## The Power of Working Longer

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
VonRyan
Posts: 12
Joined: Tue Apr 17, 2018 11:49 am

### Re: NYT Story on Importance of Working Just a Little Longer

You can find the NBER working paper here:

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

Walkure
Posts: 42
Joined: Tue Apr 11, 2017 9:59 pm

### Re: NYT Story on Importance of Working Just a Little Longer

bobcat2 wrote:
Mon Jun 04, 2018 11:51 am
By waiting an extra six months to age 65.5 to retire they will save an additional \$3,000 and earn an extra \$10,000 on their portfolio. Their portfolio will be \$513,000. If their combined SS benefits were \$27,000 at age 65, they will increase to about \$28,100 if they wait six months (slightly more than a 4% increase). Assuming their life expectancy is 20 years and using a real discount rate of 2%, the present value of those additional SS benefits is about \$18,000.

Recap (values at age 65.5 in both cases)

Wait 6 months from age 65 to retire
PV of added SS benefit \$18,000

Save an additional \$600/yr. for 30 years (saving an additional 1% per year), but retiring at age 65
Portfolio value less 6 months of spending brings portfolio value to about \$533,500

You can play with the numbers, but for this couple working an additional six months vs. saving 1% more for thirty years is not that far apart.
Appreciate your taking the time to run this example, Bob, however it repeats one of the problems I have with these "always defer Social Security schemes." Assuming both couples pass at 85, the couple that works an extra 6 months would need an actuarial life expectancy of 19.5 years from age 65.5 for your PV comparison to be fair, which gives \$17,736.87. Additionally, you have to subtract the \$27,000/2 = \$13,500 that the earlybirds already collected from the \$17,736.87, leaving a PV of NET added SS benefit of only \$4,236.87. Any significant gain would have to come, as some posters above alluded to, from the wages during those 6 months making a material increase in the PIA.

bobcat2
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Location: just barely Outside the Beltway

### Re: NYT Story on Importance of Working Just a Little Longer

Walkure wrote:
Mon Jun 04, 2018 4:36 pm
Additionally, you have to subtract the \$27,000/2 = \$13,500 that the earlybirds already collected from the \$17,736.87, leaving a PV of NET added SS benefit of only \$4,236.87. Any significant gain would have to come, as some posters above alluded to, from the wages during those 6 months making a material increase in the PIA.
I agree that I should have included the SS benefits of not waiting, but it seems to me what would be correct would be the find the PV of annual SS benefits of \$28,100 for 20 yrs vs. the PV of \$27,000 for 20.5 years. In other words, find the NPV of the two flows.

In that case I get for 20.5 years the PV of an annual benefit of \$27,000 @ 2% discount rate is \$437,118

And for delaying six months 20 years the PV of an annual benefit of \$28,100 @ 2% discount rate is \$454,925

So the NPV of waiting is about \$17,800 - not about \$18,000, which isn't a meaningful difference.

We can play with the numbers - for example different levels of benefits for the couple depending on how much of the income was earned by each partner, or we can lower the 20 year real discount rate to what it would be today, which is 0.90% on TIPS, or we can change the life expectancy numbers, or change the return on investments, etc., etc. But most of the time these results will be about the same. Working slightly longer is a very effective way to increase your retirement standard of living.

BobK
Last edited by bobcat2 on Mon Jun 04, 2018 6:21 pm, edited 1 time in total.
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.

bobcat2
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### Re: NYT Story on Importance of Working Just a Little Longer

This doesn’t mean you shouldn’t save more, but rather working even slightly longer has a very powerful effect on retirement security.
Miriam2 wrote:
Mon Jun 04, 2018 1:12 pm
Your blue conclusion is very important, but seems to me the "working longer" has to be hopeful thinking not set planning, since we don't know what life throws at us until we're there and can take advantage of it at that time.
While I haven’t read this paper carefully, one of the co-authors, Sita Slavov, made the point during a presentation to DC Bogleheads that the lower the level of real interest rates, the more powerful is the effect of working longer - a valid point that is often overlooked. For one thing, low interest rates make SS benefits more valuable and thus delaying benefits more valuable. Currently, and for the last several years, real interest rates have been well below their long-run averages.
I take this to mean that a good bull market or series of bull markets throughout that 30 years of saving that 1% would make it more beneficial to have saved that 1% than work the 3-6 months longer. Accurate?
I think several people on the thread have this about right. First, if you enjoy your job work longer. If you don't hate your job, then as you approach when you intended to retire (I'm thinking within 5 years of your expected date) you need to consider the benefit of working slightly longer, particularly if you are otherwise somewhat short of reaching your targeted retirement income goal. What it doesn't mean is I plan on working to 75, so I don't have to save much per year for the next 30 years. Finally, if you hate your job, quit when you planned or sooner.

