The Power of Working Longer

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bobcat2
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The Power of Working Longer

Post by bobcat2 »

THE POWER OF WORKING LONGER - Gila Bronshtein, Jason Scott, John B. Shoven, & Sita N. Slavov
NBER Working Paper

Some highlights -
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. …

Our primary conclusion is that working longer is relatively powerful compared to saving
more for most people.


When we look at different rates of return on assets, different ages of retirement and at singles vs.
married primary earners, the general result remains that working 3 to 6 extra months has an
equivalent impact on the affordable sustainable standard of living as saving one percentage point
more for 30 years. Increases in saving that start later in life have a proportionately smaller
impact, increasing the power of working longer for individuals who are reoptimizing close to retirement.
Link to paper - https://www.nber.org/system/files/worki ... w24226.pdf

I'm betting this is the excellent retirement planning advice that many Bogleheads don't want to hear. :wink:

BobK
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Re: The Power of Working Longer

Post by qwertyjazz »

Or with 8% return, each 1% increase in savings let’s me retire 6 months earlier.
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Re: The Power of Working Longer

Post by prd1982 »

The biggest issue with this paper is that it assumes the person can decide when to retire. Unfortunately, a lot of folks who are worried about having enough are either laid off, injured, or have a family member they must care for. While I'm not a fan of FIRE (I retired at 65), I am a fan of being financially able to retire early. So I worry about those folks who say they plan to work until they die.
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Re: The Power of Working Longer

Post by sailaway »

prd1982 wrote: Wed Feb 03, 2021 12:42 pm The biggest issue with this paper is that it assumes the person can decide when to retire. Unfortunately, a lot of folks who are worried about having enough are either laid off, injured, or have a family member they must care for. While I'm not a fan of FIRE (I retired at 65), I am a fan of being financially able to retire early. So I worry about those folks who say they plan to work until they die.
I think FIRE folks are very aware of this math, which is why OMY is a common phenomenon.

For folks who plan to be able to take SS when they retire, as suggested in this study, they likely have more control over how much they save over 30 years than they do over when they retire. Do we have statistics on choosing to retire vs being retired by circumstances?
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Re: The Power of Working Longer

Post by UpperNwGuy »

When I was working, the financial guys would create spreadsheets to illustrate the power of NOT working longer. They constantly reminded the rest of us that after a certain point, the difference between our salaries and our retirement income was only fraction of our salaries.
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Re: The Power of Working Longer

Post by willthrill81 »

Intuitively, working longer seems like a great way to combat low expected returns from stocks and bonds over the next decade and retirees living longer today than they did decades ago.

But a very big flaw in this advice is the fact that over half of today's retirees retired involuntarily.
Through 2016, our analysis found that between the time older workers enter the study and when they leave paid employment, 56 percent are laid off at least once or leave jobs under such financially damaging circumstances that it’s likely they were pushed out rather than choosing to go voluntarily.
https://www.propublica.org/article/olde ... retirement

This isn't unique to the above referenced publication either. Several data sources indicate that slightly over half of retirees were either pushed out of the workforce by layoffs or pulled out due to their own circumstances, usually their own poor health or that of a family member they must care for. And the data indicate that the situation is even worse for older workers today due to the issues stemming from COVID19.

Consequently, planning on working past age ~65 is a risky strategy, though some may genuinely have no either choice. While many will be able to pull it off, the odds are not in their favor. Saving more earlier is the more sure strategy.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
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Re: The Power of Working Longer

Post by Dottie57 »

I retired early but don’t fit the article - no SS yet. I will wait until 70 which will help my portfolio thru much smaller withdrawls that I spend.
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Re: The Power of Working Longer

Post by bligh »

Well Yes! Yes! Working longer means you need to save less.

You should also read this classic paper:

"The Power of never retiring" - Bligh

If you work till your last day on this earth you can do away with saving for retirement altogether, thereby maintaining a much higher standard of living through out your life than if you ever planned on retiring.

If you never take vacation days you save tons more money and in many cases you can cash out those vacation days so you can spend that money to attain an even higher standard of living than you would have on your income alone.

Finally, get a second job on the weekends - that way you can push your standard of living well past what you could have while working a single job.

Our primary conclusion is that people that never retire, take no vacations and hold second jobs live lives with higher standards of living, and without having to worry about saving anything at all for retirement.

Stay tuned for our next paper - The power of never having children and hobbies.
Last edited by bligh on Wed Feb 03, 2021 1:13 pm, edited 1 time in total.
rich126
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Re: The Power of Working Longer

Post by rich126 »

And sadly more than a few people don't live into their late 70s or 80s to really gain any benefit from it. I had a friend pass away around 60 last year who fortunately retired around 56 so at least he got a few years of retirement enjoyment. Recently a coworker delayed retirement due to covid (he wanted to travel in retirement) and unfortunately died due to an issue with cancer.

Numbers show a lot of stuff, and some people have no options due to low earnings/savings and have to work as long as possible but others are trying to squeeze out money that they will very unlikely ever need. I have 2 relatives in their 80s who can't spend what they have now and are limited in activities they can do. Seems to be they would have been better off retiring a year or two earlier and had more enjoyment when they could.

