Planning to retire?

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This arrangement has allowed us to pay lower taxes today, but it’s hugely unfair on young people–a form of “generational theft,” you might say. Though it sounds a little petulant to say it, we’re giving older people money to retire now at the expense of everyone else’s future going forward. Think that’s hyperbole? Look at how the balance of the federal budget has changed since the 1960s. In 1962, not including interest payments, the federal government paid out 14 cents of every dollar it spends on “entitlements”–that is, Social Security, and so on. By 2030, entitlements could account for as much as 61 cents, according to a report from Third Way, a bipartisan think-tank. At the same time, spending on “investments”–including infrastructure, education and research–has fallen steadily as a proportion. In the 1960s, we paid out three times more to investments as entitlements. But by 2022, we’ll need to spend six times as much for entitlements as investments, assuming normal growth in the overall budget. “This trend will only accelerate as the [Baby] Boomers retire, forcing us to spend less and less to educate kids, build roads, and cure disease,” the report says. “This fiscal path translates to a less-skilled workforce, lower rates of job creation, and an infrastructure unfit for a 21st-Century economy.” The Future Of Retirement There are plenty of ways we might reform entitlements, including raising the retirement age (it’s currently 65 for full benefits, but will rise to 67 starting in 2017), means-testing benefits (so people on higher incomes get proportionately less), and raising the threshold on income subject to Social Security taxes (so people earning more would pay more tax). Moreover, we could rein in health care spending, for instance by moving away from a fee-for-service model (which encourages waste) to a system where we pay based on the quality of people’s health. But these tweaks may only get us so far. Ultimately, we may need to rethink the whole concept of retirement, particularly the idea of non-working for long periods. Nobody who thinks about the future of old age thinks it will be anything like what it is now. Many of us will likely have to work longer into our lives. “Whether they recognize it or not, people in their twenties and thirties now are seeing the social contract rewritten before their eyes,” says Joseph Coughlin, director of the AgeLab at M.I.T. “We’re living longer, but retirement is going to be shorter than we’ve ever seen before.” Tyler Olson via Shutterstock “I think traditional retirement is ready to be retired,” says Paul Irving, chairman of the Center for the Future of Aging, at the Milken Institute.

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But working longer may not be a wholly bad thing. There’s plenty of evidence that work, properly structured, is good for us. “Ongoing work is good for your health and it’s good for your wealth,” Irving adds. “It’s a good decision, and a decision people should be planning for now.” So-called “bridge” jobs–part-time roles between full employment and full retirement–have been shown to reduce disease and improve mental health. At the same time, research shows that abrupt retirement can lead to less healthful consequences than we might imagine. One big long-range study, looking at retirees six years after they stopped working, found an average “5-16% increase in difficulties associated with mobility and daily activities, a 5-6% increase in illness conditions, and 6-9% decline in mental health.” Another study from Austria concluded that early retirement shortened lives: Each additional year away from work caused premature death risk to rise by 2.4%, or 1.8 months on average. The sometimes negative aspects of retirement were brought home to me recently as I talked with an older friend. In her work, she’d encountered many retirees who’d gone into decline after leaving the workplace. She put it down to a certain impossible fantasy about retirement as a time to do everything that hadn’t been achieved up to now; that people have more time on their hands to consider long-running problems; and an under-appreciation of the positive aspects of work. In general, people seemed more prepared for retirement financially than they were psychologically. These points are echoed by the likes of Robert Delamontagne, author of the Retiring Mind series. Successful people, in particular, seem to have a hard time adjusting to retirement, because non-working doesn’t provide the same opportunities for assertive behavior and mental intensity that the workplace does. There are financial and emotional reasons for working longer, and, in fact, that’s something people are doing already. In 2013, 18.6% of those 65 and over were working or looking for work, according to Labor Department, up from 10.4% in 1985. Four-fifths of Baby Boomers expect to do some work during retirement, according to the American Association of Retired Persons. “The number one retirement strategy for people entering retirement in the next five to ten years is to work longer,” says Coughlin. The new retirement, in other words, is not to retire at all, or at least not fully. Preparing To Work Given the pace of technological change, we may need to prepare for three or four careers in our lifetimes, including, perhaps, a new career in our senior years. That means being prepared to go back to school at some point to retrain, and maintaining our health and wellness, so that we’re able to work. “Your individual competitive advantage is going to be based on your ability to work longer,” Coughlin says. “The cost of chronic disease that we talk about in terms of lost productivity and the cost to society are about to become profoundly personal.”

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It also means that we need to redesign workplaces so seniors are more comfortable, ergonomically-speaking; change laws around benefits so that working part-time isn’t frowned upon; and rethink public education subsidies so they’re not just for the young. Mikael Damkier via Shutterstock Most importantly, says Irving, we need to rethink our attitudes to the elderly as people who are necessarily declining. There’s plenty of evidence of the value of +65s in the workplace, for instance in the complementarity of “inter-generational teams” where younger and older people work together. It’s true that older people are not as physically capable, generally. But they’re no less productive when it comes to knowledge and service roles, according to Laura Carstensen, director of Stanford University’s Center on Longevity. It’s just that we’ve got used to the idea that older people aren’t as able or enthusiastic as younger people. The big question is probably not whether older people will have to work, but whether there will be enough work for older people to do. Advances in artificial intelligence and robots make it likely that there will be fewer positions for “working age” people, let alone seniors. And, it’s worth remembering that one of the major motivations for retirement, which was first invented in Germany in the late-19th century, was not so much to look after older people as to get rid of them, so that young people could take their place. Irving says the idea of old people stealing young people’s work is wrong, though. Waves of previously discriminated groups–from African-Americans to women–have been brought into the economy at no loss to that economy, he points out. “Economies are elastic and by letting everyone participate, we’re likely to have a better economy that compounds opportunity.” One area of the economy where there’s sure to be plenty of work is in providing products and services to older people. By 2050, if the projections are right, a fifth of the world will be 60-plus. There will be 10 times as many “old people” as in 1950, and many more really old people: it’s estimated that half of all people born today will live beyond 100. What’s more, aging will be a global phenomenon. Europe and Japan are set to have more plus-60 folk than America. “There is no opportunity in the world as exciting,” Irving says. Persuading people in their 20s and 30s that retirement is dead may be easier than people who’ve invested longer in that dream. “The topic is both the third rail of politics and the third rail of dinners between friends,” says Coughlin. “The discussion of the changing social contract and the benefits you are due is probably going to be one of the major debating topics of the industrialized world. But it has to start today. It’s not equitable to turn off benefits immediately. Yet we can change the contract gradually while putting into place policies and services that enable people to work longer. It may not be as palatable as people like, but it is feasible.”