I take this to mean that a good bull market or series of bull markets throughout that 30 years of saving that 1% would make it more beneficial to have saved that 1% than work the 3-6 months longer. Accurate?
Of course, if the markets do well for many years you do well and if they perform poorly for many years you do not do well. But what I was referring to was real interest rates when you plan to retire. SS is set to deliver benefits at the long-term average of real bond returns of about 2.8%. When LT rates are well below 2.8%, as they are now at 0.90%, the benefit of working longer is greater, and conversely when LT rates are well above 2.8%, as they were around the turn of the century at about 4%, the benefit of working longer is less.

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.

Earl Lemongrab
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### Re: NYT Story on Importance of Working Just a Little Longer

I probably worked a year or two longer than necessary. I just wasn't ready. This past year I was.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

michaeljc70
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### Re: NYT Story on Importance of Working Just a Little Longer

CnC wrote:
Sun Jun 03, 2018 8:52 pm

What a useless and completely false story.

"Say you are 36 and plan on retiring in 30 years. You are already saving, but realize that you will need more money. You can increase your savings by 1 percent every year until you are 66, or extend your working life by three to six months. Those few extra months on the job are likely to raise your retirement income by the same amount as those 30 years of extra savings."

This is a bald faced lie that doesn't even come close to being factually correct. The math is so bad on that one I don't know how they could type it with a straight face.
I read some of the story and also thought the math was very bad. Are they assuming you keep your savings in a passbook account?

CULater
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### Re: The Power of Working Longer

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.
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

willthrill81
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Location: USA

### Re: The Power of Working Longer

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.
Yep. Working until death is actually the perfect solution to the entire savings, investment, and retirement problem.

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.

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

HIinvestor
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### Re: The Power of Working Longer

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.

CurlyDave
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### Re: The Power of Working Longer

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%.

flyingaway
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### Re: The Power of Working Longer

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.
Yep. Working until death is actually the perfect solution to the entire savings, investment, and retirement problem.
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.

Dottie57
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### Re: The Power of Working Longer

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.

dknightd
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### Re: The Power of Working Longer

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

CULater
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### Re: The Power of Working Longer

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

dknightd
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### Re: The Power of Working Longer

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

CyclingDuo
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### Re: The Power of Working Longer

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.

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.
"Everywhere is within walking distance if you have the time." ~ Steven Wright

NoHeat
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### Re: The Power of Working Longer

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.

dknightd
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### Re: The Power of Working Longer

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

CyclingDuo
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### Re: The Power of Working Longer

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:

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.
"Everywhere is within walking distance if you have the time." ~ Steven Wright

flyingaway
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### Re: The Power of Working Longer

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.)

balbrec2
Posts: 94
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### Re: The Power of Working Longer

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

willthrill81
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Location: USA

### Re: The Power of Working Longer

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.)

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

TallBoy29er
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### Re: The Power of Working Longer

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.

GCD
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### Re: The Power of Working Longer

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
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### Re: The Power of Working Longer

protagonist wrote:
Tue Jan 30, 2018 9:53 pm
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: 537
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### Re: The Power of Working Longer

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.

balbrec2
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### Retirement strategy?

https://www.msn.com/en-us/money/retirem ... li=BBnbfcN
Thoughts?

Dantes
Posts: 215
Joined: Wed Feb 25, 2015 6:38 pm

### Re: Retirement strategy?

This seems rather convoluted:

The authors show that, for each additional 1% you save in your retirement, increasing your investment performance by 1% for 30 years is equal to postponing your retirement by 0.4 months—not quite two weeks, in other words.
Are they are saying that the 1% increase in performance is applied only to the additional 1% of savings?

TwstdSista
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### Re: Retirement strategy?