Honestly I think everyone should take 6 months or a year off when they are younger to at least get a chance to enjoy life w/o the stress of work. Maybe a sabbatical every 10-15 years of work. That way a lot of people wouldn't put off bucket lists until retirement and often not be able to achieve most of them.

I keep going back and forth with retirement now (late 50s). I can easily find jobs and work into my 60s but do I want or need to? How much house do you need? I don't need to leave money to kids.

I do look at whether I want to spend down my money now (and before I can collect my pension for a few years) or instead keep working and avoid spending it down while also increasing the funds by maxing out 401K/HSA stuff. In some ways I might be more tempted to quit now if there wasn't the virus since I could travel. In the meantime I asked management to work 70% of full time (3 days a week) and that makes life much more enjoyable.

Numbers on a spreadsheet never factor in intangibles like happiness.
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Re: The Power of Working Longer

Post by willthrill81 »

rich126 wrote: Wed Feb 03, 2021 1:13 pm And sadly more than a few people don't live into their late 70s or 80s to really gain any benefit from it. I had a friend pass away around 60 last year who fortunately retired around 56 so at least he got a few years of retirement enjoyment. Recently a coworker delayed retirement due to covid (he wanted to travel in retirement) and unfortunately died due to an issue with cancer.
It's sad but true. Both of my paternal grandparents died before they reached 50. My FiL passed away at age 65. Both of my maternal grandparents passed by age 82.

According to the SSA, 20% of 65 year old males will not survive to age 74.

I personally think that too many here are planning on living to age 100 and spending the same or even more in real dollars in their late 90s than they do in their 50s.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
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Re: The Power of Working Longer

Post by Old Guy »

Having a second career and working until I was 71 and having a spouse with a second career working into her late 60s were the best things for us. We kept busy with jobs having social utility and were able to add two more pensions and pre-tax investments along with additional social security all of which has provided an extremely pleasant lifestyle in our six years of retirement. Wouldn't have had it any other way. But, different strokes for different folks.
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Re: The Power of Working Longer

Post by bobcat2 »

willthrill81 wrote: Wed Feb 03, 2021 1:17 pm
rich126 wrote: Wed Feb 03, 2021 1:13 pm And sadly more than a few people don't live into their late 70s or 80s to really gain any benefit from it. I had a friend pass away around 60 last year who fortunately retired around 56 so at least he got a few years of retirement enjoyment. Recently a coworker delayed retirement due to covid (he wanted to travel in retirement) and unfortunately died due to an issue with cancer.
It's sad but true. Both of my paternal grandparents died before they reached 50. My FiL passed away at age 65. Both of my maternal grandparents passed by age 82.
All these people would apparently have been happier saving less per year and spending more per year while they were alive. These situations are negatively affected both by high saving rates as well as late retirement dates.

BobK
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Re: The Power of Working Longer

Post by txchris »

Might give pause to younger people contemplating careers that are shorter because they start later in life, especially if said they would enter said careers with a lot of debt.
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Re: The Power of Working Longer

Post by bobcat2 »

IMO most posters are missing the point of the paper.

The paper isn't saying don't save much per year and more than make up for that low saving rate by planning on working a long time.

Instead, the paper is answering the following question. As you get very near to your retirement date, is it worthwhile to work a few more months or a year longer than you intended? The answer is incontrovertibly, YES :!:

BobK
In finance risk is defined as uncertainty that is consequential (nontrivial). | The two main methods of dealing with financial risk are the matching of assets to goals & diversifying.
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Re: The Power of Working Longer

Post by JoeRetire »

bobcat2 wrote: Wed Feb 03, 2021 12:26 pm I'm betting this is the excellent retirement planning advice that many Bogleheads don't want to hear. :wink:
I'm betting you are exactly right.
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Re: The Power of Working Longer

Post by lessismore22 »

willthrill81 wrote: Wed Feb 03, 2021 1:17 pm
rich126 wrote: Wed Feb 03, 2021 1:13 pm And sadly more than a few people don't live into their late 70s or 80s to really gain any benefit from it. I had a friend pass away around 60 last year who fortunately retired around 56 so at least he got a few years of retirement enjoyment. Recently a coworker delayed retirement due to covid (he wanted to travel in retirement) and unfortunately died due to an issue with cancer.
It's sad but true. Both of my paternal grandparents died before they reached 50. My FiL passed away at age 65. Both of my maternal grandparents passed by age 82.

According to the SSA, 20% of 65 year old males will not survive to age 74.

I personally think that too many here are planning on living to age 100 and spending the same or even more in real dollars in their late 90s than they do in their 50s.
This is why DW and I plan to use a much higher withdrawal rate than is discussed here on a regular basis. No plans to leave an inheritance, so we look forward to using it on ourselves in retirement. If we make it to our 80's and need to cut back spending a bit, so be it.
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Re: The Power of Working Longer

Post by JoeRetire »

prd1982 wrote: Wed Feb 03, 2021 12:42 pm The biggest issue with this paper is that it assumes the person can decide when to retire.
Which is usually the case.
Unfortunately, a lot of folks who are worried about having enough are either laid off, injured, or have a family member they must care for. While I'm not a fan of FIRE (I retired at 65), I am a fan of being financially able to retire early. So I worry about those folks who say they plan to work until they die.
I am also a fan of getting to FI when you can.

