Living longer? Yes!

[muttleynfelix]

On paper it sounds good but I believe there is a flaw to the argument: just because I live longer does not mean I can work longer.

Yes I've met some healthy/fit 70 year old folks, alive and vibrant but they are not a representation of the population as a whole.

I think it depends on your genetics and disposition. My parents are both extremely healthy mid-60 year olds. Mom will be 63 next month and dad will be 66 in September. My dad has his own company as a Land Surveryor (and is also a licensed engineer). My mom does payroll and takes care of her mom (88) and Aunt (86). Plus spends a lot of time as Grandma. So, they have a LOT of flexibilit as to when they can come and go and do what they want. My mom has only been in the hospital for the birth of her 3 kids and a car accident in 1995, I'm pretty sure the only time my dad was hospitalized was for giadia (sp?, that parasite thing) in 2005. They are very active. I fully expect them to live to be mid 90s. My Grandpas lived to 81 and 86 and my Grandma who passed last year was 2 weeks shy of her 90th birthday with a bad heart (other Grandma is still kicking and annoying me at 88).

So, based on all that, I fully expect to live to be 100. I can't imagine retiring before 70. Cutting back? Sure. Having a flexible job? You bet. But actually retiring? I don't see it. I don't see being retired for 30 years as fun. My mom's dad was retired for 30 years. He and my Grandma travelled a lot and had a blast and stayed really busy until his death, but my DH is 17 years older than me. The men in his family die young. I fully anticipate being a young widow. The life my Grandparents had, won't be the life I'm going to have. Anyway, that is my reasoning between saying I'm going to work until I'm 70. Things will probably change, but I can't see 30 to 40 years in the future.

[Sum Dum Gai]

If your grandparents passed in their late eighties, why are figuring your parents will last until their mid 90s and you'll live to 100? I don't think that's how the longer life spans we're seeing today are coming about. It's mostly the result of being able to treat and manage things that killed earlier generations. We haven't cured everything though, not even close. On my mom's side there are a lot of heart attacks and strokes that used to kill people earlier. We're pretty good at managing those now, so I probably don't have to worry too much about a massive heart attack in my late 50s/early 60s as long as I take care of myself. On my wife's side you see a lot of people dying of old age in their late eighties. Last I checked there was no cure for general aging, so she'll probably go around then too unless something like cancer, heart attack, or whatever gets her first.

[Works4me]

My question is extremely blunt: if someone retires at 55 and dies at 85, how are they going to support themselves for 30 years? How is society going to support them?

Arthritis can be managed with medication and lifestyle choice as can heart disease/stroke. Vision decline can also be mitigated. Obesity is a good question and one that I struggle with myself. However the fact that most elderly cannot do heavy pysical labor, especially if they have done so for a lifetime.

We may need to learn to look at work as a multi-stage process and may have to accept, even expect, working for lower wages when older.

[Works4me]

Regarding health care and Medicare, I appen to believe that basic Medicare should be available to every one. IMHO basic health care is a human need/right that can best be met by removing the expensive battle of insurance companies fighting to deny coverage.

If basic Medicare were available private insurance could/would/should exist to provide higher levels of coverage. It would cost far less by removing the battle that exists within the current system.

[8 Bit WWBG]

All the more reason to start building wealth as early as possible. There used to be an 80 year old man working at a deli counter I frequented. I do not want to end up doing that kind of job at that age.

[Deleted]

People might be living longer, but there are a lot more people living with multiple chronic conditions. If you want people to work longer, the marketplace has to adjust as well to older workers. That may require consideration toward some of these conditions like eyesight, arthritis and other issues that make a job difficult to do for someone who isn't young and healthy. And, older workers could be a great boon and asset but companies have to come to a point of recognizing this as well.

[giramomma]

May 15, 2012 21:46:13 GMT -5 Works4me said:

My question is extremely blunt: if someone retires at 55 and dies at 85, how are they going to support themselves for 30 years? How is society going to support them?

My MIL quit working at 50, FIL at 55ish. Now they have SS, pensions, plus retirement accounts. They have more than enough to get them through. They live a nice middle class life.

My plan to fund retirement at 55 is 33% pensions, 33% passive income, 33% part time job. At 60ish, the numbers will change to include IRA withdrawls. With this plan, we still wouldn't touch our taxable $$, which should be enough to address any medical needs in our twilight years. Any SS will be a bonus.

The wildcard is DH. He may want to work past 55. it depends if he can get his career going after we are done having babies (he's the primary caregiver.). I'm working nearly 2 full time jobs, and have no desire to do that for 45 years, or until I hit 70. 30 years is enough for me.

[zibazinski]

WWBG, he may enjoy doing that. My dad always wanted to be a short order cook when he retired. He was a darn good cook, too. He had money, it was for fun.