Note that the article specifically excludes the "super wealthy" -- the less than 10% with a \$1M plus retirement portfolio....

It also does not address the very real possibility that one will be unable (for whatever reason) to work to full retirement age or longer.

jminv
Posts: 541
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### Re: Retirement strategy?

First off, it excludes 10% of the population.

Second, if I choose the investment return scenario where each additional 1% savings avoids five more months work at end of career then I would view additional savings as a way to take an earlier retirement. That's logical and not a great insight. Instead, the article is framed more around that savings doesn't make a big difference by focusing on the 1% number. The article's conclusion is don't worry about returns, just work longer. The article could easily have been framed in a positive fashion and titled save additional 20% and retire 100 months early. Or cut 20% of your expenses and retire so early etc.

These kind of articles are sort of dispiriting and encourage people to believe they can never retire because they are framed in a negative fashion. A person could read this article and agree with the conclusion: work forever and don't worry about saving more today.

AlohaJoe
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Location: Saigon, Vietnam

### Re: Retirement strategy?

balbrec2 wrote:
Mon Jul 02, 2018 5:32 am
https://www.msn.com/en-us/money/retirem ... li=BBnbfcN
Thoughts?
I have two thoughts.

The first one is this post violates forum policies:
We also require that you be considerate of our readers and:
refrain from posting naked links - all links should include an explanation or excerpt unless its meaning is clear from the context
Think of it this way: why should I click a link that some random person on the internet didn't think was important enough to type a single sentence about? You saved yourself some work but generated work for hundreds or thousands of your potential readers. What's more, if you really want discussion, posts always get more discussion if the original poster offers some kind of framing or questions or something. After all, we know that the vast majority of people don't click links & read articles; they just reply to whatever excerpts the original poster provides. (That's probably unfortunate but it is the reality of life on the internet.) To show what I mean, you could have reframed your post as something like:

"This article talks about the power of working longer. I've been thinking about working One More Year and this article has me half-convinced but I didn't really double check their math. Does the math hold up?"

My second thought is: the article has already been posted (twice) & discussed:

viewtopic.php?t=250878
viewtopic.php?t=238844

Bogleheads discussed the original paper back in January (98 posts) and then again in early June when the New York Times ran an article about it (28 more posts). I'm not saying we've exhausted all possible topics of conversation around the research but it might be worth digging through those other threads to see what interesting points were already made so they don't need to be made again.

balbrec2
Posts: 94
Joined: Mon Nov 13, 2017 3:03 pm

### Re: Retirement strategy?

AlohaJoe wrote:
Mon Jul 02, 2018 6:23 am
balbrec2 wrote:
Mon Jul 02, 2018 5:32 am
https://www.msn.com/en-us/money/retirem ... li=BBnbfcN
Thoughts?
I have two thoughts.

The first one is this post violates forum policies:
We also require that you be considerate of our readers and:
refrain from posting naked links - all links should include an explanation or excerpt unless its meaning is clear from the context
Think of it this way: why should I click a link that some random person on the internet didn't think was important enough to type a single sentence about? You saved yourself some work but generated work for hundreds or thousands of your potential readers. What's more, if you really want discussion, posts always get more discussion if the original poster offers some kind of framing or questions or something. After all, we know that the vast majority of people don't click links & read articles; they just reply to whatever excerpts the original poster provides. (That's probably unfortunate but it is the reality of life on the internet.) To show what I mean, you could have reframed your post as something like:

"This article talks about the power of working longer. I've been thinking about working One More Year and this article has me half-convinced but I didn't really double check their math. Does the math hold up?"

My second thought is: the article has already been posted (twice) & discussed:

viewtopic.php?t=250878
viewtopic.php?t=238844

Bogleheads discussed the original paper back in January (98 posts) and then again in early June when the New York Times ran an article about it (28 more posts). I'm not saying we've exhausted all possible topics of conversation around the research but it might be worth digging through those other threads to see what interesting points were already made so they don't need to be made again.
My apologies, I shall refrain from this sort of post going forward.

AlohaJoe
Posts: 3745
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Location: Saigon, Vietnam

### Re: Retirement strategy?

ResearchMed
Posts: 7189
Joined: Fri Dec 26, 2008 11:25 pm

### Re: Retirement strategy?

AlohaJoe wrote:
Mon Jul 02, 2018 9:41 am
Hopefully OP means she/he will continue to post, but will NOT post naked links.
Posting one's own comments would also be nice, but at least *something* so others know whether or not they are likely to want to bother with the link...