Many folks with lesser incomes plan to "work until they can't". That may not be a lot of fun and may require altering your desired lifestyle, but (at least in the US) is usually a viable option.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
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Re: The Power of Working Longer

Post by willthrill81 »

lessismore22 wrote: Wed Feb 03, 2021 1:52 pm
willthrill81 wrote: Wed Feb 03, 2021 1:17 pm
rich126 wrote: Wed Feb 03, 2021 1:13 pm And sadly more than a few people don't live into their late 70s or 80s to really gain any benefit from it. I had a friend pass away around 60 last year who fortunately retired around 56 so at least he got a few years of retirement enjoyment. Recently a coworker delayed retirement due to covid (he wanted to travel in retirement) and unfortunately died due to an issue with cancer.
It's sad but true. Both of my paternal grandparents died before they reached 50. My FiL passed away at age 65. Both of my maternal grandparents passed by age 82.

According to the SSA, 20% of 65 year old males will not survive to age 74.

I personally think that too many here are planning on living to age 100 and spending the same or even more in real dollars in their late 90s than they do in their 50s.
This is why DW and I plan to use a much higher withdrawal rate than is discussed here on a regular basis. No plans to leave an inheritance, so we look forward to using it on ourselves in retirement. If we make it to our 80's and need to cut back spending a bit, so be it.
We too are planning on front-loading our withdrawals. We want to spend more in our 50s and 60s than in our 70s and 80s (and possibly beyond), which is what about two-thirds of retirees do anyway. It's easier to build memories and invest yourself in your loved ones when you're younger, healthier, and still alive.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
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Re: The Power of Working Longer

Post by willthrill81 »

bobcat2 wrote: Wed Feb 03, 2021 1:39 pm
willthrill81 wrote: Wed Feb 03, 2021 1:17 pm
rich126 wrote: Wed Feb 03, 2021 1:13 pm And sadly more than a few people don't live into their late 70s or 80s to really gain any benefit from it. I had a friend pass away around 60 last year who fortunately retired around 56 so at least he got a few years of retirement enjoyment. Recently a coworker delayed retirement due to covid (he wanted to travel in retirement) and unfortunately died due to an issue with cancer.
It's sad but true. Both of my paternal grandparents died before they reached 50. My FiL passed away at age 65. Both of my maternal grandparents passed by age 82.
All these people would apparently have been happier saving less per year and spending more per year while they were alive. These situations are negatively affected both by high saving rates as well as late retirement dates.

BobK
This assumes that the amount of money one spends is a causal factor in one's happiness. That's highly debatable; at best, the relationship does not appear to be linear.

I'll be the first to say that there aren't easy answers to this issue, but again, planning on working beyond age 65 is not a good plan, IMHO.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
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Re: The Power of Working Longer

Post by bobcat2 »

willthrill81 wrote: Wed Feb 03, 2021 2:02 pm
bobcat2 wrote: Wed Feb 03, 2021 1:39 pm
willthrill81 wrote: Wed Feb 03, 2021 1:17 pm
rich126 wrote: Wed Feb 03, 2021 1:13 pm And sadly more than a few people don't live into their late 70s or 80s to really gain any benefit from it. I had a friend pass away around 60 last year who fortunately retired around 56 so at least he got a few years of retirement enjoyment. Recently a coworker delayed retirement due to covid (he wanted to travel in retirement) and unfortunately died due to an issue with cancer.
It's sad but true. Both of my paternal grandparents died before they reached 50. My FiL passed away at age 65. Both of my maternal grandparents passed by age 82.
All these people would apparently have been happier saving less per year and spending more per year while they were alive. These situations are negatively affected both by high saving rates as well as late retirement dates.

BobK
This assumes that the amount of money one spends is a causal factor in one's happiness. That's highly debatable; at best, the relationship does not appear to be linear.

I'll be the first to say that there aren't easy answers to this issue, but again, planning on working beyond age 65 is not a good plan, IMHO.
The paper isn't saying don't save much per year and more than make up for that low saving rate by planning on working a long time.

Instead, the paper is answering the following question. As you get very near to your retirement date, is it worthwhile to work a few more months or a year longer than you intended? The answer is incontrovertibly, YES :!:

BobK
In finance risk is defined as uncertainty that is consequential (nontrivial). | The two main methods of dealing with financial risk are the matching of assets to goals & diversifying.
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Re: The Power of Working Longer

Post by Valuethinker »

prd1982 wrote: Wed Feb 03, 2021 12:42 pm The biggest issue with this paper is that it assumes the person can decide when to retire. Unfortunately, a lot of folks who are worried about having enough are either laid off, injured, or have a family member they must care for. While I'm not a fan of FIRE (I retired at 65), I am a fan of being financially able to retire early. So I worry about those folks who say they plan to work until they die.
Absolutely. Excellent points.

2 variables. Your health & your employability.

