As I mentioned in my first post, an estimated 10,000 Americans turn 65 every day and people over 65 now outnumber teens for the first time since 1948. By 2029 the +65 cohort will number over 71 million or about 20% of the population. And yet as the ranks of seniors swell recent polls asking if people plan to continue working, either full or part-time, past 65 have resulted in a responses ranging from 48 to 74%. Which means that if you are not planning on working past 65 I am sure you know someone who does.
So what happened to the traditional retirement model that our parents enjoyed a generation ago? Where did the secure retirement go that allowed for lazy days of golf, fishing and bridge that could be enjoyed after a lifetime of labor? I am afraid that for most of us that idea has gone the way of the jetpacks that we were promised when we were growing up in the 60's.
I am sure we all experienced several of the following that resulted in the "new" retirement model:
- A shift from defined benefit plans (pensions) to defined contribution plans (the 401k). For example, in 2015 only 20% of the Fortune 500 companies offered pension plans down from 59% back in 1998. The onus on retirement planning has been placed our shoulders and for many of us we have not been up the task. We did not max our our contributions or understand the nature of risk while investing for the long term.
- We are living longer than our parents. Advances in healthcare means that we are living about 10 years longer than our parents which means we increase the chances that we will outlive our savings.
- Wages have been stagnant for close to 40 years. Real median wages have only risen 9% since 1979. For comparison, real wages in the 25 years after the end of WWII rose 91%.
- Lifestyle inflation. Our parents didn't have three gas guzzlers in the driveway of our McMansions. Nuff said.
- Increased personnel debt has become a way of life. For example, in 2016 the average household had credit credit debt of $6,184. That is on top of the other debts: auto, student and mortgage. You can't save for retirement if your are in hock to the bank and MasterCard.
- The rise in the cost of medical expenses and college tuition has been raising faster than inflation. Since 1978 college tuition has increased 1,120% (four times faster than the consumer price index). Over the same period medical expenses have risen 601% while food has increased 244%. Many of us are still paying for students loans taken out decades ago (not to mention the loans we co-signed for our children) and the burden of medical debt is a leading cause of personal bankruptcy.
- We have become a "sandwich" generation with about 15% of middle-aged households providing financial support to both an aging parent and a child, siphoning money away from retirement savings.
- The restructuring of the American economy that shattered traditional industries resulting in many workers being fired from companies with whom they thought they would have lifetime employment. This resulted in millions of workers having long term unemployment, a reduction in savings and for many employment in positions at lower wages and benefits.
- And let us not forget the Subprime Mortgage Crisis of 2007 and the subsequent Great Recession. A recent poll has indicated that these events have left almost half of Boomer households significantly less prepared for retirement.
Ok, enough of that, sorry for being a Debbie Downer. Now on the flip side, there numerous reasons embrace the "new" retirement and the Encore Hustle:
- We are living longer and overall we are healthier! The old model of retiring at 65 was started at a time when if you lived to 68 you were considered lucky. So, in addition to advances in healthcare, we have come to realize that the continuance of work has huge health benefits. It keeps us active and engaged. It can strengthen our social network and stave off cognitive decline.
- We are a more educated workforce. In 1950 only about 7% of the workforce had a college degree. By 1990 this increased to about 24%. This education doesn't expire when we turn 65! Put it work.
- The economy has shifted where the workforce is employed in manufacturing to one of services and knowledge based. This benefits the older worker.
- Conversely since the number of workers in trades and crafts have declined there is a generational gap in this sector. If you have these skills and don't mind grease under your fingernails there will always be a place for you.
- Current unemployment rates are low and many employers appreciate flexibility and work ethic of older worker. In some cases companies are actively seeking out that sector of the workforce.
- The internet and the sharing economy has made it incredibly easy to network, search for work and start businesses. Linkedin, Monster, eBay, Facebook, Payday, Alibaba, Uber, Airbnb, eLance, Craigslist etc are all household words that did not exist 15 years ago.
Sure we are not strapping on our jetpacks or booking vacations to the moon yet. But we do have electric cars, solar energy and gene therapy. I personally can't wait to see what the next 30 years will hold. How about you?