RM
This signature is a placebo. You are in the control group.

CurlyDave
Posts: 699
Joined: Thu Jul 28, 2016 11:37 am

### Re: Retirement strategy?

balbrec2 wrote:
Mon Jul 02, 2018 5:32 am
...Thoughts?
Well, despite the naked link, I recognized a mainstream publication and clicked through to read the article. The real takeaway is the stunning stupidity of the author. Figures don't lie, but real dummies figure.

My takeaway is that if I save diligently and get one percent or less return on my savings, saving more doesn't matter as much as working a little longer. True, it is, but it is also true that if I accept a low return on my savings, I am going to have a poverty-stricken retirement, unless I work for someplace with a huge pension plan. Very bluntly, the most likely outcome of a low rate of return on savings is a miserable end of life experience.

The whole idea of saving and investing is to leap into that upper 5% by getting a good return on our savings. IMHO, this is the major purpose of our website here.

And, the other way to look at those graphs is to say that the higher my rate of return on investments, the greater the likelihood that I can retire earlier.

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Contact:

### Re: Retirement strategy?

AlohaJoe wrote:
Mon Jul 02, 2018 6:23 am
...My second thought is: the article has already been posted (twice) & discussed:

viewtopic.php?t=250878
viewtopic.php?t=238844

Bogleheads discussed the original paper back in January (98 posts) and then again in early June when the New York Times ran an article about it (28 more posts). I'm not saying we've exhausted all possible topics of conversation around the research but it might be worth digging through those other threads to see what interesting points were already made so they don't need to be made again.
Thanks! I merged those discussions together and then merged balbrec2's thread into here. The combined thread is in the Investing - Theory, News & General forum.

(Thanks to the member who reported the post. One of the reasons is "Duplicate thread".)
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.

TheTimeLord
Posts: 5284
Joined: Fri Jul 26, 2013 2:05 pm

### Re: The Power of Working Longer

So far working a series of OMYs (I will be finishing my 4th December 1) has raised my projected retirement income over 40% (these are my estimates so it is fair to question the accuracy but I am likely on the conservative side). Of course not withdrawing money from my retirement accounts while the markets were booming was definitely a tail wind. That said I am not sure what makes our OMY contributions (saving plus not taking withdrawals because you still have a paycheck) a trickle in a river when OMY should account for at least 1 year of expenses (providing spending stays steady in retirement) and with 25x to 30x being a goal for most people I find it hard to believe an additional 3%-4% plus any additional savings should be classified as a trickle. Also, I have replaced almost all my zero and near zero income years in my SS benefit calculations with max years. Working longer is an individual decision but no one should deny that it can have a very positive affect on your income in retirement.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

willthrill81
Posts: 5734
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

### Re: The Power of Working Longer

I think that very few would dispute that working longer may be increase one's retirement portfolio/income due to
1) giving your capital more time to increase,
2) your ability to save and invest more, and
3) the reduction of your time in retirement and, consequently, your financial needs.

On the other hand, this also means that you're trading off guaranteed more time at work for the possibility of a better retirement. That's not an easy trade-off to make when you're considering the whole picture.

It's surprising, but 20% of American men age 65 don't survive to age 74. Keep that in mind when you consider whether it's worthwhile to keep working in order to pad a '30 year' retirement. It may be, and it may not. It's a very personal decision.
“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

TheTimeLord
Posts: 5284
Joined: Fri Jul 26, 2013 2:05 pm

### Re: The Power of Working Longer

willthrill81 wrote:
Mon Jul 02, 2018 4:10 pm
It's surprising, but 20% of American men age 65 don't survive to age 74. Keep that in mind when you consider whether it's worthwhile to keep working in order to pad a '30 year' retirement. It may be, and it may not. It's a very personal decision.
What I balance everyday is my concern that within 10-15 years of my retirement I won't be physically able to do many of the things I love to a level where I still enjoy them. And this is what drives me towards retirement, not my work. That said I am able to do these things now and in retirement in a much nicer way than I would have had I retired 4 years ago so net/net I am happy with my personal decision to date.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