Your health you can have some influence on but "you can screw up your genes, but you can't better them much". At least, the vast majority of good advice about diet, exercise etc won't have a big impact on your health in later life vs the impact of your genes.** What they will do is live the healthy years alloted to you, whereas obesity, smoking etc have a distinct negative impact on them.

Your employability is very specific to profession and to employer.

What I noted is that even "stable" employers like government seem to favour having more young people-- at least I have seen that in UK government agencies. The CEOs are 45, say, and the general presumption is that the 55+ year olds are not able to adapt, are too slow, etc. They want to give orders to ambitious 30 year olds, and have a "young vibe" in the organisation. There is a perception that external stakeholders don't like grey hair.

(I realise this totally depends on profession). If your job involves physical labour, you are likely not going to be able to do it past 55 say. I wouldn't want to work in an Amazon warehouse when I am 60-- keeping up that constant pace. My aunt went back to shift nursing when she was 60 and it nearly killed her - she's now in a wheelchair with back problems, and I suspect that work 25 years ago caused further degeneration of her spine.

The job market for over 50s seems to be horrible. Even though age discrimination is illegal, I would say ageism is rampant.

Forget all this stuff about aging Boomers, we will all have to work longer, etc. There's no easy ways to actually effectuate that strategy.

The reason to aim for Financial Independence is that your health or your employer can call it quits on you.

** which doesn't argue against doing right by your body.
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Re: The Power of Working Longer

Post by bligh »

bobcat2 wrote: Wed Feb 03, 2021 1:50 pm IMO most posters are missing the point of the paper.

The paper isn't saying don't save much per year and more than make up for that low saving rate by planning on working a long time.

Instead, the paper is answering the following question. As you get very near to your retirement date, is it worthwhile to work a few more months or a year longer than you intended? The answer is incontrovertibly, YES :!:

BobK
In my opinion the paper is asking the wrong question and then answering it. Will working an extra 6 months to a year mean you need to save a little less for retirement? Of course. Is it not obvious? You just gave yourself a 6 month to a year less in retirement time and gave yourself longer to save more money.

Perhaps I just don't see what they are getting at? You are either financially independent or you are not. You are either able to retire or you are not. You either feel confident in your savings and expense projections or you don't. Financially, is it safer to keep working? Always. Every. Single. Time. That answer will never come back as a "no, it is safer to retire". That is, unless you take life expectancy and health risk into account. ie. you are not attaching any cost to your own time - the time you could have spent in retirement.
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Re: The Power of Working Longer

Post by Cheez-It Guy »

But I don't want to work longer.
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Re: The Power of Working Longer

Post by smitcat »

bobcat2 wrote: Wed Feb 03, 2021 2:06 pm
willthrill81 wrote: Wed Feb 03, 2021 2:02 pm
bobcat2 wrote: Wed Feb 03, 2021 1:39 pm
willthrill81 wrote: Wed Feb 03, 2021 1:17 pm
rich126 wrote: Wed Feb 03, 2021 1:13 pm And sadly more than a few people don't live into their late 70s or 80s to really gain any benefit from it. I had a friend pass away around 60 last year who fortunately retired around 56 so at least he got a few years of retirement enjoyment. Recently a coworker delayed retirement due to covid (he wanted to travel in retirement) and unfortunately died due to an issue with cancer.
It's sad but true. Both of my paternal grandparents died before they reached 50. My FiL passed away at age 65. Both of my maternal grandparents passed by age 82.
All these people would apparently have been happier saving less per year and spending more per year while they were alive. These situations are negatively affected both by high saving rates as well as late retirement dates.

BobK
This assumes that the amount of money one spends is a causal factor in one's happiness. That's highly debatable; at best, the relationship does not appear to be linear.

I'll be the first to say that there aren't easy answers to this issue, but again, planning on working beyond age 65 is not a good plan, IMHO.
The paper isn't saying don't save much per year and more than make up for that low saving rate by planning on working a long time.

Instead, the paper is answering the following question. As you get very near to your retirement date, is it worthwhile to work a few more months or a year longer than you intended? The answer is incontrovertibly, YES :!:

BobK
"The answer is incontrovertibly, YES"
Absolutetly true - the ability to gain XX times expenses rises rapidly when you are already at 25X or more.
The real problem that folks do not wrestle with is securing work that you like along the way - its not such a hard choice then.
Balance in every stage of life is one more key....
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Re: The Power of Working Longer

Post by cheese_breath »

Cheez-It Guy wrote: Wed Feb 03, 2021 2:14 pm But I don't want to work longer.
+1 The power if not working longer is longer retirement. And retire is what I did as soon as I could afford it.
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Re: The Power of Working Longer

Post by Mr.BB »

willthrill81 wrote: Wed Feb 03, 2021 1:17 pm
rich126 wrote: Wed Feb 03, 2021 1:13 pm And sadly more than a few people don't live into their late 70s or 80s to really gain any benefit from it. I had a friend pass away around 60 last year who fortunately retired around 56 so at least he got a few years of retirement enjoyment. Recently a coworker delayed retirement due to covid (he wanted to travel in retirement) and unfortunately died due to an issue with cancer.
It's sad but true. Both of my paternal grandparents died before they reached 50. My FiL passed away at age 65. Both of my maternal grandparents passed by age 82.

