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I recently read a somewhat depressing article in The Economist about the “end” of retirement.
The article begins with a bit of history: When pensions began in Germany over a hundred years ago, they were for people who lived to 70 — twice as long as the average person. When Social Security was introduced in 1935, 65 was three years more than the American life expectancy. Essentially, retirement was created for those who lived an abnormally long life. (The Social Security Administration acknowledges that average life expectancy at birth back then was 58 for men and 62 for women, though it also points out that 54% of men and 61% of women who survived childhood made it to age 65.)
The author then goes on to say that nowadays, Americans are living much, much longer, trying to retire earlier, and saving less. There’s no way Social Security can cover this, and the 401(k) isn’t working either, as both individuals and employers stop contributing.
Relatively few people today can remember the days before retirement, and I’m sure none of us want to imagine a future without it, either. But The Economist’s argument overlooks one big problem: Even if you do want to work for the rest of your life, you can’t guarantee that your job will be around that long.
A McKinsey study from last month showed that 71 percent of US workers have jobs unfavorable to income growth – jobs for which demand is decreasing or supply of workers in increasing.
The study gave an example of how a traditional job likely requires new skills:
“[A] purchasing manager in a US manufacturing multinational might be tasked with buying the best value inputs from anywhere in the world to supply factories in Asia. To do that job well, she would need advanced skills in a host of information technologies, the ability to coordinate the activities of colleagues and business partners in a global network, and very likely have a formal education in foreign languages.”
If you're an adult who has been working for years, building your human capital may seem daunting; learning new skills is difficult, time-consuming and often expensive. The study concludes by saying that America has seen redevelopment challenges like this before, and we have risen to the occasion. In the late 19th century we quickly morphed from a farm-based economy into the leaders of the industrial age. During World War II American women valiantly became skilled factory workers to fill the void left by men. It may be time for another nationwide re-education.
The recession may be the catalyst in the transformation. When the economy recovers, jobs may return — but don’t assume they’ll be the same jobs that were lost. Beware the catch-all term “growth.” According to McKinsey, “Unless the mass of America’s human capital can be developed fast, the nation risks another period in which growth resumes but income dispersion persists, with Americans in the bottom and middle-earning income clusters never really benefiting from the recovery.”
So, readers, when (if at all) are you planning to retire? If you are like our average subscriber, you have almost 20 years to go before you can collect Social Security benefits. In the meantime, what do you plan to do to ensure that your job will be around that long?
You may be able to imagine yourself working for another 20 years doing exactly the same job you’re doing now — but don’t count on it.
i think it would be best to take all the money away from everyone, put it all in a big pot and spread it equally to everyone. thankfully Obama is headed in that direction. that way everyone is equal and there will be no more crime and no need of guns etc.
In adding my statement to this blog , I also do not mean to sound or seem arrogant . Going back ten years , the economic times that we are living through today are times that I would have likened to a " locomotive " approaching that turned on the afterburners over the last couple of years reaching the final destination of " caught off guard " . Even I didn't see this coming to the magnitude of we are seeing today . If someone would have personaly predicted that times like these are upon us ; most everyone blogging about this would have cursed them , and or told them that they didn't know what they were talking about . Most people were in the " live for today " syndrome . When reality hit , it hit in a way that unless we are financially prepared it's like sinking in " quicksand ". I worked with individuals that scoffed at me when I took advantage to work the extra hours to pay down and off a mountain of debt and at the same time building my retirement savings ; that I was being greedy . Today , I'm retired because I prepared by saving my money using any savings vehicle available . Many of the scoffers that should have been able to retire are still working with uncertain futures .
Wow, I didn't realize we owed our thanks to the US government for, as this article puts it, "creating retirement". Retirement is not a RIGHT, it is a PRIVILEDGE, enjoyed by those who have the motivation and took the responsibility of planning and saving upon themselves. Social Security NEEDS to be reverted back to it's original purpose… SSI, or Social Security INSURANCE. It was never intended to be, nor should it have ever shifted to, a government funded pension. The average US life expectancy is what, 78-79 now? Set the age for SS*I* at 82 and bingo, problem solved. Will there be a generation of "retirees" who will have their plans of living off of social programs thrown out the window? Sure, but this is the same generation who knowingly accepted their fate when they decided to 1) not save for their own future, and 2) let SS*I* turn into the mess it is today. In all the years of hearing about the problems of Social Security, I have yet to hear a logical, factually supported argument against what I've proposed above. It always gets reduced into something along the lines of "it's not fair", and "I deserve such and such". Our founding fathers would be ashamed of our entitlement mentality.