[Works4me]

Shooby - Great point that the work place needs to adapt to older workers. Also agree that hopefully it can come to value them.

Giramomma - I think it is great that you inlasw (and my father) were able to retire early. I also think it is wonderful that you too are planning the same - I wish that for anyone who wants it. However, how will it be funded?

If someone starts serious work/savings at 25 and retires at 55, that only leaves 30 years to save/invest. Those years are also filled with the financila demands of student loan payoff, buying a house, raising children, etc.

How can pensions and Social Security afford to pay a person benefits for 30 plus years based on 30 years of work/contributions?

[Sum Dum Gai]

How can pensions and Social Security afford to pay a person benefits for 30 plus years based on 30 years of work/contributions?

You're looking at SS wrong. It doesn't matter how much you personally pay in, that money is immediately paid out to your parents and grandparents. Once you retire the check you get will be coming from your kids and grand kids. It's a ponzi type scheme, not a savings account.

[Works4me]

Dark - I understand that . My question is how can we only pay into a pension, social security, and/or savings for 30 years and then expect to draw on it for 30 years.

The math just does not work. Need major windfall and lots of compounded interest.

[thyme4change]

I dont think most people realize what being a mechanic, or other job like it, for 40 years does to someone's body.

That is why I'm going to encourage my children to go to college and get a job that isn't so hard on the body.

My BIL was in HVAC for 20 years. Then he went back to college, got a degree and now manages an HVAC parts supply company. He said his body couldn't take another summer.

[Sum Dum Gai]

My question is how can we only pay into a pension, social security, and/or savings for 30 years and then expect to draw on it for 30 years.

The math just does not work. Need major windfall and lots of compounded interest.

You don't need the windfall, you need the compound interest.

Let's say we have a dude who's 25, recently graduated, and he's making $50k a year. He puts 15% of his gross away for retirement, because being young he has no pension, and expects SS to be means tested away from him by the time he's old. We figure his income will rise 3% a year. Just keeping pace with inflation. His savings will return 10% a year. Now, let's make a little chart thing.

Age................401k balance
25...................$7,500 (no return this year, that's just what he'll save)
26...................$15,975 (10% return on the prior years balance, plus 15% of this years wages)
27...................$25,529.25 (same as before)
28...................$36,277.63
29...................$48,346.71
30...................$61,875.93
etc., etc.,
50...................$1,045,884.14 (breaks a million!)
etc., etc.
57...................$2,204,230.63 (breaks 2 million!)
couple more years
60...................$3,001,543.09 (3 and done, retirement time baby!)

Now, our dude is 60, he grosses $140,693.12 a year, and saves 21,103.97 of that for retirement. So he's living on, $119,589.15. If he invests his 3 million in government bonds or something that return 4% a year, his savings will gross him $120,061.72. His 401k all by itself will replace the entire income he's been living on. If SS is still around, and he qualifies for any of it, it's all gravy. Of course, we have him retiring early. He could keep working a few more years, which would look like this:

65...................$4,974,137.38

Now he's grossing $138,636.61 (after retirement savings), and his retirement money will gross $198,965.50 a year without ever drawing down principle.

ETA - Just note that we figured his salary was keeping pace with inflation that whole time, not actually beating it. In other words, when he's 65 $138k will buy exactly what $50k would today. So the dude will probably want to buy a house at some point in there and pay the sucker off, at least if he wants to have travel money and stuff when he stops working.

[Deleted]

May 16, 2012 13:14:27 GMT -5 thyme4change said:

I dont think most people realize what being a mechanic, or other job like it, for 40 years does to someone's body.

That is why I'm going to encourage my children to go to college and get a job that isn't so hard on the body.

My BIL was in HVAC for 20 years. Then he went back to college, got a degree and now manages an HVAC parts supply company. He said his body couldn't take another summer.

One of our department manager is currently going thru this. She is 48 and has been with us 30 years and it is obvious... Her back and whole body is starting to give out. She is hoping to hang on till she is 64-65 but don't think that will be possible.

She is trying to transfer to a smaller store where it would be less demanding.

Folks in physically demanding jobs cannot do the work forever think or push it back a year or 5; when your body gives out... It just gives out, sometimes with no warring signs.

This is why while I love my job, I plan to transition into something less demanding physically by the time I reach 40 or so. 50 is definitely out of the question.

[Deleted]

May 16, 2012 13:44:48 GMT -5 Sum Dum Gai said:

You don't need the windfall, you need the compound interest.