According to the SSA, 20% of 65 year old males will not survive to age 74.

I personally think that too many here are planning on living to age 100 and spending the same or even more in real dollars in their late 90s than they do in their 50s.
A good research paper would be on longevity based on family heredity. My wife grandmother lived into her mid nineties and her mom is 94 so she has good odds of living into her 90's. Yes she is waiting until age 70 for SS check :-)
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Re: The Power of Working Longer

Post by Independent George »

JoeRetire wrote: Wed Feb 03, 2021 1:52 pm
bobcat2 wrote: Wed Feb 03, 2021 12:26 pm I'm betting this is the excellent retirement planning advice that many Bogleheads don't want to hear. :wink:
I'm betting you are exactly right.
I'm betting this is advice that many Bogleheads don't need to hear. This is the place where people to ask, "Is $10M enough to retire with $50k/year living expenses?".
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Re: The Power of Working Longer

Post by fsrph »

bobcat2 wrote: Wed Feb 03, 2021 1:50 pm Instead, the paper is answering the following question. As you get very near to your retirement date, is it worthwhile to work a few more months or a year longer than you intended? The answer is incontrovertibly, YES

BobK
If it's worthwhile financially to work months or a year after your retirement date, then why stop there? Why not work two or three years more? Or even longer? This approach does not value time vs more money.

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Re: The Power of Working Longer

Post by investnoob »

The big assumption here is that you will claim social security at retirement rather than deferring it well after retirement.
So, the conclusion is delay your retirement? So that you can defer social security until then?

lol?

Ok.
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Re: The Power of Working Longer

Post by 7eight9 »

When you lose your job at 53 and can't find a job for two years you end up calling yourself retired because you give up on looking for gainful employment. At that time you are grateful that you saved earlier.
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Re: The Power of Working Longer

Post by bobcat2 »

JoeRetire wrote: Wed Feb 03, 2021 1:52 pm
bobcat2 wrote: Wed Feb 03, 2021 12:26 pm I'm betting this is the excellent retirement planning advice that many Bogleheads don't want to hear. :wink:
I'm betting you are exactly right.
:happy
:thumbsup :thumbsup

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Godot
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Re: The Power of Working Longer

Post by Godot »

Independent George wrote: Wed Feb 03, 2021 2:21 pm
JoeRetire wrote: Wed Feb 03, 2021 1:52 pm
bobcat2 wrote: Wed Feb 03, 2021 12:26 pm I'm betting this is the excellent retirement planning advice that many Bogleheads don't want to hear. :wink:
I'm betting you are exactly right.
I'm betting this is advice that many Bogleheads don't need to hear. This is the place where people ask, "Is $10M enough to retire with $50k/year living expenses?".
Ha, true, and they get responses saying that they'll be cutting it close.
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vitaflo
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Re: The Power of Working Longer

Post by vitaflo »

bobcat2 wrote: Wed Feb 03, 2021 12:26 pm 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.
Spending 1% less for 30 years seems like a pretty minor tradeoff for 6-months more in retirement, especially at a time when you will be the most energetic and physically able (the beginning). I could have a heck of a vacation during that 6 months.
aristotelian
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Re: The Power of Working Longer

Post by aristotelian »

bligh wrote: Wed Feb 03, 2021 1:09 pm Well Yes! Yes! Working longer means you need to save less.

You should also read this classic paper:

"The Power of never retiring" - Bligh

If you work till your last day on this earth you can do away with saving for retirement altogether, thereby maintaining a much higher standard of living through out your life than if you ever planned on retiring.

If you never take vacation days you save tons more money and in many cases you can cash out those vacation days so you can spend that money to attain an even higher standard of living than you would have on your income alone.

Finally, get a second job on the weekends - that way you can push your standard of living well past what you could have while working a single job.

Our primary conclusion is that people that never retire, take no vacations and hold second jobs live lives with higher standards of living, and without having to worry about saving anything at all for retirement.

Stay tuned for our next paper - The power of never having children and hobbies.
This was excellent. Academics are great at stating the obvious and then backing it up with data to sound smart.
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rob
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Re: The Power of Working Longer

Post by rob »

willthrill81 wrote: Wed Feb 03, 2021 2:00 pm We too are planning on front-loading our withdrawals. We want to spend more in our 50s and 60s than in our 70s and 80s (and possibly beyond), which is what about two-thirds of retirees do anyway. It's easier to build memories and invest yourself in your loved ones when you're younger, healthier, and still alive.
lol - You my be able to argue on the first two but been dead clearly makes things harder.

