Facing Retirement

By 2018, a third of the University workforce will be eligible to retire. Will they be ready?

Sherman James, far left, the Susan B. King Professor of Public Policy, plans to retire at the end of this academic year. Photo by Duke Photography.
Sherman James, far left, the Susan B. King Professor of Public Policy, plans to retire at the end of this academic year. Photo by Duke Photography.

Two years ago, when Sherman James was 68, he met with the dean of the Sanford School of Public Policy to discuss the next chapter in his life.

James told the dean that teaching Duke undergraduates was a highlight of being at Duke, but after nearly a decade on campus and four decades in higher education, he wanted to spend more time writing and visiting with his three grandchildren. He also wanted to help reshape the Sanford faculty by mentoring a junior faculty member.

"If we are in a position to liberate a tenure track position so that younger faculty can begin a career ... we should be sensitive to that," said James, the Susan B. King Professor of Public Policy who plans to retire at the end of this academic year. "That is also part of my motivation, in addition to just being ready."

James is among approximately 3,707 staff and faculty in Duke University's workforce who are currently eligible to retire with benefits. By 2018, as the baby boomer generation ages, that figure is expected to rise to more than 6,000 university employees, or 33 percent of the university workforce.

One question for these employees and their younger colleagues is: Will they be financially ready when the time comes?

Nationally, individual contributions to retirement savings took a hit following the collapse of the financial markets in 2008. According to Duke Human Resources, 47.3 percent of eligible Duke University and Duke University Health System employees are voluntarily contributing to a Duke retirement plan, compared to 38 percent of U.S. workers.

Kyle Cavanaugh, vice president for administration, said that while Duke is recognized for offering competitive retirement benefits, individuals still need to supplement that benefit with individual savings in today's economic climate.

"The increased contributions by our employees to retirement savings is good news," Cavanaugh said. "But our hope is that those numbers will keep going up so that more employees can look forward to retirement confidently."

'Wish I had Started Sooner'

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Susan Jones, an administrative assistant in the Provost's office, has worked at Duke for 31 years. Photo by Duke Photography.

Susan Jones, an administrative assistant in the Provost's office, saves regularly for retirement, but she has not always been so disciplined.

In a rash decision 24 years ago, Jones withdrew money from her Duke retirement savings account to pay an $8,000 car loan for a new Honda Civic.

"I practically tiptoed across the hall to Human Resources to fill out the paperwork because I knew that you weren't supposed to touch retirement savings except in a dire emergency," said Jones, 65. "But I was young and didn't want to be car poor, and retirement seemed a long way off."

Jones, who has worked at Duke for 31 years, returned to saving seriously in her 50s. She planned to retire this June. But after examining expenses, including a car lease, mortgage and veterinarian bills for her cat, she discovered she did not save enough and will wait a year to retire.

"I don't live extravagantly, but I hate the thought of spending my retirement worrying about bills," Jones said.

A 2013 survey conducted by the Employee Benefit Research Institute, a non-profit organization that studies workforce health and retirement benefits, reported that 22 percent of workers surveyed revised their expected age of retirement upward in the past year, largely due to financial concerns.

"With life expectancy of a 65-year-old hovering around 84, retirement is no longer just a few short years of rest and relaxation," said Linda George, a gerontologist at Duke's Center for the Study of Aging and Human Development. "We have to get people to register that retirement can now last 20, 30 or even 40 years."

Financial advisers suggest that to live comfortably in retirement, individuals should accumulate a nest egg worth approximately eight times the size of their annual salary at the time of their retirement. For example, an employee earning $50,000 when he or she retires should expect to have about $400,000 in savings, including contributions from his or her employer.

Many variables affect how fast retirement savings grow, said Chris Mann, a representative from Fidelity, one of Duke's four retirement vendors. But if an employee begins saving at age 30 and consistently puts aside 5 to 8 percent of his or her annual income into retirement savings, that nest egg can grow to roughly eight times an annual income by age 65.

"You cannot start saving too soon," Mann said. "The most common comment I hear is, 'I wish I had started sooner.' People say, 'I couldn’t save,' but if you can't afford to live now, how will you afford it when your paycheck stops?"

Many U.S. workers are not saving enough, according to the Employee Benefit Research Institute, which reports that 57 percent of workers polled in 2013 have less than $25,000 saved for retirement. When Celeste Hodges joined Duke in 2000 at age 53, she decided to put the maximum amount into her Duke retirement account allowed by the Internal Revenue Service - currently $17,500 per year. Even with the downturn in the economy, she never deviated from that savings plan.

"My husband and I both come from thrifty families, so we like the ability to save our money and reduce our tax bill at the same time," Hodges said.

Sylvester Hackney, associate director of Duke Benefits, encourages employees to save early. He also suggests reviewing saving habits regularly and meeting with representatives from Duke's retirement vendors for planning advice.

"Every employee deserves the opportunity to create a financial plan, regardless of how much or how little they have saved, or how close or far they are from retirement," Hackney said. "It costs the employee nothing but time."

Longer Wait for Nest Egg

During the recession, Iris Turrentine received a letter from Duke offering her early retirement with a larger than expected pension. She was one of about 900 bi-weekly employees offered voluntary retirement in 2009 due to a budget shortfall caused by the decline of economic markets.

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Iris Turrentine, left, has worked at Duke Libraries since she was 19. She feels more confident now about retiring. Photo by Duke Photography.

Turrentine dreamed of spending more time with her husband, Lonnie. For most of their marriage, he has worked nightshift at Duke Regional Hospital while she worked days as an HR associate in the Duke Libraries Human Resources Office.

After careful consideration, Turrentine declined the offer. She had been saving for retirement since she was 30, but her plan didn't include leaving work at age 53, six years before she could draw on those savings and nearly a decade before she could claim Social Security.

"It was too risky for me," said Turrentine, 58.

Campbell Harvey, a finance professor at Duke's Fuqua School of Business, said that while some employees may retire later to recoup losses during the recession, a long-term trend might be at play. Over the past two decades, lower returns on stocks and low interest rates have meant that savings grow more slowly.

"A lot of people are finding that to retire now, compared to two decades ago, you have to accept a smaller nest egg than you planned for, or wait a bit longer for it to grow," he said.

While the national average of retirement has risen from 59 to 61 over the past decade, the average age of retirement at Duke has moved from 62 in 2003 to 64 in 2013.

Turrentine, who has worked at Duke Libraries since she was 19, said she feels more confident now about retiring.

"I’ve loved my years here in the library, but it has been almost 40 years," she said. "I'm ready to start a new chapter and hope to start it sooner rather than later."

Stretching the Dollar

James, the professor at the Sanford School of Public Policy, has been closely monitoring his savings as he prepares for retirement at the end of this academic year. He began meeting quarterly with a financial adviser in his 40s and continues to have meetings with his local adviser.

"I've always wanted to retire at age 70 and live a long life without having to rely on anyone else," he said. "So I want to know what my money is doing."

James was reminded of the importance of saving three years ago when his 93-year-old mother asked him to take over her finances.

"I had always known she was frugal," he said. "We ate a lot of leftovers in our house, but now I have proof about just how conscientious she was about stretching the dollar. It's a good habit to have."