ITA. Slow and steady wins the game, and if you decide you can't get there you won't. DH and I (ages 59 and 73) are at $2 million. My net worth 20 years ago was $100K and DH's was probably negative. About $300K of our assets came from selling our houses in NJ 9 years ago, but no lottery wins, no inheritances from rich relatives. Both of us had bad years- DH was unemployed for a couple of years and still somehow paid CS. Earlier he had some years when he spent almost as much as he made trying to get the best care for his asthmatic daughter. (She's a healthy adult managing it well now.) I was married to a drunken, unemployed spendthrift. When current DH and I made money, though, we didn't spend it all. When our houses appreciated in value we didn't take out HELOCs to put in koi ponds and go on cruises.

So yeah, after 37 years I could retire but I want to work for another years and keep saving.

[Angel!]

Dark

[Works4me]

What percentage of people start saving 15% at 25 and do so every year?
Especially with student loans, car payments, houses, children, etc.

How many people average 3% raises, aside from promotions?
Currently the economy has been trashed for what - 5 years?
Your calculations fail to take that into account.

Compounding would slow and deposits stop at age 55 with retirement.
Maybe I am overly pessimistic - I hope so.
However I fear that this time of long retirement is just a glitch.

[Sum Dum Gai]

What percentage of people start saving 15% at 25 and do so every year?

Beats me, but I'm not worrying about the whole country's retirement, just mine.

Especially with student loans, car payments, houses, children, etc.

Why do you think we tell people not to run up huge student loans, delay buying a house, and delay having kids. Retirement first, period. We'll exist on Ramen noodles and pork and beans exclusively before I'll lower my retirement contributions. I'll walk away from the house, trash my credit, and move into a shitty one bedroom apartment. Retirement first. There ain't nobody else but me putting aside money for my golden years. Either I do it, or I won't have golden years to look forward too.

How many people average 3% raises, aside from promotions?

I'm way ahead of that myself. Granted, I started the plan at 25 and I'm only 30. However, I'm currently making the salary that I was supposed to have at like 42.

Currently the economy has been trashed for what - 5 years?

Define trashed. The market has been returning almost 20% for the last couple years. I got lucky in that I wasn't investing until 2007. I had barely anything in the market when it tanked, and have put a lot more in since the bottom. One man's calamity is another man's opportunity.

Compounding would slow and deposits stop at age 55 with retirement.

Who retires at 55, except people with pensions that by and large no longer exist? I ran the calculation with the guy retiring at 60 or 65. It works either way.

Maybe I am overly pessimistic - I hope so.
However I fear that this time of long retirement is just a glitch.

It's not actually as long as most people are throwing around in this thread. First off, we work for 40 years to save up for it. From 25 (roughly) to 65 (roughly). Then we're retired for only 20 years, from 65 (roughly) to 85 (roughly). There are more people living until their mid 90's, but they aren't anywhere close to a majority of people. The average life expectancy is still the mid 80s. A bit lower for men, and a bit longer women.

[2kids10horses]

Anyone who thinks they will be able to live on their SS benefits as their sole source of income when they retire is foolish.

I did just the opposite. I assumed there would be NO SS benefit for me, and invested so that I would have income for retirement. If I get any SS, it's gravy.

That's why I have rental houses. And, as it turned out, I retired at 48. 10 years ago. (I didn't actually "retire", but I no longer have a W2 job.)

[Works4me]

Dark - more people need to be like you. I just hope more people look at your numbers seriously. Dang, can't believe I said that! lol

When I said the economy was trashed I was referring to raises. Salaries do not keep pace with inflation. Average life expectancy is going to increase to 95-100 shortly. Hopefully people do as you recommend regarding student loans, cars, houses, children etc but frankly it is not that common.

I was diagnosed with lupus in 2004 and had to stop working in 2008 just before my 47th birthday. The only reason I am ok I because I had been planning to partially retire at 50 to do something fun. I have no debt, house and car paid for, and started saving money very young. I am the tail end of the Baby Boomers and their lack of savings will greatly impact everything. It will be very interesting.

[Deleted]

May 16, 2012 19:57:10 GMT -5 2kids10horses said:

That's why I have rental houses. And, as it turned out, I retired at 48. 10 years ago. (I didn't actually "retire", but I no longer have a W2 job.)

What do you do for health insurance? That would be a major stumbling block for me. As of Sunday (10-year anniversary with my company), I now have the ability to stay on my employer's plan, but their contribution will be frozen at 80% of what they contributed in 2010. I'm happy to have that as an option but it won't be cheap. One of my friends who retired at 57 is on her hubby's retiree plan from IBM. Nice if you can get it I don't qualify!

[Angel!]

May 16, 2012 18:34:50 GMT -5 Works4me said:

What percentage of people start saving 15% at 25 and do so every year?
Especially with student loans, car payments, houses, children, etc.

