The Power of Working Longer

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willthrill81
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Re: The Power of Working Longer

Post by willthrill81 » Thu Jan 25, 2018 11:28 am

CnC wrote:
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?
I showed that as well above. An extra 1% return for 30 years is far more effective than working an additional six months.
“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

CnC
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Re: The Power of Working Longer

Post by CnC » Thu Jan 25, 2018 11:45 am

willthrill81 wrote:
Thu Jan 25, 2018 11:28 am
CnC wrote:
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?
I showed that as well above. An extra 1% return for 30 years is far more effective than working an additional six months.

Ahh ok I must have glanced past it. I was just so.caught off guard by people arguing how much having that extra 1-5 years of freedom retirement buys rather than calling out the papers authors for flat out making stuff up.

Lars_2013
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Re: The Power of Working Longer

Post by Lars_2013 » Thu Jan 25, 2018 11:54 am

CnC wrote:
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?
The study finds its results because they find/assume most retirement income is generated by social security and they assume the person annuitizes all of their savings/investments upon retirement. Therefore, they find large gains from delaying retirement because of the significantly increased values of social security and annuities when claimed/purchased at older ages. These large gains dwarf the benefit of increased savings rates in their study.

If one assumes a 4% (or 3.7% or whatever) withdrawal rate from investments rather than annuitizing, the results are very different.

CnC
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Re: The Power of Working Longer

Post by CnC » Thu Jan 25, 2018 12:06 pm

Lars_2013 wrote:
Thu Jan 25, 2018 11:54 am
CnC wrote:
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?
The study finds its results because they find/assume most retirement income is generated by social security and they assume the person annuitizes all of their savings/investments upon retirement. Therefore, they find large gains from delaying retirement because of the significantly increased values of social security and annuities when claimed/purchased at older ages. These large gains dwarf the benefit of increased savings rates in their study.

If one assumes a 4% (or 3.7% or whatever) withdrawal rate from investments rather than annuitizing, the results are very different.
Ahh I suppose this is another one of those cases where figures can't lie but liers can figure.


So assuming you save so little that you are mainly relying on social security and then take an annuity that increases in value the closer to death you could reverse engineering the math to give you the information you want.

Still disturbing that a actual University would allow this published in their name because it spreads dangerous misinformation.

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Re: The Power of Working Longer

Post by smitcat » Thu Jan 25, 2018 12:24 pm

CnC wrote:
Thu Jan 25, 2018 12:06 pm
Lars_2013 wrote:
Thu Jan 25, 2018 11:54 am
CnC wrote:
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?
The study finds its results because they find/assume most retirement income is generated by social security and they assume the person annuitizes all of their savings/investments upon retirement. Therefore, they find large gains from delaying retirement because of the significantly increased values of social security and annuities when claimed/purchased at older ages. These large gains dwarf the benefit of increased savings rates in their study.

If one assumes a 4% (or 3.7% or whatever) withdrawal rate from investments rather than annuitizing, the results are very different.
Ahh I suppose this is another one of those cases where figures can't lie but liers can figure.


So assuming you save so little that you are mainly relying on social security and then take an annuity that increases in value the closer to death you could reverse engineering the math to give you the information you want.

Still disturbing that a actual University would allow this published in their name because it spreads dangerous misinformation.
"Still disturbing that a actual University would allow this published in their name because it spreads dangerous misinformation."

I do agree - but - as terrible as their information may seem it appears that it may apply well to a larger majority of the current population.
That actually scared me more than realizing that Lars_2013 observation was exactly correct.

CnC
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Re: The Power of Working Longer

Post by CnC » Thu Jan 25, 2018 12:33 pm

smitcat wrote:
Thu Jan 25, 2018 12:24 pm


"Still disturbing that a actual University would allow this published in their name because it spreads dangerous misinformation."

I do agree - but - as terrible as their information may seem it appears that it may apply well to a larger majority of the current population.
That actually scared me more than realizing that Lars_2013 observation was exactly correct.

Agreed, I had a post locked on here just last week where I pointed out an article showing that pooling suggests only 31% of us housholds could afford a single suprise $1000 bill.

It makes me some time wonder just how much of a bubble we in boggelheads are living.

I'm planning on saving and retiring on a pension and 3-5m portfolio in 20ish years. If it happens or not no one knows. But what will happen to it when EVERYONE ELSE has a net worth of $0 at 65 and can never retire?

That worries me more than my investments going up or down.

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willthrill81
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Re: The Power of Working Longer

Post by willthrill81 » Thu Jan 25, 2018 12:40 pm

CnC wrote:
Thu Jan 25, 2018 12:33 pm
Agreed, I had a post locked on here just last week where I pointed out an article showing that pooling suggests only 31% of us housholds could afford a single suprise $1000 bill.

It makes me some time wonder just how much of a bubble we in boggelheads are living.

I'm planning on saving and retiring on a pension and 3-5m portfolio in 20ish years. If it happens or not no one knows. But what will happen to it when EVERYONE ELSE has a net worth of $0 at 65 and can never retire?

That worries me more than my investments going up or down.
When I recently told a group of college-age students that the median net worth of 65-69 year olds in the U.S. is about $190k, several of them literally gasped. One girl said that it made her want to cry. That actually makes me hopeful for younger people. No doubt many of them see the predicament that their parents and grandparents are in and want something better for themselves. I heard yesterday that 64% of Millennials report that they are saving, which isn't far behind Baby Boomers at 75%.
“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

CnC
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Re: The Power of Working Longer

Post by CnC » Thu Jan 25, 2018 12:53 pm

willthrill81 wrote:
Thu Jan 25, 2018 12:40 pm
CnC wrote:
Thu Jan 25, 2018 12:33 pm
Agreed, I had a post locked on here just last week where I pointed out an article showing that pooling suggests only 31% of us housholds could afford a single suprise $1000 bill.

It makes me some time wonder just how much of a bubble we in boggelheads are living.

I'm planning on saving and retiring on a pension and 3-5m portfolio in 20ish years. If it happens or not no one knows. But what will happen to it when EVERYONE ELSE has a net worth of $0 at 65 and can never retire?

