Wharton Business School: "Work until you drop"...

[Nords]

Wharton put out four interesting retirement articles this week. Or rather I should say "not retirement" articles.

Wharton is usually pretty good on macroeconomics and business topics. However, their perspective on retirement borders on the clueless. It's probably not wise to take your retirement advice from a business school dedicated to the lifelong pursuit of filthy lucre, but these four articles offer an interesting overview of the history of retirement and the trends in other countries.

For example, now we're being told that "everyone used to work as long as they were physically able to" and "the 'golden years' were just an artifact of the 1950s to make room for younger workers". However it's interesting that other countries, particularly Europe and Japan, are rapidly aging and faced with more concrete measures. They're not only unable to support a growing aged population, but they're concerned that their workforce would have to grow through immigration if they don't encourage older workers to hang around.

An End to the 'Golden Years': Increasing Longevity Changes the Work-leisure Equation

The second article is a rundown of worldwide pensions with some scary numbers:
Broken Promises: Can the World's Stressed-out Pension Plans Be Rescued?

* In October, French lawmakers voted to raise the retirement age from 60 to 62 despite rancorous street protests, with the increase to take full effect in 2018.
* Germany is gradually raising its retirement age from 65 to 67 beginning in 2012 and taking full effect in 2029; Spain plans to phase in a similar increase between 2013 and 2025.
* In Britain, the retirement age will rise from 60 to 65 for women and from 65 to 66 for men by 2020 and is to reach 68 for both sexes by 2046.
* China and India, the world's two most populous countries, are reconsidering their retirement ages. Rapidly aging China is studying raising the age from 50 for female workers and 60 for males, without saying what the increases might be. India is mulling a move to boost the age from 60 to 62 for central government employees.
* While Sweden has kept its retirement age at 65, the country indexes its pensions to longevity projections so that monthly benefits fall when the national longevity rate rises.
* Australia, which requires employers to contribute to workers' privately managed retirement accounts, plans to increase the mandatory contributions from 9% to 12% of pay by 2019 to bolster the funds.

* Illinois will run out of pension assets in 2018 even if it earns an 8% annual return on investments.
* Chicago has a $44.8 billion unfunded liability and only enough assets to last until 2019.
* New York City, the largest municipal plan in the country, is $122.2 billion in the hole and its funds are on track to run out in 2021.

I'll just let the third article speak for itself:
The 'Silver Tsunami': Why Older Workers Offer Better Value Than Younger Ones

Such workers bring a lifetime of skills to their jobs and can be highly motivated and productive members of the workplace, according to Wharton professors. Many of the stereotypes that prevent employers from hiring and making good use of older workers are merely myths, they say.

And finally, here's another article on why the 4% SWR is too high and people are going to outlive their assets-- so they should go back to work!
The Big Financial Stretch: Preparing for Those Later Decades

 

[Onward]

From the final article:

Without work, "people lose mental capacity, they lose networks and friendships, they become depressed," Mitchell says.

To which I respectfully respond: Horse Manure.

 

[DesiGirl]

Absolute BS. I was done working for MegaCorps in 10 years. My DH needs pep-talk to go to office everyday. 12-14 hours work is not healthy or fulfilling, even loafing around at home whole day is better. I just don't belive that working 40 hours (or more) every week for 40 years of life (trading hours for dollars) is good & healthy for individual - for economy & society may be.

 

[Midpack]

Interesting but sobering articles, thanks for the links. None of this should come as a surprise to anyone...

 

[deserat]

Thanks for posting Nords - it's interesting living here in Europe - the Germans are workhorses....and my brief discussion with some Dutch people when the Greeks were fomenting over their issues this summer showed me that they were horrified at a retirement earlier than age 65.

As for 'gray' workers being better workers - I'd say I agree with that in most cases. As you get older you learn which battles are worth fighting for: how much effort to put into a specific endeavor, the politics of the people/situation, projection of future impact of particular effort....You can be much more efficient and productive. Sort of off-topic - I was doing some training for an organization this weekend (I was training) and the participants were quite broad in age. I had been paired with a young man - let's just say he was a bit ADHD. I kept watching all of that energy being wasted......interacting with him was interesting, too. I was doing my darndest to not be 'motherly.' However, at one point I did challenge one of his assertions - he hadn't thought out the long-term consequences of his stance....he quickly backed down when presented with that long-term scenario. He hadn't thought of the long-term objective or the pragmatic one. Until then, he was adamant about his stance. Same thing can happen in the workplace....