The company I worked for for over 25 years decided that age 47 was the right time for me to "retire." They closed the facility and moved out-of-state. I began looking in earnest for new employment but it was obvious that the 20 somethings I interviewd with, and would be reporting to, had a different view about my career capabilities and asperations. So, I built on what I had and started my own business. I had to pay for my health insurance out-of-pocket, which at its peak was costing over $9000 a year, with a $20,000 deductable.
Overall though, everything has worked out very well for me. I'm 65 now, drawing Social Security and Medicare. I still work at my business but it's not an everyday obligation. My savings and investments are secure, growing and waiting for when I need them. I have no debt so my financial needs are much less than the individual who just had to buy that big home or vacation property and took on another 20-year mortgage obligation.
Those of you starting out with a new or advanced degree in your 50's and "planning" to work into your 70's or beyond, good luck. Your much younger competition is much more eager than you, physically more capable and willing to relocate anywhere at any price to get started. Your potential employer may and will have a totally different view of your capabilities with or without that shiny new degree. I'm not trying to be arrogant or sarcastic. I've been there and I'm speaking from experience.
Offshoring gutted the North American economy. It has been a disaster for the average person. Investing in stocks was supposed to bring wealth and "growth". Another disaster. Company stocks have no value unless they pay cash dividends to stockholders. There is no other rational way to value stocks. Growth in stock prices can only occur if there is growth in cash dividends. Gotta stop listening to Wall Street con artists and corporate CEOs. Their only interest is to loot your bank account, get as rich as Croesus and if they wreck the North American economy in the process, well, that's the free market. They'll show some compassion for us suckers and try not to laugh in our faces.
Social security must provide at minimum an existence for the retired. Society must open for young people to work. We are at the point where babyboomers will begin collecting their contributions to SS. A sensible boomer would have set aside additional funds to augment SS but many haven't. I predict more people will convert their McMansions to rooming houses and hospitals will resemble freeways at rush hour. This should come as no surprise to government officials they have had since 1946 to plan for this pig in a python.
I was unaware that the 401(k) was not working.
Equality of opportunity, not equality of outcome.
We're all responsible for the consequences of our decisions.
The only problem I have with this article is that it skews retirement as something that one must rely on a government or employer to provide. Beyond mere 401Ks, I think savvy earners [should] more frequently plan to retire off of a lifetime of careful investing. Additionally, the term "retirement" may be archaic and should soon be replaced with something more like "Post-Career Income Producing Activities"…
We're in deflation. There have been some great articles recently about how globalization caused most of this problem: no private sector US job growth since 2000. The private sector offshored all of the new jobs that might otherwise have been here.
On the other hand, the growth of US government jobs (education, government, and health care) has been large. This can only go on if we set up a system to tax offshoring, outsourcing, and importing of goods, services, and people. We can do this, but we'll have to dance around the WTO rules to which we unfortunately agreed (Europe and Asia have figured it out, avoiding trade deficits).
For the workers here, a way needs to be found to pay for food, clothing, shelter, health care, and social needs during work and retirement. Expanding and strengthening Medicare and Social Security can help a lot. The hope is that major costs (such as housing) keep falling, as they are now. And, we must do something to rein in the cost of health care and education.
It's possible to live comfortably in a deflationary environment, but you must quickly eliminate debt or be crushed by it.
I have worked all my life (now 67 and unemployed). Raised two children on my own worked full time and attended college at night. Strugled to get myself a BS…string of events I completed my AS degree and had 15 more credits to complete at SUNY@NewPaltz, NY. When Union Carbide downsized early 90's and had a difficult time finding a full time job. Forced to rent my home and move in with family in Florida. Contacted SUNY@NewPaltz to complete my degree online. I was told I had to complete the remaining credits on campus. Tried to complete my degree in Florida that wanted 50 more credits. Company I worked with layed me off. Found another job for half the pay and the layed me off. Market took a nose dive, I am unemployed and 67 years old …Now what??? Social Security does not cover my expenses and unemployment will be ending in a month or so. Good computer skills, payroll and payroll taxes, detail oriented, pro-active, analytical, strong organizational skills. Why am I unable to find employment???? Please advise. Thank you and have a pleasant day!
Barbara
Naples, FL
401k's work . They won't work if participant's don't contribute ( save ) enough of their money . That means save more to fixed income and less invested in this " lousy " market .