Retirement: a thing of the past?

For growing numbers of Americans, yes:

The new golden years? Work, work, and more work

During the economic crisis, some Americans worried that they'd never be able to retire. Now there's evidence that may be playing out, given that older workers are hitting 65 and increasingly staying in the labor market.

A record number of Americans over the age of 65 are working, according to data from the Bureau of Labor Statistics. A decade ago, about 5 million senior citizens continued to work, a number that had swelled to more than 9 million last month. In 1994, slightly more than 1 out of 10 senior citizens was still working. Now, about one out of five Americans over the age of 65 remains employed.

While some seniors are likely putting off retirement because they want to continue working, it's likely that the shift reflects the economic instability that Americans of all ages are experiencing. More than half of people over 50 years old say they plan to or already have worked past their 65th birthday, with the majority of those saying it's linked to financial reasons, according to survey published this month from The Associated Press‑NORC Center for Public Affairs Research.

The ranks of elderly workers are likely to only keep growing, given that about 10,000 baby boomers turn 65 years old each day, a trend that's projected to continue through 2029.

Yet many of those boomers are woefully unprepared for retirement, at least when it comes to their financial health. In an annual survey conducted by investment firm BlackRock, baby boomers said they wanted to have about $45,500 in annual retirement income, although the average boomer had only saved up enough to produce slightly more than $9,000 in annual income.

Of course, Generation X and the millennial generation aren't likely to be in any better shape. The typical Gen Xer has far fewer retirement assets as someone of the same age had 25 years earlier, according to a J.P. Morgan study. Millennials, many of whom are just starting their careers, are hobbled by increasingly high student debt loads as well as an uneven job market.

The share of seniors in the workforce will most certainly continue to rise, with the Bureau of Labor Statistics projecting that almost 22 percent of the 65-and-older set will be working in 2024. [...]

Read the whole thing for embedded links, videos and more.

The answer for some may be to leave the country, for somewhere they can afford to retire to. It's a more attractive option to ending up like this.

     

Oregon, the 5th BEST state to grow old in

That's what this article says:

The 5 best and worst states in which to grow old

[...] 5th best: Oregon
Oregon scores well on the quality of care available in the state, although its assisted living and nursing home costs tend to be in the middle of the pack. The state's population is rapidly aging, with its over-65 age group growing by 18 percent from 2010 to 2014, as the Baby Boomers hit retirement age.

The average cost of a year in an assisted living facility in Oregon is almost $47,000, according to Caring.com, while a nursing home will require almost $96,000 in annual costs. [...]

And the 1st best? South Dakota. Who knew?

     

Older workers in the workforce

Here are some videos from the PBS website, part of a section called: New Adventures for Older Workers. They show many of the problems older workers face finding employment, and how some of them transcend those problems.

About half of unemployed middle aged and older workers are still unemployed two years later. If you are near retirement and an employer wants to hire you, there’s fixed costs to hiring you. They have to train you. They have to invest in you and if their investment is only going to be spread over a few years then that might not be the best investment for them compared to a worker where that investment might be spread over many more years.

— Julie Zissimopoulos
Economist, University of Southern California

This lady comes out of retirement, and finds work that she's never done before, that transforms her life:



Many older people, well past traditional retirement age, are still working:



More on late-blooming self-starters; "Encore" careers:



The advantages of a geriatric workforce. Here is a company where the median employee age is 74:

I think there’s a kind of sweet spot that’s emerging in life that’s a function of the longevity revolution. So when you’re 50 years old, you have the chance to have a whole new chapter and it’s an extraordinary opportunity for individuals to have another chance to do something important.
— Marc Freedman Founder, Encore.org

It seems that some of the oldest folks, 65 and older, who had to come out of retirement and start working again, have had even more success. It's interesting to see the different approaches that different people of different ages take, and the varying degrees of success they enjoy.
     

Interesting Links about Aging, Working, Retirement or not Retiring

An 8.3 Percent Return for Life, Guaranteed: Real or Imagined?

[...] In finance, the word "annuity" refers to a series of payments made to a person (called the "annuitant") for life or for a set number of periods. In this post we refer to a fixed, life annuity, a plain vanilla annuity that will guarantee a set income each month for the rest of your life, no matter how long you live or what dumb mistakes you make along the way. If this guarantee looks familiar, it should, since it is pretty much what we get from Social Security as well as from a traditional "defined benefit" pension -- if we are lucky enough to have one. Both are forms of life annuities because both pay until you die. [...]

I've been curious about annuities. This article has a large question and answer section, which explains a lot.

New Adventures for Older Workers
Has lots of facts, figures and links about the subject matter; retirement, coming out of retirement, working indefinitely, making it in rural areas, all sorts of things. Videos, with interviews of various people in various situations.

How Social Security Pays You to Work Forever

[...] How long do I intend to "work"? Hopefully, right up to my last day on earth. And, as if I didn't have enough good reasons to work, Social Security, it turns out, adds a significant incentive for doing so. The longer you work, the larger your Social Security benefits. This is due to Social Security's "Recomputation of Benefits" provision. Here's how it works -- for all of us older cowpokes who remain in the saddle indefinitely.

Each year you work, you add to your earnings record, leading Social Security to automatically recalculate your benefits. If you are interested, here are the gory details.

In a nutshell, Social Security averages your highest 35 years of earnings to calculate your Average Indexed Monthly Earnings or AIME. Then it plugs your AIME into a formula that figures out your full retirement benefit, called your Primary Insurance Amount (PIA). What benefits you can get for yourself and your spouse (including your ex-spouse(s) and your children, if they are young enough or are disabled) is all pegged to your PIA.