However, I have left the formal workplace or am only participating in a limited manner, so even though I might agree that older workers are of benefit to an employment organization, I don't know that I would want to one of those employees

 

[chinaco]

I think those articles describe the stark reality facing many people. They did not prepare, their DB plans (of they have them) and SS are on shaky ground.

Most cannot afford to retire early. Most will have to work longer and when they do retire, their lifestyle will be cut. If they are in debt, they may go bankrupt.


There will probably be many Gen X, Gen Y kids dealing with it. If they have not learned their financial lesson yet from their personal situation... they will soon when they learn they have to pay back Mom and Dad for spending everything on them!

Mid to upper middle class lifestyles are probably going to change. Preparing for retirement just got more expensive.

To quote a Yogi Berra: "The future ain't what it used to be"!

 

[jIMOh]

One problem employers have with retaining long term employees is "better benefits"... I have worked for mega corp for 14 years, and am already "capped" at 5 weeks of PTO (which includes sick time, and does not include 2 floating holidays). I remember co-oping at a different megacorp and a few of the 30 year vets were on 6 weeks of vacation (plus sick time, plus about 7-10 floating holidays), and had "so much" in the bank they could take 3 day weekend from Nov thru Jan 1 and still have 30 days or so in the bank to rollover to following year (Dec 25-Jan 1 were 5 floating holidays, so that week was mandatory shutdown anyway). On retirement that vacation bank was paid out (my father worked for same mega corp I co-oped with, and he had about 3 months of PTO paid out on retirement). Granted the company I co-oped with had a union which negotiated the 5-7 floating holidays (which all salaried employees received as well even if they were not union).

Now laws are different, and PTO is accrued as you work, cannot be rolled over (must be taken in year earned with exception of 40 hours) and none of it paid out on termination (except in one state where required by law).

Part of older workers continuing to work is the employers needs to have enough carrots to dangle to keep them working. Here are some comments from articles which struck a cord...

Myth. Older workers in the workforce keep younger ones from getting jobs.

Reality. While it may be "a widespread belief that you have to get older people to retire to open up the career ladder and jobs for young people," the opposite again is true, according to Wharton insurance and risk management professor Olivia S. Mitchell. Ignorance of this fact caused many French college students to join the massive street protests last fall against raising the retirement age from 60 to 62.

Suggesting protestors are ignorant means the people interpreting the protest are just as ignorant (or more). People can protest if they don't like something, whether they are informed of all facts or not is immaterial. The author connected the dots in wrong direction. People protested because government did something which younger people did not like. The fact the author interpreted this as they could not move up corporate ladder for 2 years I am sure really weighed on the protesters minds

Policies in countries that encourage workers to retire early actually have a damaging impact on youth employment, Mitchell says. This is because the growing number of retirees forces governments to finance their rising pension costs by raising taxes, which causes employers to scale back hiring or pay workers less. In such cases, "employers don't want to hire the young," says Mitchell, who directs Wharton's Pension Research Council. "It's all very intertangled. The old notion of a fixed sum of jobs is just absolutely wrong."

Funny, service related industries (consultant industries) tend to hire more college grads because they are cheaper. My company does... younger workers make good consultants because they can travel 75% of the time...

Such feelings reflect a new career stage that is not yet well understood, says Pitt-Catsouphes of the Sloan Center. Its studies show that older workers are looking for flexible jobs that have "a climate of respect, work-life fit, supervisor support and learning opportunities." Employers who fail to realize this may be missing the chance to "create environments to leverage the skills and competency" of older workers, Pitt-Catsouphes adds. "Organizations in general pay attention to these things in their early career employees, but may be taking their eye off the ball for people in their later career."

This was my big one- if my employer wants me to work longer, they need to give me an incentive to make year 30 better than year 15. 2-3% raises (if raises are even given out) are not enough... benefits are not enough either... I value time away from work more than time at work... to keep me, an employer needs to compensate that time with more time off and better pay. Everything has a cost...

 

[RonBoyd]

This was my big one- if my employer wants me to work longer, they need to give me an incentive to make year 30 better than year 15. 2-3% raises (if raises are even given out) are not enough... benefits are not enough either... I value time away from work more than time at work... to keep me, an employer needs to compensate that time with more time off and better pay. Everything has a cost...

