Right now, a large portion of baby
boomers are finding out how difficult it is to save enough for retirement.
Their incomes aren’t high enough to put as much money away as they should,
their investments aren’t yielding much of a return, and Social Security is
projected to run out within the next couple of decades, reducing the amount of
money they can count on from the government.
If things are this bad now, they’re
likely to be even worse by the time the younger generation reaches retirement
age. How do millennials—those who will turn 20 – 36 this year, and now a larger demographic than baby boomers, intend to deal with the situation?
They don’t. Around 83% of
millennials plan to keep working, even after retirement age. Interestingly enough, that’s
also the percentage of current retirees who aren’t working at all. Those two
statistics are a good illustration of the difference in outlook between the
younger and older generation. The question is, though, is this course of action
viable, for millennials to keep working their whole lives? Probably not.
Possible Reasons for Continuing to Work
The 83% figure comes from a survey
by Merrill Edge on financial concerns of the average American. While it didn’t
explicate the reasons why millennials plan to keep working, there are a couple
of possibilities.
First, there’s the concept of loving
what you do, so that you don’t feel like you need to retire in order to be
fulfilled. There’s also the looming dread of what retirement planning will
entail, particularly in the current economic climate. Coming of age
professionally during the Great Recession, many are barely making ends meet as
it is, and feel like they won’t be able to put away enough by retirement age to
sustain themselves. Therefore instead, they’ll have to continue working at
least part time in order to live.
It is likely millennials will end up
working for longer than their parents and grandparents did. The current age to
collect full Social Security benefits is 66; for Americans born after 1960,
it’s 67. Given that life expectancies are increasing, and that the Social
Security trust fund is about to run out, it’s doubtful that will still be the
standard retirement age forty years from now, as millennials start to wind down
their careers. If Social Security still exists then, benefits may well not kick
in until age 70 or 75. However, there’s a big difference between continuing in
your job for a few extra years, and working until you die.
The Problem with the “Plan”
Many people, even today, find that
they would rather continue working past retirement age, even if they transition
to a part-time job in their golden years to extend their income. The problem,
though, is that many millennials are assuming that, because they intend to
maintain an income forever, they don’t need an actual retirement plan, or at
least not much of one.
It’s easy to say, while you’re in
your twenties, that you plan on working forever. However, once you reach your
sixties, you may find a lot has changed. As you age, there may be health issues
or other physical limitations that keep you from continuing at your current
job. You may decide to look for part-time work, only to find it more difficult
than you anticipated. You might even find, after 40 or 50 years in the
workforce, that you actually do want to retire after all, and spend your days
fishing or playing golf. However, if you don’t have a retirement fund built up,
you won’t be able to do it.
Even for Americans who are planning
for their retirement, it often seems to be seen only as a vague concept. More
than half of those surveyed said they didn’t anticipate needing more than $1
million in their retirement fund, and 19% said they had no idea what amount
they actually would need. $1 million seems like a lot, but given inflation, and
the amount of time it needs to last, it may well not be enough to sustain a
millennial through their golden years.
If millennials are able to continue
working and earning comfortably, without having to retire, then more power to
them. However, it’s foolish to rely on that possibility as one’s entire
retirement plan. As those of us over forty can tell them, you never know what
might happen in the meantime. It’s vital to have a nest egg built
up, so that you’re ready for the future, no matter what it may bring.
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Comments
Prior to 1900, nobody in the retired
except for a few who were independently wealthy. Many other wealthy people
still continue to work beyond what had been established as “retirement age”.
From 1900 to the 1950s, the US
changed its retirement except for professionals and business owners who were
self-employed.
Unions represented occupations that
required physical exertion and many of the older laborers found it harder to
work as their bodies aged beyond age 60. The unions first demanded higher wages
and pensions. Unenlightened business managers established age 65 as retirement
age for all employees. They did a study to determine how long employees could
work “productively” and they agreed on age 65 as the right age to dump their
codgers. When Social Security was passed
in the 1930s, the “average” life expectancy was age 65. The invention of penicillin in 1945 heralded
the elongation of the “average” life span. So, mandatory retirement at age 65
is no longer needed, but businesses will probably not change the rule. They like to get rid of older employees,
because they usually are paid more than younger employees who could do the same
job.
All others, including family
business owners and self-employed professionals didn’t adopt the age 65 rule
for themselves and many didn’t impose retirement on their employees. Universities allowed Professors to remain
working way beyond age 65 as long as they were productive.
Retirement isn’t necessary. A bricklayer could work in his trade from age
16 to age 60 and if he had received a teaching degree in the meantime and could
get a teaching job, he could “retire” from bricklaying and take a job as a
teacher at a Junior College. He could
teach bricklaying and perhaps other construction-related trades.
Retirement should come whenever the
individual reaches the age where it became very stressful or impossible to put
in the hours required to pull their own weight. Retirement is totally dependent
on a person’s ability to continue working. Sedentary office work can continue
indefinitely. Folks in their 70s and 80s may need part-time work that allows
them to take a nap when they want to.
Folks in their 90s generally don’t hold a job. They are really “retired”.
Millennials who prepare for and are capable
of getting one of the “middle-class” jobs that will certainly be available can
begin their careers, albeit too late. If they can also buy a home and pay it
off, they may have the price of the house to live on throughout their 80s and
90s. But for most, the days of leaving a bundle of cash to the kids will be
over.
My grandfather was an MD in St. Louis Mo. And
he worked full-time until his death at age 79 in 1961.
My grandfather Leahy had been a corporate CEO
and board member for and investor in several other large chemical and munitions
companies in St. Louis Mo. We called him
“Daddy Warbucks” He became an “investor”.
My father was a corporate CEO with a large European-based
global company; he retired at age 65, but immediately started a Real Estate
Company in Dallas Texas at age 66. He
worked until his death in 1990 at age 80.
My father-in-law bought 3 acres on Highway 21
in St. Louis County and built a gas station with mechanic bays, a barber shop,
a shoe repair shop and an agricultural implement sharpening and repair shop in
the strip mall he built next to his house. He owned these businesses and
retired at age 87. He died in 1993 at age 89.
I managed my own career to allow me to leave
corporate life at age 50. I was able to
own my own private general consulting practice.
In 1993, I was approached by a half dozen electronics companies to quit
my corporate personnel job and serve as their consultant. The practice provided help to 45 large and
small Atlanta-based companies. I am age
73 and still doing projects for some of these customers on a part-time basis.
The secret of success is to love what you do.
Your work will feel like play.
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