That worries me more than my investments going up or down.
When I recently told a group of college-age students that the median net worth of 65-69 year olds in the U.S. is about $190k, several of them literally gasped. One girl said that it made her want to cry. That actually makes me hopeful for younger people. No doubt many of them see the predicament that their parents and grandparents are in and want something better for themselves. I heard yesterday that 64% of Millennials report that they are saving, which isn't far behind Baby Boomers at 75%.
I sincerely hope you are right but surveys like this do not inspire much confidence in my fellow millennials.

https://aperioncare.com/wp-content/uplo ... Test10.png

Apparently 34% of us think we can retire comfortably with less than 200k. And only 10% of us think that we would need more than 2m to COMFORTABLY retire.

herpfinance
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Re: The Power of Working Longer

Post by herpfinance » Thu Jan 25, 2018 2:22 pm

CnC wrote:
Thu Jan 25, 2018 12:53 pm
willthrill81 wrote:
Thu Jan 25, 2018 12:40 pm
CnC wrote:
Thu Jan 25, 2018 12:33 pm
Agreed, I had a post locked on here just last week where I pointed out an article showing that pooling suggests only 31% of us housholds could afford a single suprise $1000 bill.

It makes me some time wonder just how much of a bubble we in boggelheads are living.

I'm planning on saving and retiring on a pension and 3-5m portfolio in 20ish years. If it happens or not no one knows. But what will happen to it when EVERYONE ELSE has a net worth of $0 at 65 and can never retire?

That worries me more than my investments going up or down.
When I recently told a group of college-age students that the median net worth of 65-69 year olds in the U.S. is about $190k, several of them literally gasped. One girl said that it made her want to cry. That actually makes me hopeful for younger people. No doubt many of them see the predicament that their parents and grandparents are in and want something better for themselves. I heard yesterday that 64% of Millennials report that they are saving, which isn't far behind Baby Boomers at 75%.
I sincerely hope you are right but surveys like this do not inspire much confidence in my fellow millennials.

https://aperioncare.com/wp-content/uplo ... Test10.png

Apparently 34% of us think we can retire comfortably with less than 200k. And only 10% of us think that we would need more than 2m to COMFORTABLY retire.
Very informative survey. By bogleheads standards I often feel poor, but then you realize that you have actually saved more than 94% (98%?) of your corresponding generation.
"The intelligent investor is a realist who sells to optimists and buys from pessimists" - Benjamin Graham

protagonist
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Re: The Power of Working Longer

Post by protagonist » Thu Jan 25, 2018 11:13 pm

herpfinance wrote:
Thu Jan 25, 2018 2:22 pm
CnC wrote:
Thu Jan 25, 2018 12:53 pm
willthrill81 wrote:
Thu Jan 25, 2018 12:40 pm
CnC wrote:
Thu Jan 25, 2018 12:33 pm
Agreed, I had a post locked on here just last week where I pointed out an article showing that pooling suggests only 31% of us housholds could afford a single suprise $1000 bill.

It makes me some time wonder just how much of a bubble we in boggelheads are living.

I'm planning on saving and retiring on a pension and 3-5m portfolio in 20ish years. If it happens or not no one knows. But what will happen to it when EVERYONE ELSE has a net worth of $0 at 65 and can never retire?

That worries me more than my investments going up or down.
When I recently told a group of college-age students that the median net worth of 65-69 year olds in the U.S. is about $190k, several of them literally gasped. One girl said that it made her want to cry. That actually makes me hopeful for younger people. No doubt many of them see the predicament that their parents and grandparents are in and want something better for themselves. I heard yesterday that 64% of Millennials report that they are saving, which isn't far behind Baby Boomers at 75%.
I sincerely hope you are right but surveys like this do not inspire much confidence in my fellow millennials.

https://aperioncare.com/wp-content/uplo ... Test10.png

Apparently 34% of us think we can retire comfortably with less than 200k. And only 10% of us think that we would need more than 2m to COMFORTABLY retire.
Very informative survey. By bogleheads standards I often feel poor, but then you realize that you have actually saved more than 94% (98%?) of your corresponding generation.
I think that is fairly realistic by today's standards, considering that most retirees have some form of income such as social security, investment income, pension, etc. It is stated above that the median net worth of 65-69 y o's is about 190K. It certainly does not seem to me that half of American retirees are struggling. In my MCOL community most seem relatively comfortable to me.

It would be interesting to know what "group of college age students" reacted so dramatically. If it was a group of students from a private school with tuition and fees ranging around $60K/year or more, that would hardly be a representative sample of millenials. I am actually surprised that a full 10% in the survey really think they need more than $2M to retire comfortably, since to the vast majority of Americans $2M is a pipe dream. I question whether the group sampled was representative of the general population or were also from elite schools.

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willthrill81
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Re: The Power of Working Longer

Post by willthrill81 » Thu Jan 25, 2018 11:55 pm

protagonist wrote:
Thu Jan 25, 2018 11:13 pm
I think that is fairly realistic by today's standards, considering that most retirees have some form of income such as social security, investment income, pension, etc. It is stated above that the median net worth of 65-69 y o's is about 190K. It certainly does not seem to me that half of American retirees are struggling. In my MCOL community most seem relatively comfortable to me.
Here's the data source. https://dqydj.com/net-worth-by-age-calc ... ed-states/

It's actually improved a bit since last year when I looked at it the last time. The median net worth for 65-69 year olds is now $210k (including home equity), which isn't surprising given the performance of the stock market and the general economic condition. Still, that group and those were fewer assets are pretty much doomed to rely on a combination of (1) SS, (2) working as long as they physically can, and (3) relying on assistance from others.
protagonist wrote:
Thu Jan 25, 2018 11:13 pm
It would be interesting to know what "group of college age students" reacted so dramatically. If it was a group of students from a private school with tuition and fees ranging around $60K/year or more, that would hardly be a representative sample of millenials. I am actually surprised that a full 10% in the survey really think they need more than $2M to retire comfortably, since to the vast majority of Americans $2M is a pipe dream. I question whether the group sampled was representative of the general population or were also from elite schools.
The students were all from a regional, relatively low cost, public university. My experience is that even at this age, most people seem to understand that $200k isn't enough for a 'typical' retirement, especially for those who are about to (hopefully) get a four-year degree.
“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 AlohaJoe » Fri Jan 26, 2018 1:43 am

willthrill81 wrote:
Thu Jan 25, 2018 11:55 pm
It's actually improved a bit since last year when I looked at it the last time. The median net worth for 65-69 year olds is now $210k (including home equity), which isn't surprising given the performance of the stock market and the general economic condition. Still, that group and those were fewer assets are pretty much doomed to rely on a combination of (1) SS, (2) working as long as they physically can, and (3) relying on assistance from others.
This seems unnecessarily alarmist, especially because you don't mention pensions at all. "Doomed to rely on Social Security"? Oh, the horror.....

