16 to 61: A Reflection on Our Working Life

 

I recently started a position as a retirement analyst with an agency that, among many other services, provides pension benefit calculations for state and county employees anticipating retirement within six months of their application. What was so striking as I forensically parsed through the data to accurately gather every service credit, plan code, accrued leave and fiscal year to determine their average final compensation, is that this information was not a cursory glance at a culmination of employment but a summary of a purposeful career serving their respective organization.

Most of the applicants had reached the required age for full retirement without deductions, which is 62.  I began to think about the decades between the time that we are legally eligible to become licensed to operate a motor vehicle (16) and the age (61) before we become eligible to receive a portion of the soon to be endangered Social Security benefits.

The common narrative concerning our income during retirement is that it will decrease.  While not an optimistic projection, it’s apparently become palatable because of the assumption that your expenses will also decrease or be less than they were during your working career.  So here’s the rub, as I continued to enthusiastically analyze the data to determine the post-work income of these pensioners, I realized that the emphasis on investing a portion of your salary from the time you get your first check until you notify your employer’s HR department of your pending retirement date, seems to have been a casualty of either benign neglect or the cost of “ life be lifeing” eating up the vast majority of people’s earnings.

 According to an article from One Main Financial, the average person spends about 3.3 million dollars in their lifetime. I will qualify these numbers as being predicated on location, income and lifestyle. What I mean is that in many areas of the country you can, by default, be a resident of what is called a VHCOL (Very High Cost of Living) location. 

CATEGORY	Cost
Housing	$1,486,160
Car	$470,000
Children	$467,220
Health Insurance	$290,016
Retirement/401k	$195,754
Renovations	$190,429
Furniture	$61,630
Education	$42,960
Vacations	$118,000
Wedding	$34,000

 

Oddly enough, the article did not include the costs of food. It might be a bit disconcerting to realize that the multi-million-dollar lottery ticket you were hoping for appeared in the form of an annuitized income over the course of your professional career.  So, the question of who wants to be a millionaire has been asked and answered but not necessarily as you anticipated.

The class of 1977 represented one of the largest groups of citizens turning 62 in our nation’s history.  According to the Federal Reserve Survey of Consumer Finances, only 3.2% of retirees have over one million dollars in their retirement accounts.  There is a plethora of reasons that folks make a declaration of independence from the work force yet are not adequately funded based on conventional rules of thumb like the 70% Rule, which states that you’ll need 70% of your annual pre-retirement income to live “comfortably.”

These guidelines, I assume, factor in variables like the daily battle of what I call the tyranny of now, meaning that while we know we need to put something away for our future selves, old adages like tomorrow’s not promised and the immediate desire to have, experience or consume make the redirection of assets for retirement a dicey proposition.  The other economic reality is that a vast majority of working-class folks’ income is barely keeping up with the invisible tax of inflation so saving and investing is a luxury. 

The four pillars of a middle-class standard of living are: Quality Housing, Reliable Transportation, Nourishing groceries, Adequate Insurance.  Noticeably absent, vacations, and other leisure activities.  The fastest growing segment of the U.S. population is people 85 and older, a segment that is expected to triple by 2060.  Why do I bring this up?  There was a term coined years ago called the Sandwich generation.  These are people who find themselves responsible for their children and directly or in an ancillary way one or both of their parents.  While our nation’s agrarian roots made multi-generational living common, the Industrial Age and its attendant advances like urbanization and transportation shifted this dynamic to become less common.

No one told us when we were teenagers that our superhero parents would one day morph into a geriatric population that required us to make them a part of the financial algorithm that would determine our post-career lives.  Those 45 years of earning, spending, saving and hopefully investing would provide a repository for us to draw from that would allow us as retirees to explore life away from the cubicle, classroom, office or field. From teenager to well-aged teen, we have to navigate financial obligations while simultaneously cultivating and compounding seeds to become ideally multi-generational oaks. 

The projected benefit estimates for people that had dedicated decades to a noble cause gave me pause because even being beneficiaries of a defined benefit plan, an option that has fallen dramatically out of favor in the private sector, they still were going to have to have established other retirement accounts to have a semblance of the standard of living they had before they pondered and ultimately submitted their requests to terminate their employment.   

My deepest hope is that any of you between these goal post ages are strategically and diligently funding your future. It won’t be crowdfunded, and you don’t get a do over.