I think of retirement spending as a lazy U shaped thing where you can fall off at any point... more money in first say decade then spend little money as more sedentary then as final care needs go up spending increases again. More people get through the first phase than second and fewer again into the third.
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien
rich126
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Re: The Power of Working Longer

Post by rich126 »

Mr.BB wrote: Wed Feb 03, 2021 2:20 pm
willthrill81 wrote: Wed Feb 03, 2021 1:17 pm
rich126 wrote: Wed Feb 03, 2021 1:13 pm And sadly more than a few people don't live into their late 70s or 80s to really gain any benefit from it. I had a friend pass away around 60 last year who fortunately retired around 56 so at least he got a few years of retirement enjoyment. Recently a coworker delayed retirement due to covid (he wanted to travel in retirement) and unfortunately died due to an issue with cancer.
It's sad but true. Both of my paternal grandparents died before they reached 50. My FiL passed away at age 65. Both of my maternal grandparents passed by age 82.

According to the SSA, 20% of 65 year old males will not survive to age 74.

I personally think that too many here are planning on living to age 100 and spending the same or even more in real dollars in their late 90s than they do in their 50s.
A good research paper would be on longevity based on family heredity. My wife grandmother lived into her mid nineties and her mom is 94 so she has good odds of living into her 90's. Yes she is waiting until age 70 for SS check :-)
People constantly talk about longevity of relatives and believe it is a big factor in their own lifespan but everything I've read over the years indicate family medical history only is about a 15% or so factor in your own longevity. Your lifestyle health, exercise, environment, etc.) matters much more.
Mr.BB
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Re: The Power of Working Longer

Post by Mr.BB »

rich126 wrote: Wed Feb 03, 2021 3:08 pm
Mr.BB wrote: Wed Feb 03, 2021 2:20 pm
willthrill81 wrote: Wed Feb 03, 2021 1:17 pm
rich126 wrote: Wed Feb 03, 2021 1:13 pm And sadly more than a few people don't live into their late 70s or 80s to really gain any benefit from it. I had a friend pass away around 60 last year who fortunately retired around 56 so at least he got a few years of retirement enjoyment. Recently a coworker delayed retirement due to covid (he wanted to travel in retirement) and unfortunately died due to an issue with cancer.
It's sad but true. Both of my paternal grandparents died before they reached 50. My FiL passed away at age 65. Both of my maternal grandparents passed by age 82.

According to the SSA, 20% of 65 year old males will not survive to age 74.

I personally think that too many here are planning on living to age 100 and spending the same or even more in real dollars in their late 90s than they do in their 50s.
A good research paper would be on longevity based on family heredity. My wife grandmother lived into her mid nineties and her mom is 94 so she has good odds of living into her 90's. Yes she is waiting until age 70 for SS check :-)
People constantly talk about longevity of relatives and believe it is a big factor in their own lifespan but everything I've read over the years indicate family medical history only is about a 15% or so factor in your own longevity. Your lifestyle health, exercise, environment, etc.) matters much more.
I think family genetics plays a very important part of one's longevity. I totally agree with exercise, environment and self resilience also playing an important part. Bottom line is I rather have a family with a history a long life span than not.
Here are the conclusion of a study through the NIH."
Why is parental lifespan linked to children's chances of reaching a high age? A transgenerational hypothesis"

Conclusions
The chance of reaching a high age is transmitted from parents to children in a modest, but robust way. Longevity inheritance is paralleled by the inheritance of individual resilience. Individual resilience, we propose, develops in the first part of life as a response to adversity and early experience in general. This gives rise to a transgenerational pathway, distinct from social class trajectories. A theory of longevity inheritance should bring together previous thinking around general susceptibility, frailty and resilience with new insights from epigenetics and social epidemiology.
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redmaw
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Re: The Power of Working Longer

Post by redmaw »

bobcat2 wrote: Wed Feb 03, 2021 1:50 pm IMO most posters are missing the point of the paper.

The paper isn't saying don't save much per year and more than make up for that low saving rate by planning on working a long time.

Instead, the paper is answering the following question. As you get very near to your retirement date, is it worthwhile to work a few more months or a year longer than you intended? The answer is incontrovertibly, YES :!:

BobK
The problem with that is now you have set a new date, the same logic applies...and it never stops applying so it is always worth it to work a bit longer.
mak1277
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Re: The Power of Working Longer

Post by mak1277 »

bobcat2 wrote: Wed Feb 03, 2021 2:06 pm
willthrill81 wrote: Wed Feb 03, 2021 2:02 pm
bobcat2 wrote: Wed Feb 03, 2021 1:39 pm
willthrill81 wrote: Wed Feb 03, 2021 1:17 pm
rich126 wrote: Wed Feb 03, 2021 1:13 pm And sadly more than a few people don't live into their late 70s or 80s to really gain any benefit from it. I had a friend pass away around 60 last year who fortunately retired around 56 so at least he got a few years of retirement enjoyment. Recently a coworker delayed retirement due to covid (he wanted to travel in retirement) and unfortunately died due to an issue with cancer.
It's sad but true. Both of my paternal grandparents died before they reached 50. My FiL passed away at age 65. Both of my maternal grandparents passed by age 82.
All these people would apparently have been happier saving less per year and spending more per year while they were alive. These situations are negatively affected both by high saving rates as well as late retirement dates.

BobK
This assumes that the amount of money one spends is a causal factor in one's happiness. That's highly debatable; at best, the relationship does not appear to be linear.

