The Power of Working Longer

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TomP10
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The Power of Working Longer

Post by TomP10 » Mon Jan 22, 2018 7:57 am

From a new working paper. A rather amazing result.... not that working longer matters, but that it matters so much!
This paper compares the relative strengths of working longer vs. saving more in terms of increasing a household’s affordable, sustainable standard of living in retirement. Both stylized households and actual households from the Health and Retirement Study are examined. We assume that workers commence Social Security benefits when they retire. The basic result is that delaying retirement by 3-6 months has the same impact on the retirement standard of living as saving an additional one-percentage point of labor earnings for 30 years. The relative power of saving more is even lower if the decision to increase saving is made later in the work life. For instance, increasing retirement saving by one percentage point ten years before retirement has the same impact on the sustainable retirement standard of living as working a single month longer. The calculations of the relative power of working longer and saving more are done for a wide range of realized rates of returns on saving, for households with different income levels, and for singles as well as married couples. The results are quite invariant to these circumstances.
The researchers are Gila Bronshtein and John Shoven of Stanford, Jason Scott of Financial Engines and Sita Slavov of George Mason University

Youtube presentation of the research here and working paper here.
"It is remarkable how much long term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent." -- Charlie Munger

azanon
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Re: The Power of Working Longer

Post by azanon » Mon Jan 22, 2018 8:20 am

The average lifespan of a human is (only) 948 months. 3-6 months is a lot. I guess you were going for the impact that it's not a lot of time?

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TomP10
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Re: The Power of Working Longer

Post by TomP10 » Mon Jan 22, 2018 8:35 am

If the results are correct (which I have no reason to think they are not), it shows the incredible power of working just a bit longer. Obviously is you are not in good health, that's a non-starter. However, a healthy person who retires at, say, age 67 rather than age 64 can "make up" for a lifetime of under saving.

Perhaps not Bogleheads, but the evidence is quite clear that Americans save too low a percentage of their earnings. I would not have imagined that 3-6 months of additional work would be equivalent to about 1% of extra saving (over entire lifespan).
"It is remarkable how much long term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent." -- Charlie Munger

azanon
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Re: The Power of Working Longer

Post by azanon » Mon Jan 22, 2018 8:40 am

Ok fair enough. Being completely honest about it, that sounds about right to me though. One extra percent saved requires the slightest of living standard adjustment, and to know that buys me 3-6 months of freedom. If anything that validates my choice to have saved a lot.

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Re: The Power of Working Longer

Post by Shallowpockets » Mon Jan 22, 2018 8:42 am

There might be power in this view, but not much sense unless you needed that money.
At some point it is not about the money anymore, it is about the time. You can never get that back or save it. A cliche, but true.
You make your choices, money or time. It is a frequent discussion here and one half believes in money and the other half believes in time.

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Re: The Power of Working Longer

Post by KlangFool » Mon Jan 22, 2018 8:49 am

OP,

2 words response -> Age Discrimination.

For many folks, at a certain age, due to Age Discrimination, they are either unemployed or under-employed. So, working longer bring minimal extra income.

KlangFool

ThriftyPhD
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Re: The Power of Working Longer

Post by ThriftyPhD » Mon Jan 22, 2018 8:51 am

They're assuming your savings earns 0% real over the years you save.
Constant returns, 𝑟, assumed to be zero
So yes, if you are 100% in CDs, you're likely going to get a big benefit from simply working longer.

Another big assumption is that the day you retire, you put 100% of your savings into an annuity. So the delay means you get more social security, and your annuity that you purchase is cheaper.

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KlingKlang
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Re: The Power of Working Longer

Post by KlingKlang » Mon Jan 22, 2018 9:02 am

Almost everyone has the option of saving more. The option of working longer may not be under your control.

To repeat the points made by TomP10 and KlangFool, your health issues, family health issues, age discrimination, and corporate downsizing are all factors that may keep you from working as long as you would like.

