More people are working past age 65

[BunsGettingFirm]

Ugh...I just turned 40 on April 2, and wish I had that "young forever" feeling. I went to the Kings Dominion amusement park in VA on my b'day with some friends, and those damn roller coasters beat me up!

The main thing that bugs me though, is how fast the 30's went past. I remember my 30th like it was yesterday.

Yeah, I was watching the latest episode of the TV show V, and it referred to some events from "ten years ago". I thought to myself, "Really? Oh, yeah, that was 10 years ago." Scary as heck. I am looking forward to my ER in which my drunken stupor will slow down time.

 

[plex]

I would like to see our society make part-time employment a real option for people.

Currently, our health care system rules part-time employment out for a large portion of the workforce. If you need health insurance you pretty much have to work 40 hours a week. Most jobs beyond cashier and fry cook require you to work 40+ hours a week because they provide health insurance and wouldn't be cost effective to the employer at fewer hours per week.

If we ever get our health care untethered from our employment, I expect that we will see an explosion of people working part time as they get older, rather than the current full-time to zero cutoff that we currently have.

I think that this would be a very good thing.

That is essentially what the health care reform will do in 2014. It will be very expensive, but that is basically the largest effect it will likely have.

 

[ziggy29]

If we ever get our health care untethered from our employment, I expect that we will see an explosion of people working part time as they get older, rather than the current full-time to zero cutoff that we currently have.

I think that this would be a very good thing.

Agreed. I could easily see a transition from full time work to part time work to full retirement become a much more common "retirement path" than it is today. There are probably already a lot of folks who are fairly close to retirement who would love to work part time if the loss of health insurance wasn't in the picture.

 

[W2R]

Agreed. I could easily see a transition from full time work to part time work to full retirement become a much more common "retirement path" than it is today. There are probably already a lot of folks who are fairly close to retirement who would love to work part time if the loss of health insurance wasn't in the picture.

Working a full 9.5-hour day (including the half hour lunch) plus commute became a lot harder after I turned 60, for some reason. If I could have transitioned to part time work, I might still be working. However, in my job that was not an option. Guess I am pretty lucky that it wasn't.

 

[RonBoyd]

Oof! I am not looking forward to it.

I have been told that the alternative really sucks.

 

[stephenandrew]

This was my way of thinking as well, but this line of thinking is not backed up by any data. It is just popular opinion and anecdotal evidence. If you looked what Elizabeth Warren found through her studies of the middle class as an aggregate, it is not the discretionary spending that is driving the increasing financial instability. It's the competition for housing in better school districts, college education, health care cost, and the lack of flexibility from having two incomes fully committed to these fixed costs that's putting middle class families in a more precarious position.

Thanks for the link--I stopped watching after 30 minutes, but I think I got the gist of her research and position. Very interesting. A few things I noticed that I thought may be relevant: (1) Her assessment compares a 4 person family over time, and she shows increased "fixed" costs. The thing is, families are dynamic--kids grow up, they move out. Some of the costs she sights that are higher are not permanant, e.g. childcare. Also, not everyone lives in a four person family home--some folks are single all their lives, other get married and have no kids, etc. I would be interested to know how their costs changed over time---did they go up like her model family? go down? (2) She showed housing costs increasing--I suspect part of this increase is becasue over the past ten years, down payment amounts have fallen--used to be it was pretty normal to put down 10-20% on a house. In recent history, you could put nothing down--thereby increasing your interest costs--thus increasing your housing costs. I had a hard time understadning if she tried to control for quality (I don't think she did) but while more moeny goes toward housing today, it is arguably better hosuing, e.g. has central air conditioning, two car garages with garage door openers, bigger rooms (she mentioned something about controling for rooms I think), some muncipalities require hones to be built with fire suppresion systems today, larger lots, double paned windows, fancier appliances, countertops, etc. To the extent she did not capture these qualitative differences, her compariosn about costs increasing overtime is overstated. (3) I certainly can't argue with her point that heathcare costs have increased, but I would ask you the question---would you rather be treated for a medical condition today with today's technolgy, medicine, and Dr. training, or would you rather be treated using 1970's knowledge and technology/medicine/expertise. Again, threre is (in my opinion) a qualitative increase in the medical services we receive today--thus reducing some of the perceived cost increase. (4) Same with cars---cars are no doubt safer today than they were 30 years ago--seat belts, airbags, stability systems, improved design to resist crash impact--yes, costs have increased, but there has been a correpsonding increase in quality.

