Working after retirement age
When I started my faculty position at the age of 32, the university had a defined benefit plan. They would contribute 6% of my salary to my retirement investment, pre-tax. I could contribute up to 60% from my salary pre-tax, but to get the university contribution, I had to contribute at least 4%. Such a deal! And yet I knew of people who refused to make the minimum withholding and so didn’t get the free money from the university. Eventually, the university raised its contribution to 10%, and I maxed out my contribution at 10%. The government gets its share as we start taking payments, and soon we’ll have to take mandatory minimum distributions, to make sure it does.
The best way to save for retirement is to start as young as possible. Small amounts of monthly savings over 35-40 year and invested with compound interest is way easier than waiting until age 50 or later to begin. But not everyone can do that. For most retiring Americans, Social Security is most or all their retirement income. For most American homeowners, their house is most of their personal wealth. So, the response is to plan to continue working after retirement age.
“This presents a dilemma. On paper, working longer boosts retirement income — and in many cases, it’s a rational choice.
But [economist Teresa] Ghilarducci warned that “most of us don’t even have a choice to work longer, even if we don’t have enough money to live on in our old age.”
*snip*
“The working longer consensus was really a convenient untruth,” Ghilarducci said in a recent episode of the Decoding Retirement podcast. “The consensus was that … if people haven’t saved for the last 40 years … when we told them to, at least they have an out and we don’t have to do anything about it.”
*snip*
“Working actually isn’t that good for you,” she said, adding that oftentimes, the benefits of working longer depend on whether an individual is “part of the elite.”
“For the privileged few, work might make them healthier and keep their minds sharp, especially if they control the pace and content of their jobs, Ghilarducci said. But only about 11% of workers have that kind of autonomy.
“The rest, 89% of people, have jobs that if they continue them would actually hasten death by causing more anxiety and cortisol [a stress response] because work and commutes, especially if you aren’t the boss, can create higher levels of cortisol.”
So what is to be done?
“The government becomes your most important financial partner as you age,” she said.
“According to Ghilarducci, instead of relying on individuals, the government needs to take a bold new approach: a “Gray New Deal.”
“She explained that, just as FDR’s New Deal addressed the needs of workers and the unemployed, today’s policies must support a large and growing population of older adults — many of whom are being pushed out of the workforce or retiring without enough savings.”
Not anymore. The Republican party is in control of all three branches of the federal government and is assiduously pursuing the shredding of the social safety net. Even if you’re not on Medicaid, those cuts will affect hospital access. And make no mistake: the GOP coming for your Medicare and Social Security. Vote accordingly, peeps.
working longer won’t save your retirement
The best way to save for retirement is to start as young as possible. Small amounts of monthly savings over 35-40 year and invested with compound interest is way easier than waiting until age 50 or later to begin. But not everyone can do that. For most retiring Americans, Social Security is most or all their retirement income. For most American homeowners, their house is most of their personal wealth. So, the response is to plan to continue working after retirement age.
“This presents a dilemma. On paper, working longer boosts retirement income — and in many cases, it’s a rational choice.
But [economist Teresa] Ghilarducci warned that “most of us don’t even have a choice to work longer, even if we don’t have enough money to live on in our old age.”
*snip*
“The working longer consensus was really a convenient untruth,” Ghilarducci said in a recent episode of the Decoding Retirement podcast. “The consensus was that … if people haven’t saved for the last 40 years … when we told them to, at least they have an out and we don’t have to do anything about it.”
*snip*
“Working actually isn’t that good for you,” she said, adding that oftentimes, the benefits of working longer depend on whether an individual is “part of the elite.”
“For the privileged few, work might make them healthier and keep their minds sharp, especially if they control the pace and content of their jobs, Ghilarducci said. But only about 11% of workers have that kind of autonomy.
“The rest, 89% of people, have jobs that if they continue them would actually hasten death by causing more anxiety and cortisol [a stress response] because work and commutes, especially if you aren’t the boss, can create higher levels of cortisol.”
So what is to be done?
“The government becomes your most important financial partner as you age,” she said.
“According to Ghilarducci, instead of relying on individuals, the government needs to take a bold new approach: a “Gray New Deal.”
“She explained that, just as FDR’s New Deal addressed the needs of workers and the unemployed, today’s policies must support a large and growing population of older adults — many of whom are being pushed out of the workforce or retiring without enough savings.”
Not anymore. The Republican party is in control of all three branches of the federal government and is assiduously pursuing the shredding of the social safety net. Even if you’re not on Medicaid, those cuts will affect hospital access. And make no mistake: the GOP coming for your Medicare and Social Security. Vote accordingly, peeps.
working longer won’t save your retirement
I too started at an academic institution at 32. I was offered either the Defined Benefit plan (then a 6%/6% contribution) or a 403(b). The pressure from colleagues who were not offered the 403(b) or had taken it, to take the 403(b) was intense. However, i knew and know myself, I despise following the stock market and it bores me, so I took the DBP. And retired at 57 with a paycheck for as long as I live. Those 403(b) colleagues? Most of them are still working or working second/third careers because they don’t have enough to retire. As I said in 1997, “If the defined benefit plan was a bad deal, they (companies and educational institutions) wouldn’t be so desperate to get you to not take it.”
@George,
My wife and I both have TIAA-CREF defined contribution plans (403b). We worked at different universities, and both encouraged us to take it. We both retired at the time of our choosing and are quite happy with our retirement finances.
My dad worked in industry all his career and had a pension (defined benefit) plan. The company converted it to an annuity (defined benefit plan) when he retired. My parents died as paupers 20 years later. Fortunately, they had five kids and we could take care of them.
Our financial advisor suggested annuitizing some of our retirement. We decided not to, since annuity payments are not adjusted for inflation. If you don’t plan to live very long, if you believe low inflation rates are the new normal, if you’re afraid of dips in the market, or if you’re not diversified, defined benefit plans like annuities may be right for you.
My healthcare is guaranteed since I spent time at LeJeune drinking and showering in the water. My health is questionable at this time.
There was not much of a reason to retire at 67, so I stayed and worked the additional years and maxed out SS. Having a better than average salary due to education and background did payout for us too. Jan did similar. We are not wealthy . . . just comfortable.
Setting something aside is necessary if you can do it, So many can not and that is where Social Security and Medicare come into the picture more strongly. It is the minimum at best.
We are independent of our children which is what I wanted. Owning a home is not an income or profit maker. However and if in the right market, you will probably get your money back after expenses. Mind your expenses and don’t be the grasshopper.