Whether or not people really do this doesn't really matter when all Dark was proving that the math does indeed work without requiring a large windfall.

How many people average 3% raises, aside from promotions?

Why aside from promotions? Promotions increase income also, why wouldn't we count that income?

My company doesn't really do promotions, but I have averaged 4.5%/yr income growth over the past 10 years & that is if I include the 2 years I took off. If you consider I only actually have 8 yrs experience & 7 raises (getting a raise next month), then you could say that I have averaged 6.5%/raise.

I think 3% is not unreasonable at all, especially early in your career. That is if you have an actual career. I guess if you want to look at someone that intends to be a fry cook at McDonalds for 30 years, then they will be lucky to even keep pace with inflation.

[973beachbum]

There are more people living until their mid 90's, but they aren't anywhere close to a majority of people. The average life expectancy is still the mid 80s. A bit lower for men, and a bit longer women.

No it's not. US life expectancy is 78.2 years overall 75.6 for males and 80.8 for women.

Life expectancies are always from birth. So a person born today would live on avg another 78.2 years. There are other tables that will tell you how many additional years someone will live once they get to a particular age. As you age your life expectancy goes up. So a person who makes it to 60 then would have a life expectancy of 82 or something and so on.

[Sum Dum Gai]

Life expectancies are always from birth. So a person born today would live on avg another 78.2 years. There are other tables that will tell you how many additional years someone will live once they get to a particular age. As you age your life expectancy goes up. So a person who makes it to 60 then would have a life expectancy of 82 or something and so on.

I must have always seen those second kind of numbers then. I swear the last time I heard the numbers it was like 88 for women and 84 for men. Although now that sounds way too high. 78 for women and 74 for men? That sounds right.

Either way, there aren't actually that many ninety somethings running around. Most people are still kicking the bucket after 20 years or less in retirement.

[Deleted]

Dark, your number game looks great except . . . well, I don't get 3% raises each year. I might get that much every 5 years or so. I reached the top of the step system at year 17.

My retirement account hasn't returned 10% a year over the last 14 years. If it has returned 2% a year, I would be surprised. I know that's an "average," but some of us are going to fall in the outlier years. That seems to be me.

I am fortunate enough to have a pension from the state. I know these are changing even as we speak, but they tend to grandfather those close to retirement. Hopefully, that is becoming me. They just made a lot of changes to the state system including the multiplier factor (down from slightly over 2% to slightly over 1.5%), the years that they base the pension on (best 5 out of 10 instead of best 3 out of 10), their share of insurance, etc. At least they are giving new hires a 1.5% reduction on mandatory contribution although new hires probably won't put that into retirement given student loans, trying to buy houses and start families, etc.

I started late (48 although I bought back 5 years of retirement that helped and got a $95,000 divorce settlement all in untaxed dollars because that's all we had). I wasn't even teaching in the public school system then. But I will tell you that these last 14 years have been AWFUL for retirement. I am so looking forward to the next 16, which should be incredibly awesome to make this average of 10% (or even 8%) WORK.

[Sum Dum Gai]

I don't get 3% raises each year. I might get that much every 5 years or so. I reached the top of the step system at year 17.

I am fortunate enough to have a pension from the state.

Me thinks these two are probably related.

I'm trying to think of anyone I know with a pension who actually makes a decent wage... kind of coming up blank. It seems to me the labor market currently offers two choices, more money or better benefits (specifically retiree medical and pensions). It's up to each of us to choose to place our bet on saving on our own and hoping the market returns are there, or trusting that the agency/company we spend our whole lives working for will keep us around that long and not screw us on the promises later.

[morrisr2d2]

This is the main reason I refinanced my 30 year mortgage to a 15 year. I want to be paid off at age 53 when the career situation could get more uncertain. I've seen too many older people let go, especially in the higher ranks. I want to be doing something my entire life as long as I am healthy and enjoy it, buy by my 50s I want it to be more on my terms and have set myself up to have options. Health insurance is the big unknown of course.

[Deleted]

May 19, 2012 9:01:52 GMT -5 morrisr2d2 said:

This is the main reason I refinanced my 30 year mortgage to a 15 year. I want to be paid off at age 53 when the career situation could get more uncertain. I've seen too many older people let go, especially in the higher ranks. I want to be doing something my entire life as long as I am healthy and enjoy it, but by my 50s I want it to be more on my terms and have set myself up to have options. Health insurance is the big unknown of course.

Agreed- I'm 59 with 6 years to go on the mortgage. I'm still working but it's more because I want to keep adding to the retirements funds while having an employer who feeds my expensive addiction to business-class travel to Europe. It's a good feeling not to be, as one (similarly well-prepared) co-worker put it, "one paycheck away frmo disaster".