willthrill81
Posts: 5734
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

### Re: The Power of Working Longer

TheTimeLord wrote:
Mon Jul 02, 2018 4:21 pm
willthrill81 wrote:
Mon Jul 02, 2018 4:10 pm
It's surprising, but 20% of American men age 65 don't survive to age 74. Keep that in mind when you consider whether it's worthwhile to keep working in order to pad a '30 year' retirement. It may be, and it may not. It's a very personal decision.
What I balance everyday is my concern that within 10-15 years of my retirement I won't be physically able to do many of the things I love to a level where I still enjoy them. And this is what drives me towards retirement, not my work. That said I am able to do these things now and in retirement in a much nicer way than I would have had I retired 4 years ago so net/net I am happy with my personal decision to date.
It looks like my father will finally call it quits from work just before turning 70. He's still healthy, but my father-in-law was very energetic and appeared healthy when he was diagnosed with kidney cancer at age 62. By 65, he was gone. For me, I want to take full advantage of the time that I'm given, and if 'longevity risk' rears its head, we are planning to do our best to deal with that, but that's a lesser risk in my view that working until 65 and then dying in a few years, wishing I had had time to do more with my life than be stuck at a job, even one that I like but is still a job.
“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

TheTimeLord
Posts: 5284
Joined: Fri Jul 26, 2013 2:05 pm

### Re: The Power of Working Longer

willthrill81 wrote:
Mon Jul 02, 2018 4:27 pm
TheTimeLord wrote:
Mon Jul 02, 2018 4:21 pm
willthrill81 wrote:
Mon Jul 02, 2018 4:10 pm
It's surprising, but 20% of American men age 65 don't survive to age 74. Keep that in mind when you consider whether it's worthwhile to keep working in order to pad a '30 year' retirement. It may be, and it may not. It's a very personal decision.
What I balance everyday is my concern that within 10-15 years of my retirement I won't be physically able to do many of the things I love to a level where I still enjoy them. And this is what drives me towards retirement, not my work. That said I am able to do these things now and in retirement in a much nicer way than I would have had I retired 4 years ago so net/net I am happy with my personal decision to date.
It looks like my father will finally call it quits from work just before turning 70. He's still healthy, but my father-in-law was very energetic and appeared healthy when he was diagnosed with kidney cancer at age 62. By 65, he was gone. For me, I want to take full advantage of the time that I'm given, and if 'longevity risk' rears its head, we are planning to do our best to deal with that, but that's a lesser risk in my view that working until 65 and then dying in a few years, wishing I had had time to do more with my life than be stuck at a job, even one that I like but is still a job.
I am far more fearful of a chronic debilitating condition than death, believing I will have more time for regret during the former than the latter.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

marcopolo
Posts: 1120
Joined: Sat Dec 03, 2016 10:22 am

### Re: The Power of Working Longer

willthrill81 wrote:
Mon Jul 02, 2018 4:10 pm
It's surprising, but 20% of American men age 65 don't survive to age 74. Keep that in mind when you consider whether it's worthwhile to keep working in order to pad a '30 year' retirement. It may be, and it may not. It's a very personal decision.
Thanks for this.

In our elusive pursuit of "safety" in our investment plans, we often forget this very important counter balance.
It is not just the very real risk of dying, but also of fewer years of good health.
Once in a while you get shown the light, in the strangest of places if you look at it right.

invst65
Posts: 644
Joined: Thu Nov 27, 2014 11:04 am

### Re: The Power of Working Longer

marcopolo wrote:
Mon Jul 02, 2018 4:36 pm
willthrill81 wrote:
Mon Jul 02, 2018 4:10 pm
It's surprising, but 20% of American men age 65 don't survive to age 74. Keep that in mind when you consider whether it's worthwhile to keep working in order to pad a '30 year' retirement. It may be, and it may not. It's a very personal decision.
Thanks for this.