ThePrince
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Re: The Power of Working Longer

Post by ThePrince » Mon Jan 22, 2018 9:04 am

How about the power of saving more. There, I like that much better.

azanon
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Re: The Power of Working Longer

Post by azanon » Mon Jan 22, 2018 9:07 am

Also, to the degree that you have tax-advantaged space for savings, I would assume a dollar saved is even mathematically worth more than one spent.

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Re: The Power of Working Longer

Post by livesoft » Mon Jan 22, 2018 9:07 am

So if you saved only 10% annually during your 30 working years, you can make that look like you saved 15% annually during your 30 working years by working another 15 to 30 months or make it look like you saved 20% annually by working 2.5 to 5 years longer.

Is the converse true? If you save 50% annually, can you retire early? Of course you can.
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ThriftyPhD
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Re: The Power of Working Longer

Post by ThriftyPhD » Mon Jan 22, 2018 9:17 am

Another aspect to consider is that they're looking at retirement income vs wages, rather than retirement income vs expenses. The early retirement community discusses is that a high savings rate has two benefits. One, by saving more, you have more to live off of later. Two, by saving more, you're learning to live less, so you need less income in retirement, and therefore need to have less saved.

So you almost have to count that 1% twice. Then instead of saving you 3-6 months, it would be up to a year.

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Top99%
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Re: The Power of Working Longer

Post by Top99% » Mon Jan 22, 2018 9:57 am

ThePrince wrote:
Mon Jan 22, 2018 9:04 am
How about the power of saving more. There, I like that much better.
Indeed. :sharebeer
Adapt or perish

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willthrill81
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Re: The Power of Working Longer

Post by willthrill81 » Mon Jan 22, 2018 11:13 am

azanon wrote:
Mon Jan 22, 2018 8:40 am
Ok fair enough. Being completely honest about it, that sounds about right to me though. One extra percent saved requires the slightest of living standard adjustment, and to know that buys me 3-6 months of freedom. If anything that validates my choice to have saved a lot.
Without getting into the weeds of the authors' methods, their conclusion doesn't seem to be valid. For instance, saving $1k a month at 0% return for 30 years leaves you with $360k, but a 1% return leaves you with $417k, a difference of $57k or 57 months of saving at 0% return. As the rates of return go up, so does the marginal benefit of earning an extra 1%. A return of 5% in the above example would leave you with $797k, whereas 6% would leave you with $949k. Regardless, an extra 1% over 30 years seems to create a lot more benefit than an extra 3-6 months of saving.
Shallowpockets wrote:
Mon Jan 22, 2018 8:42 am
There might be power in this view, but not much sense unless you needed that money.
At some point it is not about the money anymore, it is about the time. You can never get that back or save it. A cliche, but true.
You make your choices, money or time. It is a frequent discussion here and one half believes in money and the other half believes in time.
:beer

At some point, enough is enough. You can buy a lot of things, but time is not one of them. Sadly, this truth is lost to many.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: The Power of Working Longer

Post by bgf » Mon Jan 22, 2018 11:43 am

ThriftyPhD wrote:
Mon Jan 22, 2018 8:51 am
They're assuming your savings earns 0% real over the years you save.
Constant returns, 𝑟, assumed to be zero
So yes, if you are 100% in CDs, you're likely going to get a big benefit from simply working longer.

Another big assumption is that the day you retire, you put 100% of your savings into an annuity. So the delay means you get more social security, and your annuity that you purchase is cheaper.
also, they assume saving does not begin until age 36...
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

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Re: The Power of Working Longer

Post by Christine_NM » Mon Jan 22, 2018 1:02 pm

Interesting youtube vid. As I watched, I wanted to ask the presenters and their audience, How many of you believe that your retirement income will be 80% determined by your Social Security PIA? The presenters claim this, give or take a bit depending on work income. I suspect few hands would go up. At least I hope they have other plans which require saving plenty now.