There are really three distinct groups of people in that age range...I think looking at medians like that is misleading.

...48% of the group have any retirement savings at all. In this group, the median net worth is $597,000 and 58% of them have a pension on top of that. This 48% is totally safe.

...a further 26% don't have any retirement savings. But "retirement savings" isn't everything. This group has a pension. Between their pension and their Social Security they are also safe. (A pension only needs to provide about $21,000 a year on top of Social Security to meet median spending needs.)

So far we've accounted for three-quarters of retirees.

What's left are the people who are not in a good position. No retirement savings, no pension, A median net worth of just $57,000. 67% home ownership rate. Only 36% have paid off their house. It's not great news but it still isn't as dire as it looks at first glance because people in this group have (unfortunately) spent their entire lives with low income. They have median household income of just $19,000, meaning that Social Security provides a substantial amount of what they need. 45% of them rely on Social Security for 90% of their income.

The reality is that people who don't have retirement savings are less likely to work (25% have employment income versus 50% of those who have a pension and/or retirement savings). Likely because they've unfortunately spent their entire lives in the kinds of jobs that don't lend themselves to working when you are over 55.

In summary: 75% of people in that age group are basically totally fine. Of the remaining 25%, Social Security provides most of what their pre-retirement lifestyle requires. In general, they don't have any retirement savings because they never had income during their working lives.

25% of Americans being in a precarious and relatively barebones existence is not great, I will absolutely grant that. It is something that should be improved. But telling them to save more is unlikely to be the right solution, since they don't really have the income to save in the first place.

Overall the picture is pretty far from being dire.

The real question is what happens over the next 20-30 years as the generation that grew up without pension plans starts entering this age range. Right now pensions appear to "saving" around 25-50% of the population. The evidence so far on defined contribution savings plans isn't great. But between "empty nest catch up savings" and the power of compounding, it is probably still too early to say it is a foregone conclusion.

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Re: The Power of Working Longer

Post by willthrill81 » Fri Jan 26, 2018 1:52 am

AlohaJoe wrote:
Fri Jan 26, 2018 1:43 am
willthrill81 wrote:
Thu Jan 25, 2018 11:55 pm
It's actually improved a bit since last year when I looked at it the last time. The median net worth for 65-69 year olds is now $210k (including home equity), which isn't surprising given the performance of the stock market and the general economic condition. Still, that group and those were fewer assets are pretty much doomed to rely on a combination of (1) SS, (2) working as long as they physically can, and (3) relying on assistance from others.
This seems unnecessarily alarmist, especially because you don't mention pensions at all.
That's a very fair point, and I should have included pensions. But even if the number of would-be retirees who are in financial trouble is 'only' 25%, that's still millions of people.

And as you point out, pensions are disappearing for those still in the workforce (federal employees and military excluded, of course), so unless a large portion of that bottom 50% get to saving, there will be real trouble in the coming decades. There were an estimated 1.4 million boomerang parents way back in 2000, and that number has surely grown significantly in the last 18 years. Twenty percent of Millennials are already providing financial support to their parents.
“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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El Greco
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Re: The Power of Working Longer

Post by El Greco » Fri Jan 26, 2018 8:55 am

The only power I see in working longer is all the energy it's going to deplete from me in retirement. Thanks, but no thanks. :beer

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Tycoon
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Re: The Power of Working Longer

Post by Tycoon » Fri Jan 26, 2018 9:04 am

Silliness.
...I might be just beginning | I might be near the end. Enya | | C'est la vie

smitcat
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Re: The Power of Working Longer

Post by smitcat » Fri Jan 26, 2018 10:10 am

I believe the amounts of money available to retired couples have always been lower than generally thought of on this site.
The numbers are lower for all sources of income in retirement than I would have thought....

Households Aged 55-64
$62,802 median
$89,986 mean
Households Aged 65-74:
$47,432
$68,905
Households Aged 75 and Older:
$30,635
$45,989


Where Does Most Retirement Income Come From?
According to the Pension Rights Center, older adults get retirement income from the following sources:

Social Security: 85 percent of people 65 and older get Social Security. The average Social Security income in 2017 will be $1,360, according to a fact sheet from the Social Security Administration.

Assets: Sixty-three percent of retirees rely on assets for retirement income. According to Retirement USA, “the median amount of asset income for households where either the householder or spouse was aged 65 or older was $1,542 for those households who received any asset income. In 2008 59 percent of older households had income from assets.”

Pensions: A mere 32 percent of today’s retirees have pensions and this number is trending further downward.

Earnings: 23 percent of older Americans have work income. According to the AARP, the median retirement income earned by retirees from work is $25,000 a year. Note, this is the highest amount of any income source.

Public Assistance or Veteran’s Benefits: About 7 percent of retirees are getting help from government source

Here is a link to the article....
https://www.newretirement.com/retiremen ... come-2017/

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Re: The Power of Working Longer

Post by LadyGeek » Fri Jan 26, 2018 11:01 am

You still need to have a baseline amount of money to be able to make this decision.