In short, I think Dr. Warren maybe overstating the differences she discussed as she may not be making an apples to apples comparison of 1970's goods/services to 2000's goods/services.

 

[ziggy29]

I have been told that the alternative really sucks.

That would be really interesting if the people who told you about the alternative actually had experience with it....

 

[W2R]

That would be really interesting if the people who told you about the alternative actually had experience with it....

Now THAT would be a great thread!

 

[Nords]

In short, I think Dr. Warren maybe overstating the differences she discussed as she may not be making an apples to apples comparison of 1970's goods/services to 2000's goods/services.

Have you read her book "The Two Income Trap"? Because I think you're missing some of her points.

1. Mortgage lending of the 1960s/70s used to require 20% down payments, limit buyers' mortgage payments to 28% of after-tax income, and limit total debt payments to 36% of after-tax income. As you've mentioned, most of those limits have been blown off by "modern" financing.

2. We've done it to ourselves. Families have bid neighborhood housing up to insane price levels in our desire to send our kids to good schools. Unfortunately, unlike private-school tuition or childcare, mortgage payments last a lot longer even without cash-out refinancing. And when every single house in the neighborhood is being bid up by the fabled four-person family then it doesn't matter how many kids you may have or what your marital status may be. You have to bid at least as high as them or live in a "bad" neighborhood.

3. Well, maybe that marital status matters in one important way-- income. One of the ways we've outbid ourselves was by putting two incomes toward housing payments. If two incomes are required to support the mortgage payments then neither income is discretionary. Layoffs and part-time, let alone ER, are not options.

4. Your comments about quality & safety of home, cars, & healthcare sound suspiciously like the government justifications for hedonic adjustments to the CPI. Only problem is that you can't eat hedonic adjustments...

Her point is not that we're failing to appreciate the quality. Her point is that we're spending way higher percentages of our income on non-discretionary items like homes and healthcare. If two incomes are necessary to support that non-discretionary spending, and one of those incomes is laid off, then there is no discretionary spending to cut back. Whether the hedonics are accurate or not, the percentages are the issue.

 

[freebird5825]

I think women especially who always depended on a man (for money and for decisions) are going to be in terrible shape. Sometimes it's financial, sometimes it's emotional bondage. But when the husband dies, they truly can't figure out how to go on. It's tragic, and I'm not being sarcastic. I have seen what they write about it.

Yes, it is. Widowed at age 46. My husband was the larger wage earner due to a longer time in the same type of j*b. I was earning about 2/3 of his salary level. Do the math on the household income drop.
I landed squarely on my feet (financially), not because of some big insurance policy payout or "fat" pension, but because I had a professional career, money saved, no debt, and a 401(K) and a fully self-funded portfolio already well under construction.
I have been told many times that I should give classes on how to survive one of life's biggest black swan events. I disagree.
It is up to every PERSON, regardless of gender, to do the right financial things for themselves and their loved ones. Period.

 

[Rustic23]

So when does spending on non-discretionary items become discretionary. Take two military officers. They both retire on the same date with the same pension and health care, one lives on his retirement, the other is never able to live on his. My point is the one that can not make it, chose his spending pattern. He chose to drive a Lexus rather than a beater. He chose to live in a MacMansion rather than a smaller home. Those things are discretionary, imho, and one should not feel sorry for him having to work past 65.

 

[stephenandrew]

Have you read her book "The Two Income Trap"? Because I think you're missing some of her points.

1. Mortgage lending of the 1960s/70s used to require 20% down payments, limit buyers' mortgage payments to 28% of after-tax income, and limit total debt payments to 36% of after-tax income. As you've mentioned, most of those limits have been blown off by "modern" financing.

2. We've done it to ourselves. Families have bid neighborhood housing up to insane price levels in our desire to send our kids to good schools. Unfortunately, unlike private-school tuition or childcare, mortgage payments last a lot longer even without cash-out refinancing. And when every single house in the neighborhood is being bid up by the fabled four-person family then it doesn't matter how many kids you may have or what your marital status may be. You have to bid at least as high as them or live in a "bad" neighborhood.