None of this is true in my case, nor was it meant to be true in any individual case. After Medicare expense, my Social Security benefit is 10% of my gross income. I worked 40 years, that was enough for me. As I recall, one more month of work would have felt like an eternity. Actually I had wanted to retire 2 years earlier but stuck it out to reach my no-penalty pension age.
17% cash 47% stock 36% bond. Retired, w/d rate 2.85%

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warowits
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Re: The Power of Working Longer

Post by warowits » Mon Jan 22, 2018 2:27 pm

I don't necessarily like the methodology here, for the reasons already stated by other posters, but the reasoning is sound. I have a spreadsheet where I can put in my expected returns and contributions and whatnot and then I just adjust the age I retire and the age I want to start SS. I feel like I have a fairly typical (well boglehead typical) situation and I will be able to comfortably and securely retire around 60.

But if I wanted to push it to 62.5 I will likely double what I leave for the kids when I go. Its kind of hard to wrap my head around. I can spend a lifetime of work saving diligently, and those last 2.5 years are worth as much as the prior 30 for building a legacy.
There are an army of people whose pay checks depend on convincing people to invest in ways that are against their self interest. This forum is the volunteer army that fights back!

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Re: The Power of Working Longer

Post by H-Town » Mon Jan 22, 2018 3:33 pm

TomP10 wrote:
Mon Jan 22, 2018 7:57 am
From a new working paper. A rather amazing result.... not that working longer matters, but that it matters so much!
This paper compares the relative strengths of working longer vs. saving more in terms of increasing a household’s affordable, sustainable standard of living in retirement. Both stylized households and actual households from the Health and Retirement Study are examined. We assume that workers commence Social Security benefits when they retire. The basic result is that delaying retirement by 3-6 months has the same impact on the retirement standard of living as saving an additional one-percentage point of labor earnings for 30 years. The relative power of saving more is even lower if the decision to increase saving is made later in the work life. For instance, increasing retirement saving by one percentage point ten years before retirement has the same impact on the sustainable retirement standard of living as working a single month longer. The calculations of the relative power of working longer and saving more are done for a wide range of realized rates of returns on saving, for households with different income levels, and for singles as well as married couples. The results are quite invariant to these circumstances.
The researchers are Gila Bronshtein and John Shoven of Stanford, Jason Scott of Financial Engines and Sita Slavov of George Mason University

Youtube presentation of the research here and working paper here.
I believe in the power of saving more. When we get to our targeted $4M at early 50s, we have options.

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The529guy
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Re: The Power of Working Longer

Post by The529guy » Mon Jan 22, 2018 4:08 pm

With all due respect to the researchers, this sounds like an Assume a can opener study to me. Did you notice their analysis relies on individuals annuitizing all investments upon retirement so they could make an apples-to-apples comparison between 401k savings and SS?

How many of you plan to make market growth irrelevant the moment you retire?

From page 3 of the working paper:
We define the maximum sustainable standard of living in retirement as the maximum annuity that can be obtained from both private retirement savings and Social Security. We assume that retirement accumulations are used to purchase an inflation-indexed joint survivor life annuity with 100% of the monthly benefit continuing for the survivor. Annuitizing wealth guarantees that the benefits are indeed sustainable and protected from both inflation and the risk of outliving retirement resources, and is generally optimal in the life cycle framework (see Yaari 1965; Mitchell et al. 1999). It also facilitates our analysis by ensuring that the annuity benefits from 401(k) and similar plans are comparable to Social Security benefits for primary earners, where the benefits are paid out as a second-to-die inflation-indexed annuity. We assume that workers claim Social Security upon retirement, and therefore workers who extend their careers postpone the commencement of Social Security to their new retirement age.

michaeljc70
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Re: The Power of Working Longer

Post by michaeljc70 » Mon Jan 22, 2018 5:06 pm

I saved a high % of my income so I don't have to work longer.....

I guess if you started late or saved too little....

