3/10/2014 3:45 PM ET|
7 new retirement trends
Your retirement is likely to be quite different from what your parents experienced.
We all know that retirement today is not the same as it was for our parents. Pensions are nothing but a dim memory for many of us, and we all worry about Social Security and the cost of health care. Yet our life expectancies have increased, and we can look forward to enjoying healthier, more active lifestyles either at home, in a sunbelt paradise or perhaps in some kind of senior living facility.
Here are seven current trends in the world of retirement, outlined from a recent study by the University of Michigan Retirement Research Center:
1. The traditional career arc is changing
The experience of a decades long full-time job followed by full retirement is becoming the exception rather than the rule. Instead, many workers are leaving full-time work in their 50s, and taking lower-paying "bridge" jobs they may hold for several years before finally entering full retirement. People in bridge jobs have different attitudes and expectations compared to full-time workers, which significantly affects loyalty, commitment and incentives in the workplace.
2. More people are choosing semi-retirement
Due to the lack of a secure pension or forced early retirement, a significant group of retirees are now holding down part-time jobs. According to the University of Michigan study, the proportion of partially retired workers has risen from virtually zero to 15 percent for 60 to 62 year olds, and is over 20 percent for 65 to 67 year olds, up from 5 to 10 percent in 1960.
3. Workers have less control over the timing of their retirement
Despite efforts from the government to ban age discrimination, multitudes of workers in their 50s and early 60s have been laid off or forced into early retirement. In addition, almost as many late-stage workers are being passed over for new jobs. At least some of this phenomenon results from businesses responding to difficult economic conditions since 2000.
Or, as the study says, "Workers around normal retirement age (63-67 years old) are especially sensitive to changes in the national unemployment rate."
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4. But they also have more flexibility
In 1970, Social Security introduced a gradual increase in the delayed retirement credit, meaning that employees working beyond normal retirement age continue to build up credits for Social Security. Workers now have the flexibility to take retirement benefits anywhere between 62 and 70, and theoretically receive the same expected lifetime benefits. Also, the decline in defined-benefit pension plans may have reduced instances when workers face age-specific work disincentives.
In other words, fewer companies require workers to retire at age 65 whether they want to or not. That's the silver lining of defined contribution plans: Now you can decide when to retire, rather than the pension plan pushing you to retire at a certain age.
5. The more money you make, the more likely you will keep working
It seems counterintuitive. You'd think the lower your salary, the longer you'd have to work. But it doesn't pan out that way, presumably because higher-paid workers have better jobs they not only want to keep, but are also able to keep. The full-time employment rate for 60-year-olds on the lower end of the pay scale is less than average, and for 65-year-olds it is less than half the average. Highly paid workers have had a different experience.
The average full-time employment rate for top earners ages 65 to 67 went down in the 1990s, but has been rising ever since – suggesting longer careers but less-expected retirement security for this group.
6. People spend longer periods of time in part-time careers
Those who leave the full-time workforce early need to make more income. They tend to fall into the lower end of the pay scale to begin with, and in the end have devoted fewer years to earning a salary. Therefore, instead of taking full retirement at 65 or 66, many keep working their part-time jobs until age 70 or beyond to make up for lost wages earlier in their career.
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7. Inflation, housing prices and the stock market have little impact on retirement
The study found that a high inflation rate results in a slightly higher retirement rate, because wages lag inflation and therefore lower the rewards of working. Housing prices and stock market performance have a slight bearing on the timing of retirement, primarily for wealthier individuals. But most people time their retirement based on their own tolerance and ability to work, not on general economic conditions or prospects for the stock market.
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In most cases the average human being simply lives in the moment and often lacks the foresight and the discipline to plan for the long term future. That is why various pension plans and retirement investment plans were created in the first place. They became a kind of forced retirement savings plan that gave us at least some minimum level of security once old age came upon us. In the last 20 years or so however that whole concept is disappearing and people are now facing having to make such plans themselves.
There is a frightening trend for us to return to the pre-Roosevelt days when there simply were no provisions for retirement other than what we created for ourselves. The wealthy of course had no problems but the majority of the public were work-a-day employees who lived from pay check to pay check in their early adulthood and had to struggle to save anything toward the future. That resulted in a very large contingent of people who simply had nothing to fall back on when they became old and infirm. If their children failed to take them in and support them many simply starved and died miserably where ever it was that they wound up.
That created such an uproar in society that our leadership was pressed to do something and that resulted in FDR's brilliant concept for Social Security. Even then he had a considerable fight with staunch Conservatives of the day just to get it though in 1935. If we had not been struggling to come out of the Great Depression and looking at problems in Europe because of Germany's belligerent activities it may never have passed in the first place. While no one likes war the beginning of WWII actually did more to cement the Social Security Act into place because the war effort created huge profits for businesses and the economy boomed so in general we could afford to be more liberal in our generosity with the working public. They needed the blue collar workers and their loyalty so it behooved them to take care of their labor force.
Today none of that exists. Most of our blue collar jobs have vanished overseas and automation has replaced much of what still exists of our manufacturing business. If we were to be forced into an international conflict today we no longer have the level of self sufficiency that we would need to survive. Our initial technical supremacy would fade quickly as tech. devices began to fail and our sources for parts from foreign manufacturers dried up.
In much the same way that our ancestors failed to plan long term for their future our leadership of today has adopted much the same carefree attitudes about our nation's future. Such short sighted thinking will ultimately come back to haunt us one way or another. I just hope we don't have to have another world war to find out what a mistake we are making with our future. We already are discovering that much of our national infrastructure is beginning to crumble. That raises the obvious question of whether or not our leadership is paying attention and whether they will take actions to reverse our decline in self sufficiency as a nation.
In a pension plan for example your funds are usually matched to some extent and the plan is managed by experts who are supposed to maximize the return on your investments. Today however there are few 'matching plans' for workers in the work place and they are pretty much on their own when planning for their retirement. True we still have Social Security and Medicare as a safety net but that is shrinking to some extent because of our national fiscal policies and some would even do away with them completely. Those trust funds look awfully inviting when the national debt continues to climb as it has and there are some in our Congress who would gladly pilfer those funds to continue their wild spendthrift ways.
The world has changed dramatically for the boomer generation. The prosperity of my parents time is the last golden age. In my generation (mid fifties) globalization and plutocratic influence on governments has ruined any comfortable retirement for most. People will be living longer and can look forward to a reduced standard of living sadly. Never in my wildest dreams did I imagine the U.S. becoming what it currently is. A massive economic and political shift which will negatively effect my children's generation and beyond is the new reality. I am lucky that my ex was a successful government employee general officer, reserve and active, county employee with pension and benefits.
A divorce 15 years ago and no remarriage on my part has assured me a decent retirement. I have seen stagnant mobility even though I am twenty five years in my field. I identify with the trends mentioned. because of the high cost of retirement in California I will semi retire in 2015 when my . first of pensions commence. My partner who is much younger will close his business and we'll figure it out as we go.
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Some workers lose up to a quarter of their paychecks paying off old debt from credit cards, medical bills and student loans, as well as child support.