In our elusive pursuit of "safety" in our investment plans, we often forget this very important counter balance.
It is not just the very real risk of dying, but also of fewer years of good health.
I had planned on retiring at 68 until my employer decided to retire me a year earlier. At first I was upset with the change in plans but after being retired for two years now I believe my employer did me a big favor and I would probably be better off if they had done it even sooner. The thing is you don't even realize what the mental and physical stress is doing to you until you are able to leave it behind. Sometimes I still have bad dreams about having to go back to work.

willthrill81
Posts: 5734
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

### Re: The Power of Working Longer

TheTimeLord wrote:
Mon Jul 02, 2018 4:30 pm
willthrill81 wrote:
Mon Jul 02, 2018 4:27 pm
TheTimeLord wrote:
Mon Jul 02, 2018 4:21 pm
willthrill81 wrote:
Mon Jul 02, 2018 4:10 pm
It's surprising, but 20% of American men age 65 don't survive to age 74. Keep that in mind when you consider whether it's worthwhile to keep working in order to pad a '30 year' retirement. It may be, and it may not. It's a very personal decision.
What I balance everyday is my concern that within 10-15 years of my retirement I won't be physically able to do many of the things I love to a level where I still enjoy them. And this is what drives me towards retirement, not my work. That said I am able to do these things now and in retirement in a much nicer way than I would have had I retired 4 years ago so net/net I am happy with my personal decision to date.
It looks like my father will finally call it quits from work just before turning 70. He's still healthy, but my father-in-law was very energetic and appeared healthy when he was diagnosed with kidney cancer at age 62. By 65, he was gone. For me, I want to take full advantage of the time that I'm given, and if 'longevity risk' rears its head, we are planning to do our best to deal with that, but that's a lesser risk in my view that working until 65 and then dying in a few years, wishing I had had time to do more with my life than be stuck at a job, even one that I like but is still a job.
I am far more fearful of a chronic debilitating condition than death, believing I will have more time for regret during the former than the latter.
My father-in-law had always dreamed of going to see the Grand Canyon. Yet shortly after his diagnosis, he was unable to travel far from home. That was a big regret for him. It is my intention to learn from that.
“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

TheTimeLord
Posts: 5284
Joined: Fri Jul 26, 2013 2:05 pm

### Re: The Power of Working Longer

willthrill81 wrote:
Mon Jul 02, 2018 5:13 pm
TheTimeLord wrote:
Mon Jul 02, 2018 4:30 pm
willthrill81 wrote:
Mon Jul 02, 2018 4:27 pm
TheTimeLord wrote:
Mon Jul 02, 2018 4:21 pm
willthrill81 wrote:
Mon Jul 02, 2018 4:10 pm
It's surprising, but 20% of American men age 65 don't survive to age 74. Keep that in mind when you consider whether it's worthwhile to keep working in order to pad a '30 year' retirement. It may be, and it may not. It's a very personal decision.
What I balance everyday is my concern that within 10-15 years of my retirement I won't be physically able to do many of the things I love to a level where I still enjoy them. And this is what drives me towards retirement, not my work. That said I am able to do these things now and in retirement in a much nicer way than I would have had I retired 4 years ago so net/net I am happy with my personal decision to date.
It looks like my father will finally call it quits from work just before turning 70. He's still healthy, but my father-in-law was very energetic and appeared healthy when he was diagnosed with kidney cancer at age 62. By 65, he was gone. For me, I want to take full advantage of the time that I'm given, and if 'longevity risk' rears its head, we are planning to do our best to deal with that, but that's a lesser risk in my view that working until 65 and then dying in a few years, wishing I had had time to do more with my life than be stuck at a job, even one that I like but is still a job.
I am far more fearful of a chronic debilitating condition than death, believing I will have more time for regret during the former than the latter.
My father-in-law had always dreamed of going to see the Grand Canyon. Yet shortly after his diagnosis, he was unable to travel far from home. That was a big regret for him. It is my intention to learn from that.
I have been fortunate enough to have traveled the world when I was younger, so I don't really have any destinations like that. I have things I want to do, but none of them would be a source of great regret if I am unable to mark it off the list. At this point in life relationships are more meaningful me than adventures. That doesn't mean I don't plan to travel in retirement, because I do, it just means I am more focused on who I will be traveling with than where I am traveling.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

CyclingDuo
Posts: 1724
Joined: Fri Jan 06, 2017 9:07 am

### Re: The Power of Working Longer

willthrill81 wrote:
Mon Jul 02, 2018 4:27 pm
It looks like my father will finally call it quits from work just before turning 70. He's still healthy, but my father-in-law was very energetic and appeared healthy when he was diagnosed with kidney cancer at age 62. By 65, he was gone. For me, I want to take full advantage of the time that I'm given, and if 'longevity risk' rears its head, we are planning to do our best to deal with that, but that's a lesser risk in my view that working until 65 and then dying in a few years, wishing I had had time to do more with my life than be stuck at a job, even one that I like but is still a job.
You've got the perfect job with summers off to travel and enjoy tons of experiences with your family while you can, are young, energetic and able. Are you able to take advantage of doing that?