Here's how to get there: Importance of saving early

The authors' model is defined by differences to the life-cycle model. For those who may need a refresher, the wiki has some background info: Life-cycle finance
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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Re: The Power of Working Longer

Post by ncbill » Fri Jan 26, 2018 1:18 pm

willthrill81 wrote:
Fri Jan 26, 2018 1:52 am
AlohaJoe wrote:
Fri Jan 26, 2018 1:43 am
willthrill81 wrote:
Thu Jan 25, 2018 11:55 pm
It's actually improved a bit since last year when I looked at it the last time. The median net worth for 65-69-year-olds is now $210k (including home equity), which isn't surprising given the performance of the stock market and the general economic condition. Still, that group and those were fewer assets are pretty much doomed to rely on a combination of (1) SS, (2) working as long as they physically can, and (3) relying on assistance from others.
This seems unnecessarily alarmist, especially because you don't mention pensions at all.
That's a very fair point, and I should have included pensions. But even if the number of would-be retirees who are in financial trouble is 'only' 25%, that's still millions of people.

And as you point out, pensions are disappearing for those still in the workforce (federal employees and military excluded, of course), so unless a large portion of that bottom 50% get to saving, there will be real trouble in the coming decades. There was an estimated 1.4 million boomerang parents way back in 2000, and that number has surely grown significantly in the last 18 years. Twenty percent of Millennials are already providing financial support to their parents.
Having a pension can be a huge factor in the ability to retire comfortably.

I've had blue-collar relatives, with maybe 5 figures saved, who were able to retire 25+ years ago at around age 50.

All thanks to their COLA pension & generous retiree health-care coverage, who have since seen their investments grow to high-6 figures.

At least one of my kids will be serving several years in the military as payment for their undergraduate education & given what they want to do afterward I've recommended they stay the full 20 for the pension.

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Re: The Power of Working Longer

Post by Johnnie » Fri Jan 26, 2018 3:12 pm

Compare and contrast this Marketwatch article from Merriman:

Double your retirement income (by working another) five years
"I know nothing."

protagonist
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Re: The Power of Working Longer

Post by protagonist » Tue Jan 30, 2018 9:17 pm

AlohaJoe wrote:
Fri Jan 26, 2018 1:43 am
willthrill81 wrote:
Thu Jan 25, 2018 11:55 pm
It's actually improved a bit since last year when I looked at it the last time. The median net worth for 65-69 year olds is now $210k (including home equity), which isn't surprising given the performance of the stock market and the general economic condition. Still, that group and those were fewer assets are pretty much doomed to rely on a combination of (1) SS, (2) working as long as they physically can, and (3) relying on assistance from others.
This seems unnecessarily alarmist, especially because you don't mention pensions at all. "Doomed to rely on Social Security"? Oh, the horror.....

There are really three distinct groups of people in that age range...I think looking at medians like that is misleading.

...48% of the group have any retirement savings at all. In this group, the median net worth is $597,000 and 58% of them have a pension on top of that. This 48% is totally safe.

...a further 26% don't have any retirement savings. But "retirement savings" isn't everything. This group has a pension. Between their pension and their Social Security they are also safe. (A pension only needs to provide about $21,000 a year on top of Social Security to meet median spending needs.)

So far we've accounted for three-quarters of retirees.

What's left are the people who are not in a good position. No retirement savings, no pension, A median net worth of just $57,000. 67% home ownership rate. Only 36% have paid off their house. It's not great news but it still isn't as dire as it looks at first glance because people in this group have (unfortunately) spent their entire lives with low income. They have median household income of just $19,000, meaning that Social Security provides a substantial amount of what they need. 45% of them rely on Social Security for 90% of their income.

The reality is that people who don't have retirement savings are less likely to work (25% have employment income versus 50% of those who have a pension and/or retirement savings). Likely because they've unfortunately spent their entire lives in the kinds of jobs that don't lend themselves to working when you are over 55.

In summary: 75% of people in that age group are basically totally fine. Of the remaining 25%, Social Security provides most of what their pre-retirement lifestyle requires. In general, they don't have any retirement savings because they never had income during their working lives.

25% of Americans being in a precarious and relatively barebones existence is not great, I will absolutely grant that. It is something that should be improved. But telling them to save more is unlikely to be the right solution, since they don't really have the income to save in the first place.

Overall the picture is pretty far from being dire.

The real question is what happens over the next 20-30 years as the generation that grew up without pension plans starts entering this age range. Right now pensions appear to "saving" around 25-50% of the population. The evidence so far on defined contribution savings plans isn't great. But between "empty nest catch up savings" and the power of compounding, it is probably still too early to say it is a foregone conclusion.
Thank you for this analysis, Joe. I haven't checked your facts but they seem very realistic to me.

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Re: The Power of Working Longer

Post by protagonist » Tue Jan 30, 2018 9:34 pm

FWIW, results of a 2013 Gallup poll:

"U.S. retirees are consistently more likely than nonretirees to report having enough money to live comfortably. This year, 75% of retirees versus 67% of nonretirees say they are financially comfortable right now. Since 2002, the average gap has been 10 percentage points in favor of retirees."

"one thing is clear, household income does not explain retirees' greater likelihood of saying they are financially comfortable. Nonretirees are significantly more likely to report annual household incomes of $75,000 or higher. Retirees are more likely to fall in the $30,000 to less than $50,000 range, while the two groups have similar percentages in the other income categories."

"Rather, retirees may report a more financially comfortable situation because they have lower average expenses than nonretirees do."

"Although many may think of retirees as struggling to make ends meet on fixed incomes, retirees themselves are more likely than nonretirees to say they have enough money to live comfortably. This is true even though retirees generally report lower household incomes than nonretirees."

"This pattern has been consistent throughout the 12 years Gallup has asked about financial comfort, although it is not clear if the trend will continue in the future."
http://news.gallup.com/poll/162890/reti ... irees.aspx

To put all this in context, an income of $100K puts you in approx. the top 8% of Americans. 92% make less than you do. http://graphics.wsj.com/what-percent/

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Re: The Power of Working Longer

Post by Bacchus01 » Tue Jan 30, 2018 9:38 pm

CnC wrote:
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?
Yeah. So, saving 1% a year more, or approximately 30% of an annual salary, not including compounding, is like working longer at 25-50% more salary?

