Wages peak in your 40s

[Deleted]

Sorry that I'm talking about a hard copy of the Wall Street Journal again so I can't post a link, but there was an article in today's that talked about wages peaking when you are in your 40s (about 45). You generally make the same (except for COL) in your 50s and 60s if you are lucky.

The article said that pension plans used to use this assumption when funding pensions even though no one really talked about it.

The point of the article was partially that retirement planning often ignores this truism. The online calculators assume annual raises. It also discussed the effects that losing your job after hitting your peak creates. You rarely find a higher paying one.

Does anyone's experience bear this out? I'm at the top of our salary matrix for my educational level so it's true for me.

[dancinmama]

Very interesting and probably true for most.

It doesn't hold true for my DH. Since age 49 he's gotten (2) job promotions resulting in a 92% increase in pay from what he was earning in October of 2005. I'm pretty sure that NOW (at age 54) he IS fairly close to the top of his pay scale for his labor grade. Actually he is already doing a director's job (is managing three departments and reports directly to the VP), but because of the economic environment, he will never get the title or the pay. His job is a real headache, so I don't think he'd take it (the promotion to director) even if offered even though he's already doing the job. He's decided that life is too short and plan to retire in 2012.

In order to get the promotions (and pay increases) he had to relocate (thank goodness his company paid for everything). He could never have reached the level he is at now at his previous location which was a remote field site where moving up the ladder was extremely limited.

[phil5185]

talked about wages peaking when you are in your 40s (about 45). You generally make the same (except for COL) in your 50s and 60s if you are lucky.

At our company, that was somewhat true for our Union jobs. The workers reached a peak skill level at <30 and then the skill level was nearly constant, the affects of maturity/experience/judgment helped, but it was mostly COL, plus a bit more.
But not true in the non-union area, engineers continually added knowledge/skills. In my case, my salary at age 60 was about 2.5X what it was at age 40.
But for a few yrs before I was an engineer, I drove 18-wheeler - Teamsters Union. That pay was COL and would have been forever. (There would be no reason to do otherwise, why would an old driver have more value-added to a company than a younger driver?)

[mtntigger]

In my case, my salary at age 60 was about 2.5X what it was at age 40.

How much "extra" time did you have to spend as you advanced? I'm finding that I'm not getting as high of bonuses or jumps in salary, but am expected to spend 10-20+ hours/week to do the job properly.

[dancinmama]

Jun 18, 2011 19:55:15 GMT -5 @mtntigger said:

In my case, my salary at age 60 was about 2.5X what it was at age 40.

How much "extra" time did you have to spend as you advanced? I'm finding that I'm not getting as high of bonuses or jumps in salary, but am expected to spend 10-20+ hours/week to do the job properly.

I know that this question was not directed at me, but I can tell you that for my DH is has been A TON of extra hours (usually more than 20 extra per week) and with absolutely no bonuses whatsoever. The increase in pay definitely increased his pension base; but we feel that if he continues in the position, the stress is going to take a toll on his health (both mentally and physically) so in all likelihood he will be retiring sometime in the first quarter of next year.

His company will be laying off hundreds of lower level executives before the end of the year and there are many, many people his age and older who are not sleeping well right now.

[telephus44]

I think it makes a lot of sense. At least from what I can see, 20 years of experience isn't a whole lot different from 30 or 40 years of experience, whereas 20 years of experience is a lot different from 5 or 10 years.

[dancinmama]

Jun 18, 2011 21:03:32 GMT -5 alwaysbeoptimizing said:

Dacinmama - your husband could get "lucky" and be offered the layoff/early retirement right around the time he wanted to retire anyway. I know in some companies, they'll offer a sweetener to leave (extra years of service added to pension calc/etc.)

Yes, they are asking for volunteers for layoff and they will give a severance package (no years added to service), but if you put in for it, there is no guarantee that you will be allowed to take the layoff. They have also said that they will be laying off people who do not volunteer, so everybody's head is figuratively on the chopping block. DH needs to be 55 before he can retire in order to receive retiree medical and that won't happen until the first quarter of next year, so he will not be "asking" to be laid off and because the company is getting him REALLY CHEAP, we rather doubt that they will give him a pink slip this year.

It still could work out for some kind of package for early next year, but we're not counting on it.

[formerexpat]

For most people, I can see how this would be true. By this point, I would expect most people would reach their limit, with the exception of those that can achieve the "C" designations.

Those that can't will likely get COL increases at best until retirement.

The real question is whether these people that have reached their limit in their 40's should stay there? Ever look into the Peter principle?

[❤ mollymouser ❤]

My wonderful DH will be 45 in exactly one month. His salary has probably peaked, except for small cost-of-living raises given to everyone in the military (last year was 1.4 percent of base pay). We don't anticipate another promotion since he's already an 05 and there just aren't very many 06 slots out there for what he does, if any.

[debtheaven]

It was true for me too, I reached my highest salary at 49 (I'm 51). The only time I got a really significant raise in my old career was when I changed companies after five years. Then I stayed in the second co for 18 years, with several piddly raises and COL increases. In retrospect that was a big mistake. But it was already a dying field (print journalism).