Dottie57
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Re: The Power of Working Longer

Post by Dottie57 » Mon Jan 22, 2018 5:17 pm

thangngo wrote:
Mon Jan 22, 2018 3:33 pm
TomP10 wrote:
Mon Jan 22, 2018 7:57 am
From a new working paper. A rather amazing result.... not that working longer matters, but that it matters so much!
This paper compares the relative strengths of working longer vs. saving more in terms of increasing a household’s affordable, sustainable standard of living in retirement. Both stylized households and actual households from the Health and Retirement Study are examined. We assume that workers commence Social Security benefits when they retire. The basic result is that delaying retirement by 3-6 months has the same impact on the retirement standard of living as saving an additional one-percentage point of labor earnings for 30 years. The relative power of saving more is even lower if the decision to increase saving is made later in the work life. For instance, increasing retirement saving by one percentage point ten years before retirement has the same impact on the sustainable retirement standard of living as working a single month longer. The calculations of the relative power of working longer and saving more are done for a wide range of realized rates of returns on saving, for households with different income levels, and for singles as well as married couples. The results are quite invariant to these circumstances.
The researchers are Gila Bronshtein and John Shoven of Stanford, Jason Scott of Financial Engines and Sita Slavov of George Mason University

Youtube presentation of the research here and working paper here.
I believe in the power of saving more. When we get to our targeted $4M at early 50s, we have options.
I will probably annuitize 1/10 of what I have today t creat a verysmall floor.

renue74
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Re: The Power of Working Longer

Post by renue74 » Mon Jan 22, 2018 5:22 pm

OMG I don't won't to work any longer than I have to. When I die, nobody is going to say, "that guy, he made good looking websites."

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HomerJ
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Re: The Power of Working Longer

Post by HomerJ » Mon Jan 22, 2018 5:25 pm

A real problem is that it may not be YOUR choice if you can work longer.

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Re: The Power of Working Longer

Post by invst65 » Mon Jan 22, 2018 5:39 pm

HomerJ wrote:
Mon Jan 22, 2018 5:25 pm
A real problem is that it may not be YOUR choice if you can work longer.
This is very true. I planned on working about a year longer than I did because somebody else decided it was time to go. I'm sure I could have found another job but not making any where near what I was making at the time. Software engineering jobs for 67 year-olds are hard to find and even if I found one I'm not sure I had it in me to start over again. After being retired for a year and a half I'm not pretty sure I don't.

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Earl Lemongrab
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Re: The Power of Working Longer

Post by Earl Lemongrab » Mon Jan 22, 2018 6:48 pm

It's nice to get to the financial position where you can decide when to stop working for reasons besides "I can't afford to retire."
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Re: The Power of Working Longer

Post by whodidntante » Mon Jan 22, 2018 6:59 pm

Many people do not get to decide how long they work. I'm in an industry were people do not age like fine wines. I'm putting money away while I have an above average income, because it's not going to last.

heyyou
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Re: The Power of Working Longer

Post by heyyou » Mon Jan 22, 2018 7:05 pm

As with Bengen's 4% WD rate, the authors of the paper made some assumptions for convenience of calculating that do not fit workers/retirees who are living in the real world. The new paper will continue to be quoted in the future, in spite of the criticisms mentioned above by other BHs. Did the SS administration pay for the new research?

The Power Cost of Working Longer
Having retired at 55 into the best years of my life, please ask someone from the dismal science to measure my imaginary loss from not continuing to work. What multiple of previous annual income would be required to lure early retirees back to their former jobs? Many of them have said that very cold weather, sustained freezing temperatures in Hades, are a prerequisite for returning to work.

