June 13, 2013
Consider How Long You Might Live After Retirement
You might live a long time even before considering the approaching biotech revolution. 10% of 65 year olds today will reach 95 years old. I think this is an overly conservative estimate. It is time to rethink career trajectories.
And with rising life expectancies, many people will have a lot of time: the average 65-year-old woman today can be expected to live to 86, a man to 84. One out of 10 people who are 65 today will live past 95, according to projections from the Social Security Administration.
For that 1 in 10 of 65 year olds who will live 30+ years that takes them to 2043. Imagine how radically the world will change by then. These figures do not yet reflect the impacts of coming rejuvenation therapies. Anyone who is going to live thru the next 30 years will witness the development of gene therapies, cell therapies, and tissue engineering that will enable the growth of replacement organs.
Already debt loads in retirees are rising. When they find themselves living longer their financial situations will become far worse. People need to account for this decades in advance.
It is easy to find news stories of people in their 50s and 60s unexpectedly finding themselves either unemployed or severely downshifted in their earnings power. Their skills have depreciated in value due to careers in declining ndustries, automation, and great changes in what skills are needed in many occupations. People laid off late in their careers take large pay cuts if they can find a new job. Yet rising life expectancies (with faster rises coming) bring the need to work longer and save more.
Consider the 45 year olds of today. In 2033 they'll hit 65. Surely their life expectancy at 65 will be much higher than a 65 year old of today. They'll enter old age with the next 20 years of biotechnological advances in treatments. Stem cell therapies will be common place by then. So the rate of aging should slow considerably and life expectancies will rise faster than the past trend.
What does this mean for career trajectories? You need to adjust your career path so that you will not decline in market value in your 50s and early 60s. Are you in your 40s or 50s and see that your industry or occupation faces worse times in the future? Does it seem plausible that automation will cut demand for people in your position? Lengthen your time horizon and invest in your career development. Your working years will probably last much longer than you expect. Aim to make career changes that can put you on a career arc that ensure you substantial market value well into your 70s.
Randall Parker, 2013 June 13 10:22 PM
Thank you for posting this topic as it is a very important problem. No disrespect, but your suggestions are simply not possible for the vast majority of people. Based on the research I have done on this subject the norm for private employers is to get rid of older workers(50+ years old) who are costly due higher wages and healthcare costs and replace them with younger workers who can be paid much lower wages and don't have high healthcare costs. Lets assume I am correct here and you get fired at 50 for said reasons, how are you to restore your market value? You can't! Even if you are driven and intelligent enough to obtain new knowledge and skills that have market value you are competing against both younger workers who are healthier and are willing to work for less and you are competing with all of the other older workers who being fired just like you. If this isn't problem enough then the final nail in the coffin for older workers and younger alike is automation and AI. If you expect science and technology to progress to the point where gene therapies, cell therapies, and tissue engineering are available to the masses then its logical to expect current trends in automation and AI to continue as well. If this is the case the the vast majority of work currently done by humans will be able to be completed by machines. If you talk to people today who work in science, technology, engineering and math its very hard to get a high income job even with graduate level education. Imagine if millions more people tried to have a career in STEM. In our current economic system that simply would not work.
if all possible realities that can happen,are indeed happening at the same time,what are the consequences for us?
Maybe the chief focus should not be on maintaining the high income, but reducing flippant expenses or kill off big expenses so that income needs or even living standard needs in older age are minimal. In the US, the biggest cost is usually housing, so eliminate one's mortgage by 60, and retirement or surviving downsizing in one's late 50s, should be easy. Stay in shape and watch what you eat, and you can stay away from maintenance medications that rack up the bills. It's a world of difference between no mortgage and zero to minimal meds vs. a $1000 mortgage nugget + daily cholesterol and BP meds.
When reading this site, I sometimes chuckle because you'll post something on Parapundit that makes me think the Futurepundit post has no chance of happening. Some of this tech doesn't reconcile with a crisis like peak oil. Some of these paid for options don't reconcile with an increasingly powerful, hell bent on equality, progressive power system. Will society get dumbed down so much that we lose a critical mass of innovators and scientists prior to the upgrade in AI and automation? I hope Asia can rise up to make up for this, but I don't view the world as a zero sum game, so ther's always the potential for a dark age that will throw these future cool possibilities down the drain.
