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Rethinking Retirement, Part Two

Rethinking Retirement, Part Two

Last updated on: August 16, 2016 at 9:45 am by Jane the Actuary

Rethinking Retirement, Part Two 2016-08-16T09:45:38-06:00 Jane the Actuary

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OK, “Part One” was just an invitation for comments. And I spent most of my free time over the weekend writing about other topics.

But I’d been reading a book called Unretirement (subtitled, “How Baby Boomers are Changing the Way We Think about Work, Community, and the Good Life”, and authored by Chris Farrell) and recently came across two relevant articles:

“When Outside Factors Dictate Retirement Age” – an article in the NYT shared by the Center for Retirement Research via twitter, and

“Signs of aging may soon affect financial advisers — and brokerages” at the Chicago Tribune. (Click here for a link to a google search for an indirect way of viewing the article.)

and I wanted to, first, tell you all about what they have to say, and then, in a later post, give you my own thoughts.

The basic premise of Unretirement is that the new trend is for people to continue working well into late adulthood* and that we should encourage and accelerate that trend for the sake of the American economy and the oldsters themselves.

(* Remember, “late adulthood” = my new term for adults aged 60 – 80, so as to make no presumptions about when or whether they leave paid work. I’m experimenting with that term in this post, to see how it works.)

What’s the benefit of working past retirement age? Money, for one. It solves the worry that late adults won’t have enough money for a suitable retirement, and, by virtue of the FICA taxes from their wages, props up the Social Security funding itself. But beyond this, working is, he says, for most people, a Good Thing. Sure, retirees may have all manner of plans for pursuing hobbies and the like, but working at a job, whether as a professional or a manual laborer, provides self-worth, opportunities to socialize, and keeps one active.

Farrell is very optimistic about all of this. Not for him the fears that late adults lose the mental sharpness for white collar jobs, or the physical capacity for blue collar work. Older workers may not learn new things as quickly as their juniors, but they will be able to draw on a great reservoir of experience, and employers can make a few simple ergonomic changes to the production line.

But his stories, which he shares liberally throughout the book, and form the basis of his argument much more than hard data, are largely of professionals re-creating themselves in a second career, often self-employed. He pulls out a statistic that 1/3 of American workers are in the “creative class” (remind me to read about that, as I think it’s mostly a bunch of nonsense), and claims, anecdotally, that later adults have proven themselves to be just as “creative” as anyone else.

What about the fact that, as things stand, plenty of workers not only are unable to work into traditional retirement years, but find themselves unemployed and involuntarily early-retiring? How will there be enough jobs for late adults to not only continue working up to traditional retirement age, but beyond that point?

Here Farrell gives two contradictory answers: first, he says, essentially, “of course there will be enough jobs for everyone because, after all, there were enough jobs for women when they began entering the workforce” (though it seems to me that Megan McArdle once wrote a piece referencing another economist who said that the stagnation in men’s wages could be tied to women’s entry into the workforce, though there’s so much going on that you can’t isolate a single variable), but he also gives the “if we can send a man to the moon” answer, or, rather, the Volker variant: “when Volker made it his goal to end the scourge of inflation, people said it couldn’t be done; so, in the same way, we can achieve full employment if only we try hard enough.”

On top of that, there are other problems that will need to be fixed: age discrimination, most notably. And he proposes a few policy changes: a universal savings program (e.g., Australia) that would provide portability and encourage career mobility (in contrast to DB plans – which are a moot point now anyway). He cheerleads for Obamacare, for eliminating “job lock” and making health insurance easier to obtain for the self-employed. He suggests that, to encourage delayed Social Security benefits and continued work, a lump sum option for the value of the deferred benefit be available. And he proposes that the 401(k)/IRA minimum distribution rules be delayed or eliminated.

He also has a significant section on the history of retirement, writing that, in the days before Social Security and pensions, the lucky ones worked ’til they died, or had family to care for them, or had the “pension” of a farm they could pass down contingent on being taken care of; the unlucky ones consigned to almshouses, living out their final days in penury, with the company of the mentally ill.

You won’t be surprised to hear that I think he’s far too optimistic. Not that I disagree with the idea of working to a later age, or with the value of working, in general. But it is a difficult thing to reinvent yourself, and unless we reach the point of a true labor shortage (which is always predicted, particularly as grounds for bringing in immigrants, but never happens), employers aren’t going to be any more interested in providing workplace flexibility for “traditional” jobs than in the past. Sure, maybe you could work half-time, and maybe jobs which are seasonal, hiring people year-round but alternating between times when they’re a bit bored and other times when they work their tails off, might want to hire late adults as supplemental workers during the busy season, like tax season, for instance. But what many late adults want is the ability to take more vacation time, go visit grandchildren who live out-of-town, and employers aren’t interested in employees who won’t predictably show up for work.

Besides which, he is also too optimistic about the ability of individuals to work well into late adulthood. Maybe he really, when it comes down to it, only perceives his proposal of “unretirement” as working beyond an “early retirement age” or maybe he considers individuals who simply aren’t able to keep working any longer to be in the minority.

The second of the two articles focuses on a specific industry, financial advising, and, rather than supporting the concept of “unretirement” or suggesting that financial advisors could scale back by, for instance, offering their services to middle-class families, as Farrell says, voices concern that brokerage firms face risks, as the industry ages, of “errors in client accounts because of the declining mental skills of financial advisers.”

As an adviser ages, he or she is more likely to have senior moments, including forgetting to put in a sell order, misunderstanding the number of shares asked to be bought or sold, or getting confused about clients’ investment goals, says Chicago securities lawyer Andrew Stoltmann.

(Yeah, we know this — these sorts of problems were exactly what caused my dad to fail to do his taxes for multiple years, and that was before his head injury.)

And the first of the articles, from the New York Times, starts with the fact that you may well intend to retire at a late age, but may find yourself obliged to retire earlier for health reasons. Beyond that, people with family histories of dying early or those who are in poor health themselves may choose to retire early, to avoid “missing out on” the retirement years.

Now, here’s the annoying thing. I saved this link a couple days ago, and in the meantime, hit my 10 article limit at the Times, so I have to go on memory — so forgive me if I don’t get this entirely right —

but the article seemed to imply (a) that you could reasonably choose to retire with a lower level of assets if you’re pretty sure you’re going to die early (a pretty risky strategy, if you ask me — though the individual they quoted could, conceiveably, have been thinking of a decision between a higher and a lower, but still acceptable, living standard), and (b) that you have a “right” to a given number of years of postretirement leisure, and it’s “unfair” to be unable to enjoy them.

And that is really a direction we’ve moved towards. Does it make sense? Of course, anyone who has saved dilligently indeed has the “right” to the leisure they’ve earned. But is the purpose of retirement programs, and government safety-net programs, to provide individuals with a given quantity of leisure time at the end of their lives, not just to provide for them after they lose the ability to support themselves with paid work?

Inquiring minds want to know.

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