For the past 100 years, the cycle of the American career has looked something like this: get a job at a large company right out of college in your early 20s, work there for 40 years or so and retire from said company at 65 years old. At this point, the government, through social security, along with any of your savings would take care of you.
That’s not really the case anymore. For one thing, we are living decades beyond what we used to. In the old model of the American career, after you retired at 65 you would generally pass away between the ages of 68 and 70, leaving more than enough funds from social security to live your last few years in peace. But now, we’re averaging lifespans of 80 to 90 years. Part of the reason social security is in trouble-we’re just living too long for it to hold out.
No Social Security
Early retirement has become somewhat of a dream today. Back in 1991, half of all American workers planned to retire before they reached the age of 65. Today, that number has plunged to just 23 percent. (1) I’m sure that’s because of the reality of our quickly draining social security.
For 89 percent of retirees, social security is a significant source of income. (1) And as of January 2016, the average retirement benefit is mere $1,341 a month. (2) That’s not much to live on. In fact, according to the U.S. Census Bureau, one out of every six elderly Americans is already living below the federal poverty line. (1) This is a big reason I stress the 3 Bucket Principle during your working years.
Unless something drastic changes, social security is just going to keep draining away. The Employee Benefit Research Institute reported that 46 percent of all American workers have less than $10k saved for retirement and 29 percent have less than $1k. (1) Over the next five years, the health and medical insurance industry’s revenue is forecast to increase at an average annualized rate of five percent to more than $865.8 billion. (1) This is going to put outrageous stress on our underdeveloped retirement plans.
My friends, we’ve got to do better than this. We need to step up and make sure we can take care of ourselves in the future by saving for it today.
So what are we supposed to do when there are no pensions and social security is basically nothing? Even if we are saving, there is still a big possibility that we will need to keep working. The baby boomer generation and those younger are going to be facing a serious need to keep working far beyond what our parents and grandparents did.
A Will to Work
According to a recent study, 74 percent of American workers expect to have to work past their retirement age. (1) We all know we can’t count on social security like our parents did. Most of us have come to terms that we will have to continue working and maybe getting a second career in order to maintain any kind of lifestyle in our retirement years. But even though it seems obvious that we will have to work longer, there are two reasons retirees are facing resistance- irrelevance and health.
Some companies are not hiring retirees because they are no longer relevant. These retirees haven’t kept up with technology changes and new trends. The boss needs someone who understands the market better. Or maybe the soon-to-be retiree has stayed with the company so long that their salary has inflated. The boss knows that she could hire a much younger person for much less money to do the same job.
And even if a person of 65’s mind is still sharp and ready to work, their body may be telling a different story. They’ve worked themselves ragged during their younger days to save for this moment while neglecting to balance their work lives. But when they’ve reached retirement age and realize that they haven’t saved enough, they are no longer capable of working. In fact, 69 percent of retired baby boomers say they would have liked to have worked longer than they did, but they had to retire due to health, layoffs or they just simply couldn’t perform their job anymore. (3)
A lot of people have been sold on this idea of figuring out how much you need to retire, and you’ll hit that number, tell your employer, and then you’re all done. The reality is that many people don’t get to choose how long they can continue to work because of personal health reasons or taking care of a loved one or maybe they get laid off. – Scott Goldberg, president of Banker’s Life (4)
This is exactly what happened to my dad.
My dad was a hard working retail manager for 40 years. He made a decent living while working his tail off all his life. Close to his retirement time he had saved up a decent nestegg by diligently following the 3 Bucket Principle. But when he got into his early 60s, his body started giving out. Retail had kept him in stock rooms and manual labor for those 40 years. They worked him hard, but his mind was still sharp and he wanted to keep working. But after a trip to the ER, we knew something would have to change.
He didn’t think he had enough saved up and was afraid to retire before his social security kicked in. After talking through the situation, I coached him in how to negotiate with the CEO of his company for a new position. I thought with all his experience in the industry my dad would be a great mentor to younger employees and he could continue working as long as it wasn’t manual labor. A part-time salary job would be perfect to keep my dad working until his social security hit. However, my dad felt uncomfortable presenting this to his CEO as it “broke the mold” of how they traditionally just hired a younger manager. The idea of letting someone go that has over 40 years of experience and loyalty to your industry blows my mind.
I couldn’t believe the CEO didn’t see the value in a mentorship program. I wanted to fly to his office and convince him to be an industry leader and show him all the benefits of keeping experienced workers in his employ to teach new hires.
I think it’s somewhat mind-blowing that you have about half of the people say, ‘I’m going to work not only past 65 but potentially past the age of 70.’ Let’s face it, for our employers, it’s really good news. You have a group of very experienced people who have a lot of knowledge to bring to the table. Plus, they tend to be a little more socially mature.- Scott Goldberg (4)
I couldn’t agree more. I wish Goldberg had been the CEO of my dad’s company when we were going through that situation. Experience is such an underrated value. And who has more experience than people who have a couple decades under the belt?
Working in Retirement
You may be thinking, “So you’re telling me all I can do is expect to work until I drop?” That’s not what I’m saying at all. If you keep up with your 3 Buckets early on and live a balanced lifestyle, I think you can easily have enough saved for your retirement. But even if you don’t, that doesn’t mean you have to work a 9 to 5 desk job for the rest of your life.
Despite the fact that most retirees are paid a lower compensation, working baby boomer retirees say that they are happier and more satisfied with their job than nonretirees. While 78 percent say they are just as satisfied with their job now than before, 32 percent say they are much more satisfied (4). I guess at this point, a job becomes less about the money and more about being out and doing something you enjoy. In fact, compared to non-working retirees, employed retirees report lower stress levels, better relationships and other positive impacts (4). I watch my dad and mom connect now as best friends at a deeper level with my dad home more, sleeping well, less stressed, and having the time and capacity to be much more present in life. It’s a beautiful thing to watch.
So if you’re at this point of your life, maybe its time to look for a part-time job or a second career. Find something you love doing and people you love being around. Not only will it take away some of the stress from continually dipping into your savings, it can also keep your mind and body sharp. After all, retirement isn’t all about money, it’s a mindset and way of life that affords you the luxury to live in the present and enjoy each and every day.
- 12 Terrifying Retirement Facts Keeping Boomers- and Their Advisers- Up at Night
- Official Social Security Website
- Reality Bites for Boomers Unable to Work in Retirement, New Study Unveils by Bankers Life
- Baby Boomers Can’t Quit: Still Want to Work After They ‘Retire’ by Buck Wargo
Any opinions are those of David Adams and not necessarily those of Raymond James. Please consult with your financial professional about your individual situation.