So, you work 45 years and then live on another 22 1/2 years. How much of your gross income should you save for retirement?
Assuming that the perpetual growth machine comes to a halt (as it must one day), and your savings accrue no interest over and above inflation, then you need to save half your gross income to provide for your retirement. It needs to be gross income as pensions are taxed too.
That, clearly, isn't going to happen.
It could be argued, of course, that one's outgoings during retirement will be substantially less than in one's working years, but given the evidence above, that might well be an unrealistic assumption.
The government could vastly reduce spending on insanely expensive healthcare procedures for the elderly, while making hospitals subjectively appear to be much more pleasant.
To maintain social cohesion during the great transitions of the 21st century, we must to establish the guaranteed minimum income.
Bubba's point about over 50 workers is valid for the public sector.
There's a way around it. Become a public union employee. Even if your competence decreases after 50 or you're tired of being productive, no problem. It's nearly impossible to get fired. You will have a superior health care plan and unlike all those laboring at risk and on merit in the dreaded private sector, you will retire with that platinum prize, the defined benefit program. You retire earlier than the private sector taxpayer drones and your retirement will grow faster than inflation. No 401K market risk for you. Politicians' re-election depends on you being pleased with your largesse so they'll keep the benefits coming.
Necessity is the mother of invention. Not everyone can invent. But to act you must first recognize the necessity. I am arguing for the necessity to act.
I agree the problems you describe exist. Yet I know talented people who are making lots of money in their 50s and 60s. Why? They tried harder, learned more, noved to where the most opportunities exist, were basically much more nimble.
I realize this is hard. I realize not everyone can do what they need to do to stay employed and productive in their 50s and 60s. But some people have the capacity to do so if they change their career arcs. I'm talking to those people. Even some of the people who can't maintain their earning power into their 50s can at least slow their descent.
There's an argument here for finding ways to run your own business. Say, open a restaurant chain franchise or some form of service business.
Some people are basically out of luck. But not everyone is.
People must work longer because, yes, they can't save enough in 45 years to live for 22 or possibly even 30 years. People should aim to stay employed past the age of 70. 5 more years of saving rather than pulling down savings would make the needed difference.
We can not expect the political system to improve. More likely: the Western governments will do even more than lowers average per capita incomes. We can not
Yes, by all means, lower your living standard decades before you retire. But that is not sufficient. You should also need to save enough money so you can afford rejuvenation therapies in your old age. The early therapies will be very expensive. But they'll be the difference between life death for those who can afford them.
Therefore I think people need to pursue career arcs that cause their incomes to peak later and to slow the rate of income decline in later career stages.
What I'm advocating is harder. But since I think my average reader has an IQ well above 100 my advice can be followed by most of my readers to some extent. It depends on how much they are willing to make changes and take on extra work and learning tasks, to make job changes, move between cities, and the like. Working in a declining industry in a declining region? Time to move. Skills becoming obsolete? Time to start learning new ones.
I do not expect many to heed my call. But some will hear and change their thinking as a result.
"In our current global economy the explicit message is that it's the worker's job to figure out how best to adapt to the "needs" of our rapidly changing world.
In other words, we serve the gods of commerce and the deities of profit.
An alternative point of view asks how the systems we have created can better serve us, instead of us serving them.
But that would mean a massive reconfiguration of power and control in our world, specifically redistribution from those who have the most to those who don't.
The apologists for the status quo call that theft.
I suggest that we redefine the word theft to describe what the corporate overlords are doing to their workers: Making people work harder for less money while your profits and portfolios grow is theft. Gaming the system so you don't have to pay benefits is theft. Moving your corporate headquarters to the Cayman Islands so you can avoid paying taxes is theft.
A fair number of the most powerful and affluent people in this world are stealing from the rest of us. Let's call it what it is.
And stop blaming workers for being unemployed and poor."
There is such a thing as an "immediate annuity". I grant you that most people couldn't afford a very big one, and the ones that can are usually better off investing in the stock market, but, it's the direct answer to your question.