I look back at my years from ages 28 - 46 with kids in the house: lived in Europe and traveled during the 2 months off I had every summer (a month one summer in France alone in the mini-van, along with spending time in England, Spain, Italy, Poland, Germany, Austria, Switzerland, Czech Republic, Slovakia, etc...). Moved back stateside, and traveled to Canada along with domestic travels to Niagara Falls, NYC, Washington D.C., San Francisco, Vail, Breckenridge, Yellowstone, Grand Canyon, Tahoe, Black Hills, Mackinac Island, Wisconsin Dells, and many other destinations for sporting events (St. Louis, Phoenix, Minneapolis, Milwaukee, Chicago, Kansas City, Oakland. Enough that I have no need to tear up when I hear Harry Chapin's Cats in the Cradle.

Jobs in academia allow for a lot of summertime opportunities, so I hope you are able to take advantage of it with your family. We only get one journey. No need to wait until retirement...

"Everywhere is within walking distance if you have the time." ~ Steven Wright

willthrill81
Posts: 5734
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

### Re: The Power of Working Longer

CyclingDuo wrote:
Tue Jul 03, 2018 9:38 am
willthrill81 wrote:
Mon Jul 02, 2018 4:27 pm
It looks like my father will finally call it quits from work just before turning 70. He's still healthy, but my father-in-law was very energetic and appeared healthy when he was diagnosed with kidney cancer at age 62. By 65, he was gone. For me, I want to take full advantage of the time that I'm given, and if 'longevity risk' rears its head, we are planning to do our best to deal with that, but that's a lesser risk in my view that working until 65 and then dying in a few years, wishing I had had time to do more with my life than be stuck at a job, even one that I like but is still a job.
You've got the perfect job with summers off to travel and enjoy tons of experiences with your family while you can, are young, energetic and able. Are you able to take advantage of doing that?

I look back at my years from ages 28 - 46 with kids in the house: lived in Europe and traveled during the 2 months off I had every summer (a month one summer in France alone in the mini-van, along with spending time in England, Spain, Italy, Poland, Germany, Austria, Switzerland, Czech Republic, Slovakia, etc...). Moved back stateside, and traveled to Canada along with domestic travels to Niagara Falls, NYC, Washington D.C., San Francisco, Vail, Breckenridge, Yellowstone, Grand Canyon, Tahoe, Black Hills, Mackinac Island, Wisconsin Dells, and many other destinations for sporting events (St. Louis, Phoenix, Minneapolis, Milwaukee, Chicago, Kansas City, Oakland. Enough that I have no need to tear up when I hear Harry Chapin's Cats in the Cradle.

Jobs in academia allow for a lot of summertime opportunities, so I hope you are able to take advantage of it with your family. We only get one journey. No need to wait until retirement...

Yes, we travel quite a lot, though it's been reduced the last couple of years with the birth of our daughter. She's traveled with us a lot already though (e.g. 4k mile road trip through CA and OR, week in HI, going to Disney World for the second time next year), and in a couple more years, we'll do a lot more road trips. Once she's around 10, we'll take her with us on international trips. New Zealand is high on our list of places to see.

A big part of the reason I pursued a career in academia was to have time to spend with my family. And that has certainly happened. But even so, I'm still planning on an early retirement, very likely no later than 55 and perhaps earlier. The only disadvantage of this career is that I have very little flexibility in determining when we can travel. When classes are underway, a long weekend is about the best we can do. I do plan on taking a sabbatical at some point so we can see New England and drive down the Blue Ridge Parkway in the fall.