I'll be the first to say that there aren't easy answers to this issue, but again, planning on working beyond age 65 is not a good plan, IMHO.
The paper isn't saying don't save much per year and more than make up for that low saving rate by planning on working a long time.

Instead, the paper is answering the following question. As you get very near to your retirement date, is it worthwhile to work a few more months or a year longer than you intended? The answer is incontrovertibly, YES :!:

BobK
But that theory can easily lead to working 3 or 4 or 10 years longer, because it's always true. You have to draw a line somewhere.
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Kenkat
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Re: The Power of Working Longer

Post by Kenkat »

bobcat2 wrote: Wed Feb 03, 2021 1:50 pm IMO most posters are missing the point of the paper.

The paper isn't saying don't save much per year and more than make up for that low saving rate by planning on working a long time.

Instead, the paper is answering the following question. As you get very near to your retirement date, is it worthwhile to work a few more months or a year longer than you intended? The answer is incontrovertibly, YES :!:

BobK
I agree that it is worthwhile to work another year; but it is necessary?

I’ve come to the conclusion that no bell will ring signaling you have enough to retire. There is so much uncertainty in life and in the future, there’s no way of telling when to say with certainty “I’m done”.

It is good to know that if you fall behind in the retirement quest, it’s potentially pretty fixable by working a little longer. Not great, but there’s worse things.
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JoeRetire
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Re: The Power of Working Longer

Post by JoeRetire »

Independent George wrote: Wed Feb 03, 2021 2:21 pm
JoeRetire wrote: Wed Feb 03, 2021 1:52 pm
bobcat2 wrote: Wed Feb 03, 2021 12:26 pm I'm betting this is the excellent retirement planning advice that many Bogleheads don't want to hear. :wink:
I'm betting you are exactly right.
I'm betting this is advice that many Bogleheads don't need to hear.
That's true too. Not only do many not want to hear it, but many don't need to hear it. Some of those "many" may be the same people. And maybe they can decide that by just reading the title. Working longer? Nope, I don't need that!

Some should want to hear it. Often it's the subject of one of those "I want to advise my MIL..." threads.
Last edited by JoeRetire on Wed Feb 03, 2021 4:04 pm, edited 1 time in total.
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smitcat
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Re: The Power of Working Longer

Post by smitcat »

mak1277 wrote: Wed Feb 03, 2021 3:51 pm
bobcat2 wrote: Wed Feb 03, 2021 2:06 pm
willthrill81 wrote: Wed Feb 03, 2021 2:02 pm
bobcat2 wrote: Wed Feb 03, 2021 1:39 pm
willthrill81 wrote: Wed Feb 03, 2021 1:17 pm

It's sad but true. Both of my paternal grandparents died before they reached 50. My FiL passed away at age 65. Both of my maternal grandparents passed by age 82.
All these people would apparently have been happier saving less per year and spending more per year while they were alive. These situations are negatively affected both by high saving rates as well as late retirement dates.

BobK
This assumes that the amount of money one spends is a causal factor in one's happiness. That's highly debatable; at best, the relationship does not appear to be linear.

I'll be the first to say that there aren't easy answers to this issue, but again, planning on working beyond age 65 is not a good plan, IMHO.
The paper isn't saying don't save much per year and more than make up for that low saving rate by planning on working a long time.

Instead, the paper is answering the following question. As you get very near to your retirement date, is it worthwhile to work a few more months or a year longer than you intended? The answer is incontrovertibly, YES :!:

BobK
But that theory can easily lead to working 3 or 4 or 10 years longer, because it's always true. You have to draw a line somewhere.
Or find work that you like and allows flexibility and balance both spending and time both before and after retirement.
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JoeRetire
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Re: The Power of Working Longer

Post by JoeRetire »

Perhaps I missed it, but I didn't read where the authors said that people should work longer, as many folks here seem to be assuming. It's hard to tell if some folks actually read the paper, or if there's something they disagree with that the authors actually wrote.

Here's an excerpt from the authors' conclusion that might help the discussion:
"Our primary conclusion is that working longer is relatively powerful compared to savingmore for most people.
...

Obviously, the choice of whether to work longer, save more, or adjust the retirement standard of living depends on individuals’ preferences. However, by laying out the tradeoffs, we hope that this paper helps people plan for their retirement and helps them reoptimize their retirement plans in the face of changing circumstances. Not everyone has control over their retirement date, but certainly many people do. We have shown that career length is a powerful determinant of the standard of living in retirement. Roughly speaking, deferring retirement by one year allows for an 8 percent higher standard of living for a couple and the subsequent survivor. The effect compounds for two, three, and four-year work extensions. The impact of working longer relative to saving more increases as individuals get closer to retirement. Thus, working longer may be a much more attractive option than saving more for people who are reoptimizing their retirement plans ten or so years before retirement."
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afan
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Re: The Power of Working Longer

Post by afan »

Planning to work longer is different than planning to NEED to work longer.
I intend to work past 72. Not because I could not afford to retire earlier, but because I make a good income, which would go away if I were to quit. Each year I work provides for 2 or more years of retirement. At this point, I am increasing my margin of error in my belief that I can retire now.
Let's say one person retires on their 70th birthday and their twin works until 71st birthday.
Early retiring twin starts drawing on accumulated assets at age 70.
Later retiring twin, who has identical savings at age 70, puts away more than a years worth of spending during that extra year.
Late twin therefore does not touch assets from age 70 to 71. Lives on earned income.
From age 71 to 72, late twin lives off money saved in year 70-71.
From 72-73 late twin starts spending some of the money accumulated by age 70. But since it has not been touched so far, it has grown.
Thus, but working one more year, late twin has provided for more than 2 years of retirement.
Hard to look at that and decide against retiring.