Now, if you could only get Customer support -- pay the subsequent higher prices -- for this "tree-grows-to-the-sky" policy.

 

[Purron]

I'll just let the third article speak for itself:
The 'Silver Tsunami': Why Older Workers Offer Better Value Than Younger Ones

Another article explaining why older workers are valuable. The reality is, people over 50 have a much harder time getting a job. I have a brother in law and friend who've been looking for work for over a year. Both are talented and have valuable skills - I'm sure they would have landed jobs quickly, even in this economy, if they were in their 30s instead of pushing 60. Ageism is still rampent yet we're told how valuable experience is.

Maybe they should try "Touch of Gray":

YouTube - Touch of Gray Advert

 

[Dawg52]

I think I will play until I drop.

 

[jIMOh]

Now, if you could only get Customer support -- pay the subsequent higher prices -- for this "tree-grows-to-the-sky" policy.

My point was this

plenty of people will work "for the man" longer because they HAVE to. If I do not have to (meaning I have reached FI before I turn 60), my incentive to work is less, but I would still do so if the benefits outweighed the negatives.

 

[W2R]

And finally, here's another article on why the 4% SWR is too high and people are going to outlive their assets-- so they should go back to work!
The Big Financial Stretch: Preparing for Those Later Decades

From this article,

Many boomers want to keep working, of course, and not just because of their shrunken 401(k) accounts. "They say, 'We have more to contribute. We still have value. We're not done yet,'" says Marcie Pitt-Catsouphes, director of the Sloan Center on Aging & Work at Boston College.

"Most people, when they're done with their primary career, are not done with what they want to do in their lives and in their work," says Marci Alboher, vice president of the San Francisco-based nonprofit. She would like to see the creation of "Individual Purpose Accounts" that people could use to help make the transition from their regular jobs to post-retirement careers. Some people go back to school to learn new skills, others start businesses or move to new locations, says Alboher. Those who plan for the transition will make it more smoothly than those who don't, she adds. "We think 'encore planning' will become as common as 'retirement planning.'"

I think the above parts express some excellent reasons(that I emphasized with bold font) to either semi-retire or not retire at all. Just wanted to weigh in on that. I have seen many reasons to keep working, some of which I may not agree with so much, but it seems to me that the reasons above are some of the best - - not just to show up every day, but to actually contribute more and reach the culmination of one's career.

 

[Texas Proud]

From the final article:



To which I respectfully respond: Horse Manure.

See... you are depressed already and you don't even know it...



I just can't wait until I can be blissfully ignorant of my mental facilities...

 

[Nords]

I have seen many reasons to keep working, some of which I may not agree with so much, but it seems to me that the reasons above are some of the best - - not just to show up every day, but to actually contribute more and reach the culmination of one's career.

I'm good with that-- right up to the point where I'm expected to drive during rush hours, wear long pants (let alone shoes & socks), punch the time clock (let alone the face-time clock), and attend the mandatory department seminars on prevention of workplace sexual harassment...

I don't mind the working part. It's all the non-working parts that are too much of a hassle.

 

[Jay_Gatsby]

Thanks for posting Nords - it's interesting living here in Europe - the Germans are workhorses....and my brief discussion with some Dutch people when the Greeks were fomenting over their issues this summer showed me that they were horrified at a retirement earlier than age 65.

As for 'gray' workers being better workers - I'd say I agree with that in most cases. As you get older you learn which battles are worth fighting for: how much effort to put into a specific endeavor, the politics of the people/situation, projection of future impact of particular effort....You can be much more efficient and productive. Sort of off-topic - I was doing some training for an organization this weekend (I was training) and the participants were quite broad in age. I had been paired with a young man - let's just say he was a bit ADHD. I kept watching all of that energy being wasted......interacting with him was interesting, too. I was doing my darndest to not be 'motherly.' However, at one point I did challenge one of his assertions - he hadn't thought out the long-term consequences of his stance....he quickly backed down when presented with that long-term scenario. He hadn't thought of the long-term objective or the pragmatic one. Until then, he was adamant about his stance. Same thing can happen in the workplace....

However, I have left the formal workplace or am only participating in a limited manner, so even though I might agree that older workers are of benefit to an employment organization, I don't know that I would want to one of those employees

Intelligence without wisdom is quite common, while the opposite is rare.