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Re: The Power of Working Longer

Post by willthrill81 » Mon Jan 22, 2018 7:20 pm

whodidntante wrote:
Mon Jan 22, 2018 6:59 pm
Many people do not get to decide how long they work. I'm in an industry were people do not age like fine wines. I'm putting money away while I have an above average income, because it's not going to last.
While my employment is exceptionally stable currently, I have concerns about the long-term viability of my industry (higher ed) and am likewise making hay while the sun is shining brightly. I've not heard anyone wish that they hadn't saved as much as they did.
heyyou wrote:
Mon Jan 22, 2018 7:05 pm
As with Bengen's 4% WD rate, the authors of the paper made some assumptions for convenience of calculating that do not fit workers/retirees who are living in the real world. The new paper will continue to be quoted in the future, in spite of the criticisms mentioned above by other BHs. Did the SS administration pay for the new research?

The Power Cost of Working Longer
Having retired at 55 into the best years of my life, please ask someone from the dismal science to measure my imaginary loss from not continuing to work. What multiple of previous annual income would be required to lure early retirees back to their former jobs?
I like to 'invert the problem' like this when making all sorts of financial decisions and really like your example.

If you had an income of X (presumably the income you would receive after you retired), would you voluntarily come back to work? I think this would change how many who are on the fence would think about the situation.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: The Power of Working Longer

Post by Lynette » Mon Jan 22, 2018 8:28 pm

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Last edited by Lynette on Mon Jan 22, 2018 9:44 pm, edited 4 times in total.

2015
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Re: The Power of Working Longer

Post by 2015 » Mon Jan 22, 2018 9:11 pm

heyyou wrote:
Mon Jan 22, 2018 7:05 pm
As with Bengen's 4% WD rate, the authors of the paper made some assumptions for convenience of calculating that do not fit workers/retirees who are living in the real world. The new paper will continue to be quoted in the future, in spite of the criticisms mentioned above by other BHs. Did the SS administration pay for the new research?

The Power Cost of Working Longer
Having retired at 55 into the best years of my life, please ask someone from the dismal science to measure my imaginary loss from not continuing to work. What multiple of previous annual income would be required to lure early retirees back to their former jobs? Many of them have said that very cold weather, sustained freezing temperatures in Hades, are a prerequisite for returning to work.
Nailed that!
The problem with all of this theorizing and assumptions and "research" is just that. It's theory. As one who has experienced the best years of his life since retiring, Hades could resemble the eastern seaboard this past winter and I wouldn't return to work. There is just no substitute for the sense of fulfillment I felt today.

The problem is attempting to explain this to anyone who has not experienced it. It becomes like the old joke about attempting to explain sex to a virgin.

J295
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Re: The Power of Working Longer

Post by J295 » Mon Jan 22, 2018 9:24 pm

Ahhh ... but if more money is not necessary or important .... when I transitioned to part time and then retired during my peak earning years I easily accepted a personal mantra "work less make less" knowing full well that working wouldn't allow me to buy more time.

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Will do good
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Re: The Power of Working Longer

Post by Will do good » Mon Jan 22, 2018 9:26 pm

willthrill81 wrote:
Mon Jan 22, 2018 11:13 am
azanon wrote:
Mon Jan 22, 2018 8:40 am

Without getting into the weeds of the authors' methods, their conclusion doesn't seem to be valid. For instance, saving $1k a month at 0% return for 30 years leaves you with $360k, but a 1% return leaves you with $417k, a difference of $57k or 57 months of saving at 0% return. As the rates of return go up, so does the marginal benefit of earning an extra 1%. A return of 5% in the above example would leave you with $797k, whereas 6% would leave you with $949k. Regardless, an extra 1% over 30 years seems to create a lot more benefit than an extra 3-6 months of saving.
+1
Let's not have real world samples get in the way of their study.

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Re: The Power of Working Longer

Post by 2Birds1Stone » Mon Jan 22, 2018 9:40 pm

I would gladly save 10% more and retire a decade sooner.

Too each their own. Interesting concept, but for me it makes much more sense to think of the inverse relationship.

