, this measure also increases a bank’s room for manoeuvre to stabilise itself in a crisis through its own efforts. This makes it less likely that UBS has to be bailed out by the government in the event of a crisis,” SNB said in a Friday statement.

‘Too big to fail’

UBS has been battling the specter of tighter capital rules since acquiring the country’s second-largest bank at a cut-price following years of strategic errors, mismanagement and scandals at Credit Suisse.

The shock demise of the banking giant also brought Swiss financial regulator FINMA under fire for its perceived scarce supervision of the bank and the ultimate timing of its intervention.

Swiss regulators argue that UBS must have stronger capital requirements to safeguard the national economy and financial system, given the bank’s balance topped $1.7 trillion in 2023, roughly double the projected Swiss economic output of last year. UBS insists it is not “too big to fail” and that the additional capital requirements — set to drain its cash liquidity — will impact the bank’s competitiveness.

At the heart of the standoff are pressing concerns over UBS’ ability to buffer any prospective losses at its foreign units, where it has, until now, had the duty to back 60% of capital with capital at the parent bank.

Higher capital requirements can whittle down a bank’s balance sheet and credit supply by bolstering a lender’s funding costs and choking off their willingness to lend — as well as waning their appetite for risk. For shareholders, of note will be the potential impact on discretionary funds available for distribution, including dividends, share buybacks and bonus payments.

“While winding down Credit Suisse’s legacy businesses should free up capital and reduce costs for UBS, much of these gains could be absorbed by stricter regulatory demands,” Johann Scholtz, senior equity analyst at Morningstar, said in a note preceding the FINMA announcement.

“Such measures may place UBS’s capital requirements well above those faced by rivals in the United States, putting pressure on returns and reducing prospects for narrowing its long-term valuation gap. Even its long-standing premium rating relative to the European banking sector has recently evaporated.”