I took a payout when I was 49 because my company moved and I suddenly had a 3.5 hour daily commute. I lasted six months, then I took the payout. I took a year off. I'm still trying to get back to my old level of pay in my new field (teaching). I'm not quite there yet, but I'm very close.

[gooddecisions]

I've heard the same thing about wages peaking in your 40s. I'm not there yet, but am in a hurry to make some critical career moves before I become a[nother] protected class. My perspective has been if I'm not able to make these moves before I hit early 40s, I'm doomed to stay in middle management. Once I'm in my 40s and beyond and am at the desired stage in my career, hopefully additional promotions and salary increases won't be as necessary to sustain my retirement plans.

[cronewitch]

My peak was 1999 when I earned 65K, now I earn 58,800 with no overtime since I am salaried. I work many less hours and just got a 7% raise but don't expect to get another raise ever. I don't want promoted the only level up would be to CFO and I don't want the hassle, maybe for one day so I could fire the receptionist.

I was 51 or 52 when I peaked. I earned half as much a couple of years after that job.

[garion2003]

I wondered about this too, all the retirement calculators seem to assume constant increases in salary. Cost of living allowance (if we get them) aren't keeping up. I should probably find a calculator that lets me tweak the salary amounts. Right my only way to increase my salary would be to change jobs.

[Deleted]

I'm union and I've topped out at my current job. I'm 39. Cost of living allowances and small (very small) wage increases are usually negotiated in our contracts (national). So this is pretty much it for me unless I change jobs.

[dancinmama]

Jun 19, 2011 16:45:26 GMT -5 @pinkcshmere said:

I'm union and I've topped out at my current job. I'm 39. Cost of living allowances and small (very small) wage increases are usually negotiated in our contracts (national). So this is pretty much it for me unless I change jobs.

That's pretty young to have hit your peak. Do you have to change jobs or change careers?

[Deleted]

"That's pretty young to have hit your peak. Do you have to change jobs or change careers?"

I don't really have a career, just a job. I make enough money that I'd likely have to either get a degree or learn a skill to make more money somewhere else. To make more money with my current employer I'd have to either go into management (and be willing to relocate) or commit to being available to work 84 hours/week so I can have some OT. It's odd, but some coworkers of mine work enough OT to gross more than our managers.

Because it's a decent salary for my area, I'm not all that ambitious, and I COULD make more if I really wanted to (simply by working more hours), I'm not all that motivated to change anything right now. That makes me a YM misfit, but it's the truth.

[dancinmama]

Jun 19, 2011 17:31:17 GMT -5 @pinkcshmere said:

"That's pretty young to have hit your peak. Do you have to change jobs or change careers?"

It's odd, but some coworkers of mine work enough OT to gross more than our managers.

I don't find it odd at all. I know that a union employee earning a decent wage plus overtime can easily out earn a manager who is salaried and receives no overtime.

So how does your earning potential (or lack thereof) play into your retirement plan. At what age do you think you will be able to retire?

[Deleted]

"So how does your earning potential (or lack thereof) play into your retirement plan. At what age do you think you will be able to retire?"

That's where it all gets tricky. lol Let's see, I've been putting money away for retirement since I first started working full time. If I'd been smart enough to leave the money alone, I'd have a nice balance by now. 30 years of service with my current employer would make me eligible for 30% of my highest 3 earning years for retirement and I'd be able to keep my health insurance. I'm not sure how much more of the premiums I'd have to pay. But after 30 years of service, I'd only be 56.

I'm not even sure I'll make it 30 years; so many of my co-workers are broke down because our job is physically demanding. How do I bridge the gap if I have to leave early? Will SS be there or not when I'm old enough?

I've run calculators and I still have more questions than answers. So right now I'm saving for retirement, saving for what I want, saving just because I need to, and keeping my expenses low so I can keep saving......... until I come up with a real plan.

[dancinmama]

Jun 19, 2011 18:19:55 GMT -5 @pinkcshmere said:

"So how does your earning potential (or lack thereof) play into your retirement plan. At what age do you think you will be able to retire?"

30 years of service with my current employer would make me eligible for 30% of my highest 3 earning years for retirement and I'd be able to keep my health insurance. I'm not sure how much more of the premiums I'd have to pay. But after 30 years of service, I'd only be 56.

I'm not even sure I'll make it 30 years; so many of my co-workers are broke down because our job is physically demanding. How do I bridge the gap if I have to leave early? Will SS be there or not when I'm old enough?

30 of your highest 3 years isn't too shabby. My DH will get less than 30% after 31+ years. I do understand the physical problems that can arise. DBIL was a union sheet metal worker when his back gave out in his early 40s. He was subsequently elected as a union rep which saved his butt - otherwise I don't know what he would have done.

[Clifford]

I know I'm weird, but my retirement calculator that I use to project where I stand shows my income dropping in half from ages 38-40. I have a mini-retirement in there around that time, and I am trying to be realistic about getting back into the workforce after a 12-24 month break - if I actually pull the trigger. I also project that I will have lower contributions to retirement savings after that, because of the decrease in income.

If you do acknowledge that your income will lower after your peak years, be sure to also factor in a decrease in contributions as a % of income, because you will need more of your paycheck to cover the bills.