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Re: The Power of Working Longer

Post by protagonist » Mon Jan 22, 2018 10:47 pm

azanon wrote:
Mon Jan 22, 2018 8:40 am
Ok fair enough. Being completely honest about it, that sounds about right to me though. One extra percent saved requires the slightest of living standard adjustment, and to know that buys me 3-6 months of freedom. If anything that validates my choice to have saved a lot.
So if you save 10% more that would buy you 30-60 months of freedom? eg: saving, say, $11K/yr for every 10K/yr currently saved? That does not seem unreasonable. And 10% is not much of a pill to swallow for one making a good salary, in return for 2 1/2-5 more years of freedom, or 20% for 5-10 years, assuming you still have enough money to enjoy your life while you are young as well.

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The Power of Working Longer

Post by jbranx » Tue Jan 23, 2018 11:44 pm

[merged jbranx's post and its replies into this existing thread - moderator prudent]

This Bloomberg article references a new NBER paper on the "power of working longer" that is available for download on SSNR for $5:

https://www.bloomberg.com/view/articles ... retirement

Couple of key paragraphs from the link above:


"You're 49 years old, you make $113,000 a year and you're starting to get worried about financing your retirement. You could take the drastic step of upping your retirement savings by 10 percent of your salary. Or you could achieve the same result by retiring two years and five months later than you had been planning to.

This is one of a number of such comparisons in a remarkable new National Bureau of Economic Research working paper, "The Power of Working Longer," that I imagine is going to become a staple of retirement advice in the coming years. The authors are Gila Bronshtein, Jason Scott, John B. Shoven and Sita N. Slavov. Shoven is a Stanford economics professor and longtime retirement guru who, at age 70, is practicing what he preaches. Bronshtein, Scott and Slavov all got their doctorates in economics from Stanford in the past 15 years and are now working at, respectively, Cornerstone Research, Financial Engines and George Mason University."

The NBER/SSRN link to the full PDF:

http://www.nber.org/papers/w24226

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The529guy
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Re: The Power of Working Longer

Post by The529guy » Wed Jan 24, 2018 12:05 am

[Thread merged into here, see below. --admin LadyGeek]

This paper is discussed in this thread.

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Re: The Power of Working Longer

Post by jbranx » Wed Jan 24, 2018 12:08 am

Thanks much 529. I missed the thread in my search.

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Re: The Power of Working Longer

Post by Ron Scott » Wed Jan 24, 2018 7:09 am

I believe we’re looking at a post heyday future with real returns on a balanced portfolio closer to 2%, so the article should be rewritten as The Necessity of Working Longer. The times when we spend a third of our lives preparing to work, a third working, and a third in retirement are over IMO.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. Preparing for financial challenges is more fruitful than trying to predict them.

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Re: The Power of Working Longer

Post by cherijoh » Wed Jan 24, 2018 7:26 am

jbranx wrote:
Tue Jan 23, 2018 11:44 pm
This Bloomberg article references a new NBER paper on the "power of working longer" that is available for download on SSNR for $5:

https://www.bloomberg.com/view/articles ... retirement

Couple of key paragraphs from the link above:


"You're 49 years old, you make $113,000 a year and you're starting to get worried about financing your retirement. You could take the drastic step of upping your retirement savings by 10 percent of your salary. Or you could achieve the same result by retiring two years and five months later than you had been planning to.

This is one of a number of such comparisons in a remarkable new National Bureau of Economic Research working paper, "The Power of Working Longer," that I imagine is going to become a staple of retirement advice in the coming years. The authors are Gila Bronshtein, Jason Scott, John B. Shoven and Sita N. Slavov. Shoven is a Stanford economics professor and longtime retirement guru who, at age 70, is practicing what he preaches. Bronshtein, Scott and Slavov all got their doctorates in economics from Stanford in the past 15 years and are now working at, respectively, Cornerstone Research, Financial Engines and George Mason University."