“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

afan
Posts: 3840
Joined: Sun Jul 25, 2010 4:01 pm

### Re: The Power of Working Longer

With all due respect to those criticizing the study, assuming 100% annuitization is the right way to do it. They are trying to predict a lifetime income stream available from a given level of assets. The way to get a CERTAIN income from a given networth is to convert it all to annuities. The alternative is to reproduce what the insurance companies already do- make projections about investment returns and how much they can reliably pay. But insurance companies also have a source of income that individuals do not. Insurance companies do not care whether an individual ends up taking more money out than they put in to an annuity, after accounting for distributions and investment returns. Insurance companies only care about the returns to a large number of annuities they may sell.

For the purposes of this study, the authors could have projected a range of annual incomes possible based on a balanced portfolio and some assumptions about real investment returns. This would have left any conclusions at the mercy about whatever they assumed to be these returns. But this article was not about investment returns. It was about CERTAIN income. The way you get to certain income is annuities.

Same argument about pensions. Most pensions become more valuable as one works longer. By extending the working life one has more years of higher income. In effect, a pension is a deal in which the employer has created an annuity for the retiree, bypassing the step of putting money into an account that the retiree can use to buy an annuity.

Working longer definitely makes for more certainty in retirement:

If someone retires at 65 and lives to 95 then their assets at 65 have to support them for 30 years. This is true whether all of their assets are in one account, all are in pensions, or somewhere in between.

If that person works to age 75, saving a year's worth of living expenses each year and lives to 95 then they reduce by 2/3 what their assets at 65 need to support. The decade from 65 to 75 draws no income from assets because the person is still working. The decade from 75-85 is supported by the savings from age 65 to 75. Only at age 85 does the person start drawing on the money accumulated up to 65. Assuming no real return in investments, this money now has to support 10 years of retirement, rather than 30.

I plan to work as long as my ability and demand for my services permit. I passed a threshold for enough to retire years ago. Since then I have been increasing my margin of safety. I don't know how bad the worst plausible economic experience during my lifetime may be. It certainly could be worse than the worst so far in US history. How about a few years of a Venezuela-style meltdown? How about something worse than that? Throughout history countries have been hit by some terrible financial times. The more money one has going in, the better off they are.

I don't plan to spend a lot of time traveling during retirement. Not unless I am forced to migrate as a refugee. Given a choice, the last business trip I take will be the last time I get on an airplane. And I have no intention of doing long distance driving.

I don't particularly like my job, but I absolutely LOVE getting paid.
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

CyclingDuo
Posts: 1724
Joined: Fri Jan 06, 2017 9:07 am

### Re: The Power of Working Longer

willthrill81 wrote:
Tue Jul 03, 2018 11:17 am
Yes, we travel quite a lot, though it's been reduced the last couple of years with the birth of our daughter. She's traveled with us a lot already though (e.g. 4k mile road trip through CA and OR, week in HI, going to Disney World for the second time next year), and in a couple more years, we'll do a lot more road trips. Once she's around 10, we'll take her with us on international trips. New Zealand is high on our list of places to see.

A big part of the reason I pursued a career in academia was to have time to spend with my family. And that has certainly happened. But even so, I'm still planning on an early retirement, very likely no later than 55 and perhaps earlier. The only disadvantage of this career is that I have very little flexibility in determining when we can travel. When classes are underway, a long weekend is about the best we can do. I do plan on taking a sabbatical at some point so we can see New England and drive down the Blue Ridge Parkway in the fall.
Good, you are doing it right - in our opinion.

Let's see, where I've been working the past 15 years, if I add up Fall Break (4 days), Spring Break (8 days), Thanksgiving Break (4 days), and Christmas/Holidays Break (29 days), it equals an additional 45 days of travel opportunity time.

That being said, your target of 55 is a good one.
"Everywhere is within walking distance if you have the time." ~ Steven Wright

jj45
Posts: 23
Joined: Tue Jan 02, 2018 4:02 pm

### Re: The Power of Working Longer

willthrill81 wrote:
Sun Jun 10, 2018 11:08 pm
Take a look at the graph below. Those life expectancy lines are surprisingly steep.
Do any retirement calculators take into account life expectancy? What I have seen is pick a time frame, say 30 years, and calculate the probability of portfolio survival. A 65 year old man only has a 7% chance of living to 95, so why pick a withdrawal rate pinned to 30 years? Just guessing, I would think that if you took longevity into account and even if you wanted a 99% success rate, the withdrawal rate would be higher than 4%. The math seems like it would be straightforward for someone who knows probabilities well, and the data is out there. Any leads?