People are working past the traditional retirement age.
The one thing we all have in common is that we grow older. As we live longer, if we’re lucky, we’ll enter our golden years with health and enough wealth to enjoy retirement. The problem is that there are now many roadblocks that didn’t exist even a year ago. Record-high inflation, rising interest rates and the costs of everything, from food to gas to apartment rentals and home prices, create the palpable fear of outliving your savings.
During the pandemic and following its aftermath, Baby Boomers opted out of the job market. Some made enough money during the ebullient 2020 to early 2022 on their investments and appreciating value of their homes. Feeling flush from the wealth effect, they elected to retire earlier than they had previously anticipated, the New York Times reported. Some older workers lost their jobs, were unable to find meaningful employment and left the labor force—not of their own desire. Long COVID took a toll on the health of senior workers, leading to their exit from the labor force and applying for long-term disability payments.
Barron’s reported on a study conducted by Voya Cares, focusing on “employment extenders,” the people working past the traditional retirement age. The majority self-reported that they continue to work because they want or have to. Many of this cohort lack sufficient funds to leave the labor force. More than 40% of the respondents said they are working because they need the money to cover current expenses, and 92% of the employment extenders need more money to retire.
Needing To Work Into Your 70s
In 2021, the Bureau of Labor Statistics projected that the number of labor participants 75 years or older is expected to grow by 96.5% by 2030. This was before the late 2022 and early 2023 economic downturn and substantial increase in the cost of living.
Most of this fastest-growing segment of the labor market—employment extenders—indicates they have not sufficiently saved enough money for a respectable retirement. According to the study, seniors older than 62 bear the brunt of the largest increase in student loan debt. This includes assuming financial responsibility for their children's and grandchildren’s college tuition loans. Around 60% of respondents say they have less than $500,000 in savings, and about 30% reported that they’ve only saved $100,000.
The high costs of medical care, nursing aids and moving to a nursing home, and the possibility of becoming physically incapable of working or caring for a loved one can become a financial nightmare. The costs of care are high, with “the average cost of a home health aide topping $5,000 a month in 2021, adult daycare close to $1,700 per month, an apartment in an assisted living facility $4,500 and a private room in a skilled nursing facility was over $9,000 per month,” the study found. You also have to worry about exorbitant healthcare costs. If you are diagnosed with a severe illness like cancer, you run the risk of going bankrupt or losing a big chunk of your hard-earned savings in a short period.
Pushed Out Of Work
Many seasoned workers have found themselves between jobs. I’ve spoken and communicated with several dozen people who are 40 years of age and older, and they’ve said that it's getting nearly impossible to find a new role at the level and compensation that they previously earned. As months go by, many of them realize that searching for a new job is futile, and throw in the towel.
According to research from the University of Chicago, “the pandemic has derailed the finances and careers of individuals of all ages” and wreaked havoc on older people—particularly those who are 50 years of age and older.
A 2022 study from the Schwartz Center for Economics at the New School showed that “many older workers did not leave their jobs voluntarily but got pushed out of the labor force” during the pandemic.
The retired population in America—between ages 55 and 74—has boomed since March 2020. A lot of this was by force—not choice. More than 1 million people in this demographic left the job market. The report found that the number of those who retired involuntarily a year after losing a job was 10 times higher than in pre-pandemic times. The study indicates that workers didn’t leave the job market because of the Great Resignation.
What’s worse is many older workers that lost jobs during the pandemic won’t be back. To add insult to injury, many older people lack the money to sustain themselves in retirement, especially as life expectancy has increased. The Federal Reserve Bank reports roughly 44% of Americans say their retirement savings are not on track, and 25% aren’t financially protected with pensions or sufficient retirement savings.
Affected By Ageism
If you check out the career sites of major corporations, you’ll be greeted with fresh, shiny and happy faces of 23 to 33-year-olds. When you go to tech, startup and “cool” companies, the young staffers are wearing beanies, jeans, T-shirts and hoodies. Once in a while, there will be a token, gray-haired person.
A significant way for businesses to save money and cut costs is to eliminate middle management. These are the 40-and-up group of folks. Roles are juniorized and middle managers are squeezed out. This means that mid-to-senior level jobs are eliminated and replaced with roles that only require three to five years of experience. You’ll notice the proliferation of job descriptions that only ask for candidates with a couple of years of experience, and the titles are at associate or analyst levels.
In an earnings call, Meta CEO Mark Zuckerberg pointed out the proliferation of managers within the organization, claiming it creates unnecessary bloat and spiraling costs. Zuckerberg called out the inefficiencies within the large social media platform, which is also happening at other large tech companies, stating, “I don’t think you want a management structure that’s just managers managing managers, managing managers, managing managers, managing the people who are doing the work.”
There is also an unconscious bias and sometimes not-so-hidden view that experienced workers will come aboard and want to take charge immediately. They’ll claim that they have all of the answers, as they’ve been working in the field for 30-plus years and boss the younger workers around.
It is said that people want to work with people who look like them. Young managers may be uncomfortable with older workers, as they feel they don't speak the same language, dress similarly, share the same sensibilities and believe they are out of touch with current trends.
Start Planning Now
Since we all hope to reach this age demographic one day, you need to take action right now. Begin with creating a solid plan to save as much money as possible. Seek out a professional financial advisor. You will have to defer current gratification for the future. This entails fewer vacations, a smaller home and avoiding expensive luxury automobiles and other extravagances.
CNBC offered advice to people worried about outliving their savings, saying, “To figure out how much money you need to save before you can retire, you’ll want first to estimate how much you’ll spend each year in retirement. Consider costs, like rent or mortgage payments, healthcare and long-term care costs, groceries, transportation, travel expenses and pet care (if you plan to have a pet).”
Even if you save a lot of money, there will be big risks that could crush your plans. Inflation eats away at your savings. Stay away from meme stocks and avoid following the crowd chasing hot stock tips or pumping up cryptocurrencies that you don’t possess any knowledge about and didn’t conduct any due diligence. You have to factor in where your money is stored. If it’s in the stock market, your nest egg could crack if there is another financial crisis. If it’s in the bank, you’re only getting about 1%, but it is starting to rise higher.
In addition to navigating and managing your career, you must intelligently plan for your future. The younger you start, the better. You could have a fantastic job and be highly compensated, but if you're not smart about your future, all of your hard work is for nothing.
When you graduate college, live at home longer to save as much as possible early on. Move to a lower-cost place that you can rent or buy more cheaply. Enlist roommates to help break up the costs of your home. Save as much money as possible. Put money into your company’s 401(k) plan, especially if they offer matching. Make sure you’re aware of a potential spouse's debt level and earning potential before you get married. Try to develop alternative financial plans that will earn you an income in old age, in case something goes wrong.
Create multiple income streams that will work for you when you aren’t holding down a job that provides a steady paycheck. Recognize the cold fact that circumstances change quickly, and you always need to be prepared for the worst-case scenario.