The NBER/SSRN link to the full PDF:

http://www.nber.org/papers/w24226
".. remarkable new..." ?!? I see nothing remarkable OR new about the concept that working longer reduces the amount you need to save for retirement and improves your retirement viability. The question is whether you will have the opportunity to do so. :oops: Tenured academics are amongst the few professions that are welcomed to continue to work into their seventies. Everyone else has to worry about getting the boot before they are financially prepared for retirement. Plus there is always the issue of health - your own and that of a spouse or life partner.

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Re: The Power of Working Longer

Post by carolinaman » Wed Jan 24, 2018 7:41 am

Working longer may be a backup plan but should not be your primary plan if at all possible. I have read several articles that state that a large percentage of workers are forced to retire early due to job loss, health issues or to care for a loved one. None of us knows if we will be one of those statistics or not until we live through that period.

I was fortunate that I was able to work until age 66. My original plan was to retire a few years earlier but 2008 happened and I decided to work longer to recover market losses and increase my retirement scenario. Many people lost their jobs during the downturn and did not get the opportunity to work longer. It made a big difference to me as I was able to increase my pension, SS and savings and, of course, did not tap my savings for living expenses for those years.

I skimmed the article and noted some of their assumptions seemed suspect. For example, they assumed a 36 year old worker would get 0% real wage increases and 0% real growth from investments during their career. I am sure that is true for some people, but I would think some modest increase in real wage and investment growth would be much more likely.

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Re: The Power of Working Longer

Post by Dottie57 » Wed Jan 24, 2018 7:55 am

carolinaman wrote:
Wed Jan 24, 2018 7:41 am
Working longer may be a backup plan but should not be your primary plan if at all possible. I have read several articles that state that a large percentage of workers are forced to retire early due to job loss, health issues or to care for a loved one. None of us knows if we will be one of those statistics or not until we live through that period.

I was fortunate that I was able to work until age 66. My original plan was to retire a few years earlier but 2008 happened and I decided to work longer to recover market losses and increase my retirement scenario. Many people lost their jobs during the downturn and did not get the opportunity to work longer. It made a big difference to me as I was able to increase my pension, SS and savings and, of course, did not tap my savings for living expenses for those years.

I skimmed the article and noted some of their assumptions seemed suspect. For example, they assumed a 36 year old worker would get 0% real wage increases and 0% real growth from investments during their career. I am sure that is true for some people, but I would think some modest increase in real wage and investment growth would be much more likely.
+1

My comany no longer likes my age and experience and I no longer believe in the corporate goals. Hopefully retiring soon. Two years ago I thought I would work til FRA and keep adding to 401k. That is no longer possible.

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Re: The Power of Working Longer

Post by ryman554 » Wed Jan 24, 2018 9:56 am

I'm 25 and never want to retire.

I'm 35 and life with kids is looking rosy, and I'm running marathons!

I'm 45 and counting the days (ok, years, really) until FI. Oh, and I'm fat and lazy too.

I wonder what I'll think when I'm 55.

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As you get older you value time more than money. And you realize that money well spent buys you time.

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Re: The Power of Working Longer

Post by zaboomafoozarg » Wed Jan 24, 2018 10:02 am

Ron Scott wrote:
Wed Jan 24, 2018 7:09 am
I believe we’re looking at a post heyday future with real returns on a balanced portfolio closer to 2%, so the article should be rewritten as The Necessity of Working Longer. The times when we spend a third of our lives preparing to work, a third working, and a third in retirement are over IMO.
Agreed, the future of normal stock/bonds returns looks very bleak. I save 50-60% of my income just to have a chance at retiring 10-15 years early. I expect that in 30 years, most people will be working until they die or cannot work anymore.

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Re: The Power of Working Longer

Post by mptfan » Wed Jan 24, 2018 10:11 am

Ron Scott wrote:
Wed Jan 24, 2018 7:09 am
The times when we spend a third of our lives preparing to work, a third working, and a third in retirement are over IMO.
Those times of which you speak represent an historical anomoly and represent a small fraction of time in modern history for a small fraction of people in a small fraction of wealthy industrialized countries. The vast majority of people throughout history, including most people in the world today, have to work most of their lives until the point where they are physically unable to do so anymore and have a relatively short amount of time for retirement.