3. Well, maybe that marital status matters in one important way-- income. One of the ways we've outbid ourselves was by putting two incomes toward housing payments. If two incomes are required to support the mortgage payments then neither income is discretionary. Layoffs and part-time, let alone ER, are not options.

4. Your comments about quality & safety of home, cars, & healthcare sound suspiciously like the government justifications for hedonic adjustments to the CPI. Only problem is that you can't eat hedonic adjustments...

Her point is not that we're failing to appreciate the quality. Her point is that we're spending way higher percentages of our income on non-discretionary items like homes and healthcare. If two incomes are necessary to support that non-discretionary spending, and one of those incomes is laid off, then there is no discretionary spending to cut back. Whether the hedonics are accurate or not, the percentages are the issue.

Let's see:

(1) No I haven't read her book---though I suspect it would be an interesting read. Thanks for making me aware she had written one.

(2) Regarding the mortgage issue---not sure I understand your point. If folks today chose to put down more money, it would lower their payments (and hence their share of income that goes to housing expenses). Nobody forces people to take out large mortgages with 95-100% financing. That is a personal choice, and it obviosuly can be a problem (as we have recently seen).

(3) I think schools are one component of the house price issue. But my guess is that another major component is people's desires to keep up with the Jones by making improvements to houses with new appliances, granite counter tops, etc. I bet a lot of people financed these improvements by taking out second mortgage, HELOCs etc. In turn, her data show that our share of money going to appliance purchases, etc. have declined. We used to pay cash for appliances--now we build them into our housing costs by mortgaging and remortgaging our homes. I suspect that this is true for other expenses we incur--autombiles, travel, food (dining out)---lots of these items were financed by increasing our housing costs (again, 2nd mortgages). It would be interesting to see how much of Dr. Warren's hosuing costs are attributable to payments on 2nd mortgages and HELOCs. My bet is that it much higher now than in the 70's.

(4) Not sure why you use the term "suspiciously" to describe my attempt reference the change in quality as part of the reason for price changes. It is not an attempt to be "tricky" or "disingenuous" (sp?)---I think it is a legitimate and real reason that costs for some goods/services have gone up. This is true story that I share only to illustrate my point. I was diagnosed with a form of cancer that would have killed me had I been treated with the chemotherapy drugs and medcial knoweldge that existed in 1970. Fortunately I was diagnosed in 1993---drugs, diagnostic tools, and surgical techniques not available in 1970 saved my life. Total list cost of my treatments (who knows wht the hell the insurance companies really paid) was over $250K. I for one was happy to be paying a larger portion of my income to medical care in 1990 than 1970. Maybe I would have been better off financially in 1970, but I would be dead. Of course we are paying more for medical now---it is better than what it was. Would you rather pay less for a lesser quality of care? I think if you polled most people they would prefer to pay more for better care, and there's the rub. Ya gots to pay for what ya wants.

 

[Zoocat]

What are the solutions? I have no idea! I know at least one friend who is going to be destitute when she can no longer work. Probably her children will end up helping her, I hope. I have another friend who continued to spend freely (pre-recession) and said that if she ended up without enough money then her children could damn well support her. But she changed her tune once the recession took its bite and she has downsized her life considerably. So people will make changes, and some will find their own solutions. That's all we can hope for, I think.

I have to say that planning for retirement can only accomplish as much as fate allows. There are always the "black swan" events, such as the current Great Recession. Even if you planned well and survive this recession, there's no guarantee against something else that might come along and snatch away your financial security. Like devaluation of the currency, for example.

Whenever I get angry about the irresponsible spending and debt that occurred, I have to remind myself of the stupid things I have done on occasion. Even though my ex and I were pretty responsible and I am financially independent, I am human, just like the rest of you and I make mistakes. With that in mind, I have a hard time blaming others for being stupid.

I do NOT have a hard time blaming the investment banks and government though. I always assumed that stupidity could be ameliorated by groups of people working together and institutions with rules and regulations to provide some structure. Apparently, not.

 

[Bimmerbill]

Suckers.
That being said, I could end up working until I die if my DD isn't able to live on her own. I'd rather have the $ to put her in a nice assisted living home vs. a medicaid one.