Of course, one should plan to be ABLE to retire early. As noted by several, illness and changes in one's employability can prevent a longer working life. But as one approaches retirement age, if they are still employed, it is a good deal to keep working.

Based on what I see older people in my field do, I am targeting mid 70's. If I am still healthy and there is demand for my services at that point, I will go longer. If my performance or demand deteriorate before that, then I will go earlier.
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Onlineid3089
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Re: The Power of Working Longer

Post by Onlineid3089 »

My current plan is to retire no later than my 58th birthday. If I stay in employment covered by my state's pension I'll be able to retire and start drawing immediately with no penalty for early retirement. That's 20+ years out, so the thing I am most sure of is that my plans will change several times along the way. Our current savings and expenses should put us FI well before that, but who knows how it'll all play out.
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Re: The Power of Working Longer

Post by afan »

vitaflo wrote: Wed Feb 03, 2021 2:45 pm
Spending 1% less for 30 years seems like a pretty minor tradeoff for 6-months more in retirement, especially at a time when you will be the most energetic and physically able (the beginning). I could have a heck of a vacation during that 6 months.
If I am energetic and physically able, the last thing I plan to do is retire. That will come when I cannot do the job, or no one will keep paying me. Opportunity cost of retiring before that is far too high.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
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CyclingDuo
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Re: The Power of Working Longer

Post by CyclingDuo »

bobcat2 wrote: Wed Feb 03, 2021 12:26 pm THE POWER OF WORKING LONGER - Gila Bronshtein, Jason Scott, John B. Shoven, & Sita N. Slavov
NBER Working Paper

Some highlights -
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. …

Our primary conclusion is that working longer is relatively powerful compared to saving
more for most people.


When we look at different rates of return on assets, different ages of retirement and at singles vs.
married primary earners, the general result remains that working 3 to 6 extra months has an
equivalent impact on the affordable sustainable standard of living as saving one percentage point
more for 30 years. Increases in saving that start later in life have a proportionately smaller
impact, increasing the power of working longer for individuals who are reoptimizing close to retirement.
Link to paper - https://www.nber.org/system/files/worki ... w24226.pdf

I'm betting this is the excellent retirement planning advice that many Bogleheads don't want to hear. :wink:

BobK
Hey, BobK. I like that paper a lot and the work they did. It was posted about it, along with a discussion here at BH a few years ago: viewtopic.php?f=10&t=238844

I'll include the link to a video when the researchers presented their work at a conference. It's illustrative to watch and the Q&A session at the end is very informative.

https://youtu.be/lxKRTwmMLDI

CyclingDuo
Last edited by CyclingDuo on Wed Feb 03, 2021 5:27 pm, edited 1 time in total.
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Wannaretireearly
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Re: The Power of Working Longer

Post by Wannaretireearly »

bobcat2 wrote: Wed Feb 03, 2021 1:50 pm IMO most posters are missing the point of the paper.

The paper isn't saying don't save much per year and more than make up for that low saving rate by planning on working a long time.

Instead, the paper is answering the following question. As you get very near to your retirement date, is it worthwhile to work a few more months or a year longer than you intended? The answer is incontrovertibly, YES :!:

BobK
Hopefully working a few extra months by goofing off? Traveling while working, sabbatical, short term leaves etc. There could prob be a book written on how to 'ce la vie' in style. I would love to do an international transfer towards the end of my career, with the help (financial or otherwise) from Megacorp!
This time next year, we'll be millionaires!
Wannaretireearly
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Re: The Power of Working Longer

Post by Wannaretireearly »

afan wrote: Wed Feb 03, 2021 4:34 pm
vitaflo wrote: Wed Feb 03, 2021 2:45 pm
Spending 1% less for 30 years seems like a pretty minor tradeoff for 6-months more in retirement, especially at a time when you will be the most energetic and physically able (the beginning). I could have a heck of a vacation during that 6 months.
If I am energetic and physically able, the last thing I plan to do is retire. That will come when I cannot do the job, or no one will keep paying me. Opportunity cost of retiring before that is far too high.
You must enjoy your job a lot! Or do you really only mean the financial opp cost is too high? Marginal utility of a few extra bucks when your 70 is high? Really?
This time next year, we'll be millionaires!
Candor
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Re: The Power of Working Longer

Post by Candor »

This is one of the reasons why OMY is such a thing for many. When I play around with Firecalc and start adding years of work the numbers really do move quite a bit but obviously at the expense of OLY (one less year ) of life in retirement which is a no go for me. You'll never be that young again and you will never get that year back.
Time is your friend, impulse is your enemy. - John C. Bogle
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