Smart Money on Retirement

Today’s Wall Street Journal includes a Smart Money Magazine highlighting two themes related to Later Living.

First, Ian Salisbury, “Fix Your 401(k)”, calls attention to the limits—especially high fees and lack of important investment options—in 401(k) plans. Such plans were not designed to be a primary pillar of retirement, but they are quickly evolving into that role. Some of the problems include:

    • Many new “target funds” are plagued with high, probably unnecessary costs (index funds are probably the best choice in 401(k) target funds)
    • Many 401(k)s lack important options like bond index funds, real estate funds, and alternative investment vehicles, all of which can help in a choppy stock market
    • Many 401(k)s come with little, incomplete, and generic investment advice

Near and current retirees need to shoulder responsibility for learning, gradually but systematically, about investments, just as one might learn about health.

Second, Anne Kadet, “Working 9 to 5 — at 75”, describes how the nation’s “massive asset meltdown” has forced people to delay retirement or return to work. The percentage of Americans over 65 who work reached a low of about 13% in 2000, and it has been climbing since, more sharply in the last few years. Polls show that significantly fewer people now intend to retire early, and significantly more people expect to work until age 70 or later.

Work can be challenging for older people. Many mental functions noticeably decline after age 50, and increasingly, modern work is information and technology intensive. Older workers have strengths too—”accrued wisdom and a strong work ethic”. Ms. Kadet’s article includes several interesting stories of people staying in harness beyond 65. You gotta do what you gotta do.

5 thoughts on “Smart Money on Retirement

  1. Even if the financial barriers are to be eliminated we would still find that retirement is not for every one. I know many individuals who will find it difficult to stop going to work and to get used to more leisure. Physically demanding work does take its toll on individuals but many other jobs actually allow some to thrive and contribute. Lets not forget that the 70 figure was pulled out of a hat by Bismark simply because very few lived beyond it.
    It is interesting to note that Germany lowered the retirement age to 65 only after WWI. Life expectancy during 1930 was just shy of 60 years when retirement in general was 65 but since then life expectancy is almost 79 and yet retirement is still 65.

  2. The number of countries that have not adopted an official retirement age has shrunk a lot over the past 50 years or so. Yet it might be informative to recall that when Germany first introduced this notion ; in the 1880’s;they used the figure of 70 years old as the beginning of retirement and that was reduced after WWI to 65. Age expectancy then was under 60 while it is currently close to 79. This means that over the past 82 years we have maintained practically the same retirement age when our life expectancy has increased by almost 20 years.
    As you had mentioned earlier some occupations are much more demanding than others and so take a bigger physical toll on their practitioners. But as a general rule there are many jobs that can be performed rather well by individuals into their eighties and so I have no problems in encouraging such individuals to stay on the job if they chose to do so. Actually some studies even suggest that staying engaged with work could be very beneficial to the mental as well as the financial health of some. And so I question at times, the validity of these studies that show that some cannot retire at say 60 or 65 years of age. Isn’t the 65 years age a social custom anyway and don’t we often change our social habits?
    I guess that what I am saying is that retirement , just like most other concepts, should not be looked upon as a one size fits all.

  3. Very good. Thanks—I did not know about the German story. I see this stuff as questions of wealth. The WSJ article on “Working 9 to 5 — at 75” shows glimpses of history, where in the late 1800s, more than 60% of the 65+ work force was still employed. That percentage trended downward until recently. Only time will tell if the current uptick in workers over 65 continues into a new trend.

    You’re right, I think, that one size does not fit all. I do believe, though, that people work because they have to; remove the necessity, either through pensions, savings, or very low costs of living, and most people will chuck the job in favor of ease. Not all, but most—how about you? When do you intend to retire?

    • I will be 68 in September and I am not sure when I am going to hang my hat. To me retirement is not about not working but it is about having the freedom to do what you like without having the pressure that you must compromise in order to preserve your job. In a sense I will quit tomorrow if I find something more fulfilling to do. Unfortunately I did not take the time to develop such an alternative and so I think that it would be highly unlikely for me to shift gears at this stage.
      The only thing that I can see myself doing besides full retirement would be to start a small business that would keep me occupied. But then tomorrow is another day:-)

  4. Perhaps a retirement age is still around so that others who are younger get an opportunity to move up the ladder. Second careers, what post retirment jobs are sometimes refered to, need not necessarily be for money, although many may well be looking at this option. It could also be voluntary, just a means to remain mentally active. For sure, there will be constraints on physical work, as one ages, but there are hardly any barriers for thoughts.
    A couple of years back, here in India, I had the opportunity to interact with some consultants in one of the big four consulting companies. The people I was talking to were themselves not young, yet despite this, the sheer indifference (bordering on contempt) and disdain with which they dismissed my suggestion that we look for experienced retirees to be taken on board on part-time basis for a particular job was surprising. They were completely dismissive of the suggestion!!!!
    While it is important to manage your money so that retired living is comfortable, it might not always work that way.

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