Well, duh.

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Re: The Power of Working Longer

Post by protagonist » Tue Jan 30, 2018 9:53 pm

LadyGeek wrote:
Fri Jan 26, 2018 11:01 am
You still need to have a baseline amount of money to be able to make this decision.

Here's how to get there: Importance of saving early

The authors' model is defined by differences to the life-cycle model. For those who may need a refresher, the wiki has some background info: Life-cycle finance

Saving early is not as easy as it might look through the retrospectoscope of a retiree.

Young people tend to make a lot less money, have a lot less of a security blanket, and are more likely to be saddled with the costs of raising children, student loans, and rents/mortgages. Necessities cost a much larger percentage of their income and nest egg. The more you make, the easier it is to save a fixed percentage of your salary. A person making $100K/yr can save 10% without putting much of a dent in their lifestyle. But for one making $10K/yr. to save at the same 10% rate ($1K/yr) could mean the difference between being able to put food on the table or pay the rent that month.
Last edited by protagonist on Tue Jan 30, 2018 9:53 pm, edited 1 time in total.

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Re: The Power of Working Longer

Post by willthrill81 » Tue Jan 30, 2018 9:53 pm

protagonist wrote:
Tue Jan 30, 2018 9:34 pm
FWIW, results of a 2013 Gallup poll:

"U.S. retirees are consistently more likely than nonretirees to report having enough money to live comfortably.
Keep in mind that those have decided to retiree (i.e. retirees) are more likely to be comfortable with their finances than those who have not decided to retire. Granted, some are forced into retirement, and some are financially able but still unwilling to retire for whatever reason, but those are the exceptions.

Correlation does not equal causation. Retiring does not necessarily make one comfortable with one's finances.
protagonist wrote:
Tue Jan 30, 2018 9:53 pm
LadyGeek wrote:
Fri Jan 26, 2018 11:01 am
You still need to have a baseline amount of money to be able to make this decision.

Here's how to get there: Importance of saving early

The authors' model is defined by differences to the life-cycle model. For those who may need a refresher, the wiki has some background info: Life-cycle finance

Saving early is not as easy as it might look through the retrospectoscope of a retiree.

Young people tend to make a lot less money, have a lot less of a security blanket, and are more likely to be saddled with the costs of raising children, student loans, and rents/mortgages. Necessities cost a much larger percentage of their income and nest egg. The more you make, the easier it is to save a fixed percentage of your salary. A person making $100K/yr can save 10% without putting much of a dent in their lifestyle. But for one making $10K/yr. to save at the same 10% rate ($1K/yr) could mean the difference between being able to put food on the table or pay the rent that month.
I agree. Realistically, very few under the age of 30 actually start saving in earnest for retirement, and this is likely to 'get worse' as student loan repayments loom larger over time. I was 28 when I started saving 15% of my gross income; now it's over 50%.
“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 protagonist » Tue Jan 30, 2018 9:59 pm

willthrill81 wrote:
Tue Jan 30, 2018 9:53 pm
protagonist wrote:
Tue Jan 30, 2018 9:34 pm
FWIW, results of a 2013 Gallup poll:

"U.S. retirees are consistently more likely than nonretirees to report having enough money to live comfortably.
Keep in mind that those have decided to retiree (i.e. retirees) are more likely to be comfortable with their finances than those who have not decided to retire. Granted, some are forced into retirement, and some are financially able but still unwilling to retire for whatever reason, but those are the exceptions.

Correlation does not equal causation. Retiring does not necessarily make one comfortable with one's finances.
True, and I was not suggesting a causal link. I was just pointing out that the conclusions support Aloha Joe's analysis of retirement above....75% feel comfortable, despite the fact that the median retirement net worth is "only" ~200K and, acc. to Joe, 26% have "no retirement savings". People who state that you need millions to retire comfortably are misleading others. Very few Americans fall into that category, and yet 75% of retirees feel "comfortable".

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Re: The Power of Working Longer

Post by willthrill81 » Tue Jan 30, 2018 10:03 pm

protagonist wrote:
Tue Jan 30, 2018 9:59 pm
willthrill81 wrote:
Tue Jan 30, 2018 9:53 pm
protagonist wrote:
Tue Jan 30, 2018 9:34 pm
FWIW, results of a 2013 Gallup poll:

"U.S. retirees are consistently more likely than nonretirees to report having enough money to live comfortably.
Keep in mind that those have decided to retiree (i.e. retirees) are more likely to be comfortable with their finances than those who have not decided to retire. Granted, some are forced into retirement, and some are financially able but still unwilling to retire for whatever reason, but those are the exceptions.

Correlation does not equal causation. Retiring does not necessarily make one comfortable with one's finances.
True, and I was not suggesting a causal link. I was just pointing out that the conclusions support Aloha Joe's analysis of retirement above....75% feel comfortable, despite the fact that the median retirement net worth is "only" ~200K and, acc. to Joe, 26% have "no retirement savings". People who state that you need millions to retire comfortably are misleading others. Very few Americans fall into that category.
I mostly agree, but remember that pensions are a dying breed for most in the private sector, and SS is projected by the SS administration, under current law, to have benefits cut by 30% within around 15 years. As such, the need for Americans to have large nest eggs to retire comfortably is definitely growing.
“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 smitcat » Wed Jan 31, 2018 9:09 am

protagonist wrote:
Tue Jan 30, 2018 9:59 pm
willthrill81 wrote:
Tue Jan 30, 2018 9:53 pm
protagonist wrote:
Tue Jan 30, 2018 9:34 pm
FWIW, results of a 2013 Gallup poll:

"U.S. retirees are consistently more likely than nonretirees to report having enough money to live comfortably.
Keep in mind that those have decided to retiree (i.e. retirees) are more likely to be comfortable with their finances than those who have not decided to retire. Granted, some are forced into retirement, and some are financially able but still unwilling to retire for whatever reason, but those are the exceptions.