From age 16 on, Social Security considers all your earnings, up to a ceiling that rises from year to year. It then indexes, based on historic wage growth, all earnings through the year you turn 60.

In other words, Social Security adjusts past earnings upward to account for the growth in the economy. But after age 60, you get credit for your earnings without any adjustment at all. So imagine that there's a sudden surge in inflation and wages after age 60 skyrocket. They're going to look spectacular compared to your wages of the past, even though they've been indexed. And here's the kicker. Social Security bases your benefits on your highest 35 years of earnings.

So now imagine that age 30 was the lowest of those 35 years and you made, say, $40,000, even after indexing. But now inflation takes off and you're suddenly making $200,000, even though $200,000 ain't what it used to be.

But for your Social Security benefits, this is a bonanza. You're suddenly being treated as if you were really earning a lot more, and thus deserving of much higher benefits. So, for every year that your post-60 earnings exceed the lowest of the previous 35 years, bingo! You'll raise your Social Security check (or checks, if your dependents are also collecting). [...]

He continues on, using himself and his earnings as an example. Wow.

Recommendation No. 1 for a Secure Retirement: "Age in Place"

[...] Owning an accessible home in which we can age in place is important to keeping our future core expenses down for many reasons. First, and most obvious, owning a home outright in retirement greatly reduces our need for income since we no longer have to pay the mortgage.

In the United States, paying as much as 40 percent of your income for housing has been considered normal. Many of us did this when we were young with growing families and growing incomes. Think of how much better we could have done if we had owned our homes, outright, through our adult lives. In many cases, by not making mortgage payments, our housing-related expenses could have been cut by 75 percent or more.

Contrary to what others may have told us, our standard of living in retirement is not based on what we make or what we spend. Rather, it is based on what we spend and the benefits we get from the things that we own outright such as housing, cars, appliances, furniture and clothing. Economists call the income that we get from owning our homes and other possessions outright, and not having to pay rent on them, "implicit income." Since we already own so much of what we use in retirement (home, car, furniture, appliances, clothes), the income that we will need to comfortably support ourselves in retirement may be far, far less than the income we earned while we were working and paying for all of these things. So much for fear-mongers who insist that we must have cash retirement income equal to 70 percent of our pre-retirement income! That is just not true.

A second major benefit of owning, outright, an age-in-place home is that it is a wonderful hedge against inflation. Some of our older readers will remember the double-digit inflation of the late 1970s and early 1980s, where costs (including the costs of renting a home) could double in six or seven years. If we own our retirement home outright, or have a fixed-rate mortgage, which I will deal with below, most of our housing costs are protected against inflation and the value of the home is also likely to increase. While there are other ways of protecting against inflation (see my last column on inflation-protected annuities), the cost of inflation-protection is high. Rather than pay for inflation protection, we can save money by reducing our core expenses that are subject to inflation. Much of this can be done by owning a paid-up, low-maintenance, energy-efficient age-in-place home.

Aside from the financial benefits of reducing cash flow needs and hedging against inflation, another huge saving from having an age-in-place home is likely to be the reduction or elimination of very expensive nursing home costs in the future. With an age-in-place home, an incapacitated spouse or single person may be able to live in a comfortable, familiar environment with some outside help for a long period of time at a fraction of the cost of a nursing home. Staying at home can also reduce the need for increasingly expensive long-term care insurance whose maximum daily benefits are often just $150 or so, a fraction of nursing home costs, leaving patients and their families to make up the huge difference. [...]

The article also goes into reverse mortgages and many other things. A good resource to read.

I'll probably be referring back to many of these links. Good stuff to know.
     

Financial Savvy Peaks at Age 53?

So say some:

Financial Savvy Peaks at Age 53: What to Do When You Get Stupid

[...] Lew Mandell: As we move through middle age, our ability to manage our finances tends to peak, on average, shortly after our 53rd birthday, and declines thereafter. By the time we hit 70, this rate of decline steepens precipitously. This is the opening theme of my new book "What to Do When I Get Stupid."

The relationship between age and financial capability is a function of two offsetting aspects of intelligence. As we get older, experience makes us better able to cope with a variety of familiar problems. This is called "crystallized intelligence." However, past the age of 20, the analytical ability we need to perform new tasks declines steadily. This is called "fluid intelligence." Since the intelligence we gain from experience increases more and more slowly after some three decades of adult experience, our steadily declining fluid intelligence ultimately offsets the gains from experience, causing most of the decline in our mental capacities including financial capability. (Check out Paul Solman's animated explanation of Harvard's economist David Laibson's graph demonstrating this relationship and see Making Sen$e's full segment below.)


At a certain point, declining "fluid intelligence," or our analytical ability, offsets gains in our experiential intelligence, putting our financial decision-making at risk.

Adding to this decline is the beginning of age-related neurological problems including dementia and other types of cognitive impairment. Overall cognitive impairment affects 21 percent of us in our 70s, increasing to 53 percent of those in our 80s and 76 percent of those over 90.

The ability to make investment decisions has been found to peak at about age 70, somewhat later than other types of financial decisions such as those that relate to the use of debt. This is probably due to the fact that many adults focus on their investments only later in life when they have both assets and the time to think about them. Experience with investments tends to come later, thus abilities peak later.

Unfortunately, studies have found that as people get older, their confidence in their abilities to make good investment and insurance choices actually increases as their measured ability decreases, leading to the likelihood of poor outcomes. [...]

The rest of the article talks about what you can do about this, as well as embedded links to other articles with retirement advice.