By Morf Morford
Tacoma Daily Index
You’ve probably seen the term used to describe the job market over the past year – “The Great Resignation”. The reality is closer to the “great realignment”. Few workers leave the world of work, they only leave jobs that are not satisfying financially or in many other ways. A term we will hear soon is “The Great Retreat”. Demographics and COVID have combined to give us the biggest generational shift in work and wealth the world has probably ever seen.
Retirement at what age?
As more and more of us reach what used to be considered retirement age, fewer and fewer of us want – or can afford – to retire. About 51% of Americans retire between the ages of 61 and 65. That means about half of us don’t. Many of us continue to work, not because we need to, but because we want to – we like the idea of continuing to contribute to the market, to the economy, even to the culture around us.
Where is the money?
According to a 2020 report from the Federal Reserve, a quarter of Americans have no retirement savings. 50% of Americans age 65 or older have an annual income of less than $24,224. The average retirement income in the United States for households led by someone aged 65 to 69 is $53,951, while the median income for households led by someone 75 or older is $34,925.
About 46% of homeowners aged 65 to 79 still have mortgage debt. And many of them have other types of lingering debts.
Nearly a third of seniors live alone, according to retirement statistics. This means that 13.8 million seniors in the United States live alone. 53% of seniors live with a partner or spouse, while 10% live with their children.
About one million people in the United States move every year after retirement – and most move to a place with a lower cost of living.
Do the math
How much does it cost to live as you expect to live in retirement? If housing still accounts for about a third of your income, can you afford what you want?
The numbers are staggering – 28.6 million people between the ages of 56 and 74 retired in the third quarter of 2020.
Most of us can expect to live an average of 10 to 20 years after retirement – if we can afford to retire. You can see an exploration of the average lifespan of a person after retirement here: https://www.bbc.com/news/magazine-18952037. For this reason, many of us choose to continue working to some degree on an indefinite basis. More and more of us are choosing this option. See our previous article on this trend here: www.tacomadailyindex.com/blog/the-rise-of-the-un-retired/2452162/.
About a quarter of workers started saving in their 30s, while 25% started saving in their 40s or later. When it comes to saving, the sooner the better, because starting at a later age means saving more each month. And a simple principle, when you’re putting money aside for retirement, the more the better – and the sooner the better.
That extra ten or twenty or even fifty dollars each pay period makes a huge difference over several years.
Average annual retirement benefits in the United States range from $9,262 for private pensions to $22,172 for a federal government pension. Either way, it’s not much. And many of us don’t have any kind of pension. These were once common, but becoming less common each year. They have completely disappeared in many industries. And they are unlikely to reappear anytime soon.
Social Security to the rescue?
The typical American receiving Social Security in 2020 receives an average monthly benefit of about $1,294, according to the Social Security Administration. How much does this represent compared to your usual and expected expenses? The literal question is: is it enough? Your spending habits are unlikely to change much, so consider how much you are already spending, compared to how much your income will be.
One consideration is to wait before claiming your retirement benefit. Those who claim at age 70 can get up to 75% higher monthly payments than they would if they claim at age 62.
Think of Social Security as your economic base. You don’t want to go below, but as much above as possible would be best.
The ultimate outcome of retirement is not exclusively financial. In all respects, retire when you need it. Working full time is not for everyone.
And more and more companies are hiring – flexibility being a central feature of many jobs. In this, as in many other respects, it is not the economy – or the workplace – that we once knew. Many offices have multiple generations working side by side.
Everyone has their own strengths and energies. We may never see age-segregated workspaces again.
The gig-economy, after all, might just work for those of all ages.