Correlation does not equal causation. Retiring does not necessarily make one comfortable with one's finances.
True, and I was not suggesting a causal link. I was just pointing out that the conclusions support Aloha Joe's analysis of retirement above....75% feel comfortable, despite the fact that the median retirement net worth is "only" ~200K and, acc. to Joe, 26% have "no retirement savings". People who state that you need millions to retire comfortably are misleading others. Very few Americans fall into that category, and yet 75% of retirees feel "comfortable".
Yes - 75% of retires feel comfortable with an income between $30-50K per year. Many are on the lower side of that number. That is not what is typically spoken about on this forum and likely the largest reason folks do not realize that most retirees income is very low.
It was certainly that way for my parents and almost everyone of their friends while they were alive.

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Re: The Power of Working Longer

Post by protagonist » Wed Jan 31, 2018 6:18 pm

smitcat wrote:
Wed Jan 31, 2018 9:09 am
protagonist wrote:
Tue Jan 30, 2018 9:59 pm
willthrill81 wrote:
Tue Jan 30, 2018 9:53 pm
protagonist wrote:
Tue Jan 30, 2018 9:34 pm
FWIW, results of a 2013 Gallup poll:

"U.S. retirees are consistently more likely than nonretirees to report having enough money to live comfortably.
Keep in mind that those have decided to retiree (i.e. retirees) are more likely to be comfortable with their finances than those who have not decided to retire. Granted, some are forced into retirement, and some are financially able but still unwilling to retire for whatever reason, but those are the exceptions.

Correlation does not equal causation. Retiring does not necessarily make one comfortable with one's finances.
True, and I was not suggesting a causal link. I was just pointing out that the conclusions support Aloha Joe's analysis of retirement above....75% feel comfortable, despite the fact that the median retirement net worth is "only" ~200K and, acc. to Joe, 26% have "no retirement savings". People who state that you need millions to retire comfortably are misleading others. Very few Americans fall into that category, and yet 75% of retirees feel "comfortable".
Yes - 75% of retires feel comfortable with an income between $30-50K per year. Many are on the lower side of that number. That is not what is typically spoken about on this forum and likely the largest reason folks do not realize that most retirees income is very low.
It was certainly that way for my parents and almost everyone of their friends while they were alive.
I doubt if I am typically spending more than $50K/year and I live very well. I travel to S America, Caribbean or Asia in the winters and to France in the summer. I take private music lessons in MA and in NYC. I drive from MA to NYC at least every other weekend and stay in my gf's apartment for usually 4 days at a time in Manhattan. We go out to eat a fair amount. I buy anything I want to buy and do anything I want to do. I own my home in a MCOL college town in MA. I could be spending a lot more money and I would be fine, but honestly, there isn't anything I want to spend it on that I don't already have. This year I spent more because I bought a new car, but it was my first one since 2005.

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Re: The Power of Working Longer

Post by CULater » Sun Jun 10, 2018 10:22 pm

Death is probably the single best hedge against running out of money in retirement. Solves all your problems, such as figuring out safe withdrawal rates and all that. Another advantage of working longer is that you're closer to it when you give up your earnings income. Makes you wonder why everybody doesn't do it and why anybody thinks early retirement is a good idea, doesn't it? And if you hate your job, maybe you'll die even sooner. :beer
May you have the hindsight to know where you've been, The foresight to know where you're going, And the insight to know when you've gone too far. ~ Irish Blessing

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Re: The Power of Working Longer

Post by willthrill81 » Sun Jun 10, 2018 11:08 pm

CULater wrote:
Sun Jun 10, 2018 10:22 pm
Death is probably the single best hedge against running out of money in retirement. Solves all your problems, such as figuring out safe withdrawal rates and all that. Another advantage of working longer is that you're closer to it when you give up your earnings income. Makes you wonder why everybody doesn't do it and why anybody thinks early retirement is a good idea, doesn't it? And if you hate your job, maybe you'll die even sooner. :beer
Yep. Working until death is actually the perfect solution to the entire savings, investment, and retirement problem. :shock:

Take a look at the graph below. Those life expectancy lines are surprisingly steep, almost flat for males aged 65 and older and not far from that for females either. Twenty percent of men aged 65 won't survive to age 74. Joint life expectancy really starts dropping off at age 80.

Image
https://www.kitces.com/blog/life-expect ... survivors/

There is only an 18% chance that at least one of the spouses above will survive to age 95. There is about a 50% chance that neither will make it to age 90.

Couple that with two-thirds of couples seeing their spending decline annually by an average of 1-2% in real dollars, and the longevity 'problem' loses some of its sharp edges at the least.
“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 HIinvestor » Sun Jun 10, 2018 11:26 pm

The big issue with working longer is that sometimes workers don’t get to choose how long they stay at their jobs—many are downsized or have to quit to care for loved ones. Finding a new job when you are in your 50s, 60s and 70s is challenging. Also, sometimes physical or mental conditions prevent folks from working as long as they might prefer.

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Re: The Power of Working Longer

Post by CurlyDave » Sun Jun 10, 2018 11:49 pm

zaboomafoozarg wrote:
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.
I was reading those same predictions 5 years ago. The 5-year S&P 500 CAGR is 12.87%.

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Re: The Power of Working Longer

Post by flyingaway » Mon Jun 11, 2018 12:48 am

willthrill81 wrote:
Sun Jun 10, 2018 11:08 pm
CULater wrote:
Sun Jun 10, 2018 10:22 pm
Death is probably the single best hedge against running out of money in retirement. Solves all your problems, such as figuring out safe withdrawal rates and all that. Another advantage of working longer is that you're closer to it when you give up your earnings income. Makes you wonder why everybody doesn't do it and why anybody thinks early retirement is a good idea, doesn't it? And if you hate your job, maybe you'll die even sooner. :beer
Yep. Working until death is actually the perfect solution to the entire savings, investment, and retirement problem. :shock:
This is actually the perfect solution. If one is disabled before death, disability insurance takes care of it.

So we have to convience people that it is a great honor to work until death.

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Re: The Power of Working Longer

Post by Dottie57 » Mon Jun 11, 2018 6:40 am

CnC wrote:
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?
Only thing I can figure out is

Expenses 5000 a month * 6 months = $30,000. (Less taken from 401k)
401k saving 2 k a month = $12,000.(more put in).

