The following is in response to Joe Tomlinson’s article, We Need a Bold Solution to Fix the Retirement System, which appeared last week:
Dear Editor,
Retirement planning typically assumes a retirement age of 65. How about considering the view that if you can't afford to retire, then you keep working? How does increased life expectancy play into the equation?
When the normal retirement age of 65 was implemented back in the 1930s, the life expectancy (at least for males) was around 68. Now that life expectancy is approximately 82, is it reasonable to assume that 65 is the appropriate retirement age for somebody who has failed to save sufficient assets to last up to 25 years (and maybe longer)? Of course not.
We need to consider the notion that if you don't have sufficient assets to retire, then you can't retire. I really would like to see government stay out of this issue.
This is about human history and the issues and costs imposed on us by increasing life expectancies. Some number of people will drop out of the work force due to health or other reasons beyond their control. They are in a different group because they require a different solution.
There are a bunch of healthy people who have the expectation of retirement at age 55-65 as if it is an entitlement. If they are financially prepared - great! Go ahead and retire. If not, then they should expect to work longer.
I'm all for solutions that help people who can't help themselves – and that is a group of people who would have to be identified. But until the solutions take into account the additional cost of living to age 90 or 95 (with a retirement period of 20 to 25 years), then you are missing the big picture. Very few people can save that much money. If you don't have sufficient assets to retire, then you need to keep working. We cannot tax others enough to provide for retirement for everybody that goes 20-25 years.
Matt Luoma
Joe Tomlinson replies:
I realize we come at this from different perspectives. This may be more a difference of opinion about political philosophy than about facts.
I don't agree with the philosophy these retirement issues should be left entirely to the private sector. The sad reality is that people often cannot work as long as they need to. I'm aware of various studies showing that people often retire before they intend to due to disability, family circumstances, being forced out of the labor market and other reasons. This MetLife study sheds some light on why people retire and when.
We are seeing people delay retirement when they are able to do so, but that is not an option for everyone.
There is a role for government in helping people save more for retirement, and mandating the availability of low-cost investment options. We need to look for creative ways to share the retirement risk and not put the entire burden on employees. The solution of leaving it to the private sector means that we will have more and more old people living in poverty and depending on the government.
We need to find more ways for people to be productive, when possible, beyond age 65, although perhaps at a declining pace. I'm not sure who takes the lead with this. Working careers have tended to involve retiring at peak salary, and I'm not aware of many companies that are interested in hiring older workers.
It's unnatural to save enough, even for a 20-year retirement (given the pressures to consume and the lack of any increase in the median real wage over the past 40 years), so it's worth thinking about things that might be done to improve incentives to save and/or make the saving more productive (less burdened by investment expenses).
I'm not an optimist about how this is all going to play out.