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The Remarkable Power of Dying Earlier

Post by telemark » Wed Jan 24, 2018 12:10 pm

We need a companion study to examine the relative benefits of saving more over a long period vs. dying a few years earlier. I imagine the effects would be quite dramatic.

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Re: The Power of Working Longer

Post by LadyGeek » Wed Jan 24, 2018 5:34 pm

The529guy - I merged your thread into here. It will now show up in Your posts so you can track the activity.
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Re: The Power of Working Longer

Post by vested1 » Thu Jan 25, 2018 9:39 am

mptfan wrote:
Wed Jan 24, 2018 10:11 am
Ron Scott wrote:
Wed Jan 24, 2018 7:09 am
The times when we spend a third of our lives preparing to work, a third working, and a third in retirement are over IMO.
Those times of which you speak represent an historical anomoly and represent a small fraction of time in modern history for a small fraction of people in a small fraction of wealthy industrialized countries. The vast majority of people throughout history, including most people in the world today, have to work most of their lives until the point where they are physically unable to do so anymore and have a relatively short amount of time for retirement.
I guess I missed that period in modern history. With 50 years on my SS statement I would have to live to age 144 in order to have that period be merely 1/3 of my lifespan. Even if I lived as long as both of my parents did, that would still leave me over 50 years short.

This was either a product of poor planning when young, poor execution in mid-life, or screwed up values instilled from an early age which led me to believe that working a long time was something to aspire to. In my case it was all three.

Save more, work less.

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Re: The Power of Working Longer

Post by CnC » Thu Jan 25, 2018 10:56 am

This is just bad math. The people who created it should be ashamed that they would publish such blatant lies.


They claim 6months = 1% savings?

They are saying that retiring 5 years later will allow you to save 10% less of your salary per year. That is just fiction.


I can assure you that if you can retire at 62 saving 15% of your salary you can't retire as well at 67 saving only 5%.


Look at the math
Say you make 100k per year saving 15k a year at a yield of 5% for 30 years gives you right at 1 million

Now say you save 5k a year for 35 years. You have 450k.


How this passed anyone's sniff test astounds me.

Even at 0% the math doesn't work. 35 years at 5k =175k 30 years at 15k =450k.

How has noone pointed this out? What am I missing?

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Re: The Power of Working Longer

Post by mptfan » Thu Jan 25, 2018 11:09 am

vested1 wrote:
Thu Jan 25, 2018 9:39 am
I guess I missed that period in modern history. With 50 years on my SS statement I would have to live to age 144 in order to have that period be merely 1/3 of my lifespan. Even if I lived as long as both of my parents did, that would still leave me over 50 years short.
I agree that 1/3 of a lifespan is a bit of exaggeration in most cases, but there is a small fraction of people who can and do spend a significant fraction of their lives in retirement. Consider people who work for federal or state or local governments, in the military or police officers or teachers or other occupations that offer stable pensions. For example, the military offers a pension after 20 years of service, so someone could retire from the military in their early 40's and be "retired" for the rest of their life. If they live to be 80, they could be reitired for 35 years, which would be more than 40% of their life. Also, many government agencies offer a pension after 30 years, so someone could retire in their early 50's and live to be 80 and that would be almost exactly 1/3 of their life in retirement.
Last edited by mptfan on Thu Jan 25, 2018 11:37 am, edited 1 time in total.

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Re: The Power of Working Longer

Post by CnC » Thu Jan 25, 2018 11:13 am

I'm still really struggling with the fact noone has pointed out that basic math does not work in their favor.


6 months of extra work ≠ saving 1 % for 30 years. How am I the only one to poi t this out?

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