42k better than retiring 6 months earlier.

Everything depends on savings/ spending which is not new.

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Re: The Power of Working Longer

Post by dknightd » Mon Jun 11, 2018 9:04 am

I'm in that difficult cusp period. I could probably retire today if I had to. But my retirement would be more comfortable and secure if I worked another year or two. It is hard to decide where to draw the line. Sometimes I wish that I was forced to "retire". I don't want to cut the cord (income) too early, but I also don't want to work too long. Maybe the luxury of deciding of when to retire is one of the most difficult decisions I have to make in my life. I think I'll read https://www.bogleheads.org/wiki/Life-cycle_finance - I'm constantly amazed by the depth and breath of wiki here

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Re: The Power of Working Longer

Post by CULater » Mon Jun 11, 2018 9:50 am

Considering the news that SS has dipped into the Trust Fund for the first time, and Medicare is even shakier certainly gives pause about when to retire. I am long retired, but if I were coming up on retirement now, I'm pretty sure I would opt to keep working longer. Plus the fact that having the social contacts and the purpose of getting out of bed and going to a job each day can be healthier. After the first couple years of retirement, it started to become a bore. And because you don't have the obligation of a job, you become too available for other stuff you might prefer to sidestep but no longer have the job as an excuse. I'm really not into low-cog senior part time jobs or volunteer stuff. I had a job that required some brain power and that's what is most satisfying to me.
May you have the hindsight to know where you've been, The foresight to know where you're going, And the insight to know when you've gone too far. ~ Irish Blessing

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Re: The Power of Working Longer

Post by dknightd » Mon Jun 11, 2018 10:58 am

I could make my job more interesting if I wanted to. But that would take time and effort. I think I'm perhaps just bored with my job. I have hobbies I'd rather pursue. But they do not pay. I want to make sure we have enough to pursue our hobbies. We are both CU Boulder grads. R U

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Re: The Power of Working Longer

Post by CyclingDuo » Mon Jun 11, 2018 11:12 am

CULater wrote:
Mon Jun 11, 2018 9:50 am
Considering the news that SS has dipped into the Trust Fund for the first time, and Medicare is even shakier certainly gives pause about when to retire. I am long retired, but if I were coming up on retirement now, I'm pretty sure I would opt to keep working longer. Plus the fact that having the social contacts and the purpose of getting out of bed and going to a job each day can be healthier. After the first couple years of retirement, it started to become a bore. And because you don't have the obligation of a job, you become too available for other stuff you might prefer to sidestep but no longer have the job as an excuse. I'm really not into low-cog senior part time jobs or volunteer stuff. I had a job that required some brain power and that's what is most satisfying to me.
Some excellent food for thought, CULater! Especially the part about daily routine, brain power, socialization in the work place, etc... and being able to sidestep things you may not want to do using work as your out. :beer

Of course, if one continues working it doesn't have to be full-time, and it doesn't have to be low cognitive in such a scenario of work that is less than full-time even though the reality of much part-time work lends itself to a lot of entry level, lower cognitive unskilled work. However, if one seeks out work that satisfies both flexible hours and a higher cognitive function - a nice balance can be found that many would declare as desirable.

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Re: The Power of Working Longer

Post by NoHeat » Mon Jun 11, 2018 11:50 am

I read this paper. It is really nothing more than a statement about SS benefits, and how they are improved by starting them later. Nothing more. Nothing new.

To try to dress up their paper and make it look like something new, the authors added into their calculations a tiny amount of 401k proceeds. And tiny is the key word. Three key assumptions assured this tinyness: the 401k had no investment return, the worker never had a pay raise, and all proceeds were placed in a low-yielding annuity at retirement. That way, the 401k proceeds are assured to be dwarfed by the SS benefits.

So, basically, this is a trivial paper about how SS benefits improve by delaying their start. An obvious fact to anyone here. Everything else in the paper is merely noise.

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Re: The Power of Working Longer

Post by dknightd » Mon Jun 11, 2018 12:15 pm

NoHeat wrote:
Mon Jun 11, 2018 11:50 am
I read this paper. It is really nothing more than a statement about SS benefits, and how they are improved by starting them later. Nothing more. Nothing new.

To try to dress up their paper and make it look like something new, the authors added into their calculations a tiny amount of 401k proceeds. And tiny is the key word. Three key assumptions assured this tinyness: the 401k had no investment return, the worker never had a pay raise, and all proceeds were placed in a low-yielding annuity at retirement. That way, the 401k proceeds are assured to be dwarfed by the SS benefits.

So, basically, this is a trivial paper about how SS benefits improve by delaying their start. An obvious fact to anyone here. Everything else in the paper is merely noise.
As I read it, the message was work one more year, then have one more year of expenses paid by salary. Still nothing new. But something worth thinking about IMO. It still amazes me what people get to paid to write

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Re: The Power of Working Longer

Post by CyclingDuo » Mon Jun 11, 2018 5:57 pm

dknightd wrote:
Mon Jun 11, 2018 12:15 pm
NoHeat wrote:
Mon Jun 11, 2018 11:50 am
I read this paper. It is really nothing more than a statement about SS benefits, and how they are improved by starting them later. Nothing more. Nothing new.

To try to dress up their paper and make it look like something new, the authors added into their calculations a tiny amount of 401k proceeds. And tiny is the key word. Three key assumptions assured this tinyness: the 401k had no investment return, the worker never had a pay raise, and all proceeds were placed in a low-yielding annuity at retirement. That way, the 401k proceeds are assured to be dwarfed by the SS benefits.

So, basically, this is a trivial paper about how SS benefits improve by delaying their start. An obvious fact to anyone here. Everything else in the paper is merely noise.
As I read it, the message was work one more year, then have one more year of expenses paid by salary. Still nothing new. But something worth thinking about IMO. It still amazes me what people get to paid to write
I enjoyed the video presentation, the counterpoint, and then the Q&A session by participants at the forum with the authors of the paper.

I would disagree that the rest of the paper is noise and that the focus was on when to take SS.