 

[Khan]

I keep reading about people working into their 60s 70s...
If they can/want to great.
Some of us start falling apart physically/mentally in our 50s. It's hereditary/genetic, there's nothing I can do but accept it and ignore all those who tell me there's something I can do about it.l

 

[deserat]

Intelligence without wisdom is quite common, while the opposite is rare.

Yup -and wisdom comes with experience and age - I think ;-) As I get older, I seek wisdom but realize it can be quite fleeting.....

 

[Rustic23]

If I were not FI and still at work, I might answer the question 'I have so much more to do, I just could not see retiring.' Of course that would be a bold face lie, but I'm not going to say 'Darn, I screwed up, lived above my means, don't have enough to live on and absolutely have to have this job!'

 

[Onward]

What are the odds that the thing you do to keep a roof over your head is exactly the thing, among an infinity of options, that you most want to do with your very finite time, once you don't need the income?

I just don't get it, unless you need the money or benefits.

 

[kaudrey]

I'm good with that-- right up to the point where I'm expected to drive during rush hours, wear long pants (let alone shoes & socks), punch the time clock (let alone the face-time clock), and attend the mandatory department seminars on prevention of workplace sexual harassment...

I don't mind the working part. It's all the non-working parts that are too much of a hassle.

This gets toward what I was thinking about my parents, and what the definition of "work" is. They retired 15 years ago at 57. They moved to their dream home on a lake in NH. Neither works per se, but they do contribute a LOT to their community. My dad is helping the Historical Society rebuild an historic barn, he runs the Photography Club, oversees a rock quarry (he's a rockhound) outside of town, and does a bunch of other stuff. My mom is active with the local cancer support group, the town's art council, and her church.

So, they haven't returned to "work", but they definitely work! They are busier now than when they had real jobs! I don't see why the assumption is that you have to work to contribute to society. How about all the retirees who volunteer countless hours of their time? One could argue that that is more valuable than bringing home a paycheck.

 

[Jay_Gatsby]

This gets toward what I was thinking about my parents, and what the definition of "work" is. They retired 15 years ago at 57. They moved to their dream home on a lake in NH. Neither works per se, but they do contribute a LOT to their community. My dad is helping the Historical Society rebuild an historic barn, he runs the Photography Club, oversees a rock quarry (he's a rockhound) outside of town, and does a bunch of other stuff. My mom is active with the local cancer support group, the town's art council, and her church.

So, they haven't returned to "work", but they definitely work! They are busier now than when they had real jobs! I don't see why the assumption is that you have to work to contribute to society. How about all the retirees who volunteer countless hours of their time? One could argue that that is more valuable than bringing home a paycheck.

The difference in terms of "work" is that they are doing what THEY want to do. When they don't like it anymore, they have the option of quitting with minimal, if any, repercussions.

 

[NW-Bound]

I don't have any hard data, but how can we fight the demographic trends in developed countries where people live longer, and yet the birth rate gets lower. With so many retirees, who is out there producing? I mean the ones who are not tied up in nursing homes taking care of the elderly?

So, we say people need to work longer. But doing what? How can we provide meaningful and productive work to the elderly who need it?

And should we be talking ill of the people who cannot afford to retire? Not everyone has a good enough income to live on while stashing away tens of thousand a year. And if everyone does, well, to this non-economist, would that not mean higher inflation and cost of living? If everyone has a 7-figure portfolio, but there are so few youngsters out there to pamper and to take care of us geezers, would everything not cost more?

It sounds bleak! And yet, we all want to live longer, into our 90s and 100s. What is good for individuals is not necessarily good for the species!

 

[haha]

So, we say people need to work longer. But doing what? How can we provide meaningful and productive work to the elderly who need it?

In late middle age people shoud go to law school. Then, after they pass the bar, they can get old clients, and sue other old people, who will in turn hire old lawyers. Judges are already old, as they never die. This should take care of most of the problem.

Ha

 

[Nords]

I don't have any hard data, but how can we fight the demographic trends in developed countries where people live longer, and yet the birth rate gets lower. With so many retirees, who is out there producing? I mean the ones who are not tied up in nursing homes taking care of the elderly?

Immigration...

 

[NW-Bound]

Yes, thank you! Tell that to people who believe that immigrants simply steal our jobs.

Of course in exchange for them to take care of us and changing our diapers in nursing homes, we will have to pay for the care with our stocks, our homes, our assets. They will earn it.