The relative power and single focus of the paper is working longer. Whether one has saved enough and when they started, when to take SS, the investment fees and compounding are not the focus of the paper. It is working longer.

It's oft been said in various threads here at BH that once the portfolio size effect kicks in, that the savings rate near the end of your working career is like pissing in a river. The paper kept the saving rate at 9% for the income made during the working longer months or years.

Several things not new to everyone's thinking if working longer:

Your SS amount rises.
You don't have to spend down your savings due to continued income.
When you finally do stop working, you will have fewer years to fund in retirement.

Again, the focus was how powerful the factor in the entire equation is of working longer. So powerful, that it can make up for a lot of mistakes along the way (too high of AUM and ER fees, not saving enough, getting the AA wrong, not starting your savings early enough, when to take SS, the percentage you save each year).

Certainly a worthy addition to the Boglehead philosophy that working longer, even if it is on a part-time basis, those who have not saved enough or are on the cusp of not having enough that there is a strategy to still make the equation work for a financially successful retirement. Or at least an improvement. Even the authors of the paper were surprised at how powerful of a factor working longer is in the equation.

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Re: The Power of Working Longer

Post by flyingaway » Mon Jun 11, 2018 6:05 pm

I prefer to save more so that I have options when I am old.
I could work longer if I want, I could retire earlier if I want or have to.
Waiting until old to realize that I have to work longer is not a good idea.
(There have been several similar threads recently, working vs. retiring.)

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Re: The Power of Working Longer

Post by balbrec2 » Mon Jun 11, 2018 6:49 pm

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.
+1

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Re: The Power of Working Longer

Post by willthrill81 » Mon Jun 11, 2018 7:48 pm

flyingaway wrote:
Mon Jun 11, 2018 6:05 pm
I prefer to save more so that I have options when I am old.
I could work longer if I want, I could retire earlier if I want or have to.
Waiting until old to realize that I have to work longer is not a good idea.
(There have been several similar threads recently, working vs. retiring.)
:thumbsup

That's my view as well. I enjoy my career and even consider it to be lucrative. That being said, I wouldn't do it for free, and if I had the means to walk away and maintain the same relatively frugal lifestyle that we currently lead, I would.

Finding out at 55 that you're getting laid off, likely to take a 50% pay cut working elsewhere, but you're still a decade or more from anything resembling financial independence is pretty high on my list of priorities of events to avoid.

Frankly, I think that most folks, at least those that are likely to frequent this site, should plan to be financially independent by the age of 60 at the latest, preferably younger. Planning to just barely make retirement work by age 65 is a risky business. What if that last decade of returns, which is often critical to reaching financial independence, is a repeat of 2000-2009? What if you get laid off in your late 50s? What if you become disabled (disability coverage doesn't often replace all of your take home pay from what I've seen) or a loved one does and you must care for them full-time? All of these and other calamities have happened to many people, and the best means of dealing with them is to be financially independent as soon as you reasonably can.
“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 TallBoy29er » Mon Jun 11, 2018 8:39 pm

A power of working longer is not having to think about what we may do when not working at all. I can't wait for the challenge when this "power" is taken away from me. :D

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Re: The Power of Working Longer

Post by GCD » Mon Jun 11, 2018 9:10 pm

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.
Thank you for digging so I didn't have to. It always comes down to this. Math is usually unarguable. At least the math in use by social scientists. Statistical analysis is relatively easy compared to getting your assumptions right. The failure point for most academic research is construct validity.

This is why I have very little use for the social sciences anymore. Humanities and hard sciences yes, social sciences not so much.

CnC
Posts: 512
Joined: Thu May 11, 2017 12:41 pm

Re: The Power of Working Longer

Post by CnC » Tue Jun 12, 2018 8:21 am

protagonist wrote:
Tue Jan 30, 2018 9:53 pm
LadyGeek wrote:
Fri Jan 26, 2018 11:01 am
You still need to have a baseline amount of money to be able to make this decision.

Here's how to get there: Importance of saving early

The authors' model is defined by differences to the life-cycle model. For those who may need a refresher, the wiki has some background info: Life-cycle finance

Saving early is not as easy as it might look through the retrospectoscope of a retiree.

Young people tend to make a lot less money, have a lot less of a security blanket, and are more likely to be saddled with the costs of raising children, student loans, and rents/mortgages. Necessities cost a much larger percentage of their income and nest egg. The more you make, the easier it is to save a fixed percentage of your salary. A person making $100K/yr can save 10% without putting much of a dent in their lifestyle. But for one making $10K/yr. to save at the same 10% rate ($1K/yr) could mean the difference between being able to put food on the table or pay the rent that month.
As a young person with a house a degree and a family I respectfully disagree.

I would say, it's hard to save money if you made poor choices in life. This is really regardless of age.

If you made correct choices young you shouldn't have any trouble saving money. If you make poor choices life will be tough regardless of age. The only advantages older people have are years dealing with poor choices tend to make them think twice about making more and years to recover from them.

Having a kid too early, getting a 250k degree in art history on loan from the government, buying a mcmansion, overpaying for fast cars, moving to the coast to become famous, thinking you can start life on a low paying part time job. All these things are going to make the years rough for young people. But, as they get older they learn realistic expectations and can save money.

Long story short, it's not age that impacts ability to save money, it's years since your last bad decision.

(Health and disability exempt since those can have life long negative results)

GCD
Posts: 513
Joined: Tue Sep 26, 2017 7:11 pm

Re: The Power of Working Longer

Post by GCD » Tue Jun 12, 2018 2:55 pm

CnC wrote:
Tue Jun 12, 2018 8:21 am
I would say, it's hard to save money if you made poor choices in life. This is really regardless of age.
Long story short, it's not age that impacts ability to save money, it's years since your last bad decision.
I agree. But would add it also matters how bad you want it. Paying off debt and maxing tax advantaged investment isn't mutually exclusive. You can do both and lead your life on the remainder. One doesn't have to let lifestyle drive savings.

Parsing drive and discipline from "bad choices" is probably too nuanced since they are intertwined in real life. But the primary factor sure isn't age.

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