Reject the Assertion You’ll Work Longer than Your Parents

College graduation season will be here in no time. Graduates and their families will celebrate at an uplifting commencement ceremony, complete with speeches by inspirational alumni, business leaders and political figures, followed by a triumphant dinner at Applebees.

Business Insider and other Twitter feeds will surely remind us that Steve Jobs gave a cool commencement speech at Stanford once.

Commencement means beginning, as in beginning life’s journey into the real world after a thorough education. It’s a time for dreaming big. If you’re a parent or relative of a new grad, make sure to remind them of that.

Remind them the path is any way they choose, and not necessarily the one that is expected of them.

Then remind yourself that any day can be a commencement. You can change your priorities and goals in an instant if you are unhappy.

Pessimism in the Media

Unfortunately during this time of the year, we need to brace ourselves for the media to shit on aspirations with their annual ominous declaration; that today’s college graduates are destined to work later into their lives than their parents. The reasons are familiar:

  • Crippling student loans are a ball and chain delaying the wealth building snowball
  • Better life expectancy means new college grads will live longer, thus needing more money at retirement
  • The job market sucks, and has sucked for the last ten years
  • Older workers are still broke so they aren’t retiring, clinging to jobs instead of bequeathing them to young workers
  • Pensions don’t exist anymore; the remaining ones are doomed

Here’s an article from 2013 about a study done by Nerd Wallet, stating that most of today’s graduates should expect to work until their mid-70’s, mainly due to student loans. In fact, they suggest that most will work 12 years longer than today’s average retirement age. Here’s a quote from Nerd Wallet:

Currently, the average retirement age is 61. But for most of today’s college grads, the realistic retirement age will be closer to their mid-70s. Given an average life expectancy of 84, this will leave only 10-12 years for people to spend in retirement. The main reason for this is that although the median college graduate leaves with a seemingly manageable $23,300 debt load, 7% of a student’s earnings go toward yearly loan payments of $2,858 for the first ten years of his or her career. This prevents any meaningful contributions toward retirement.

So they’re saying, for a 22-year-old graduating this May, it will take them 50 years to retire because they have $23,300 in student loans?

Sure, they use a lot of data to back up their statements, but a big fault is they assume it will take young workers ten years to pay off $23,300 in debt, which is an unlikelihood.

That’s a minimum payment of $238 per month for ten years*, as if they can’t find any more money to put into their 401k’s over that time. The article offers some meager suggestions at the end to avoid the fate of a 50-year career, such as investing in 401k’s and index funds. But the article doesn’t say much about hustling more or spending less.

Then the US News piece ends on this quote for the middle-aged among us:

I would say that somebody 45 today is going to retire later than their parents just because of the decreased prevalence of pensions, the uncertain future of social security, longer life spans, the higher cost of health care, and anemic rates of retirement savings… This is not something that’s confined to millennials by any means.

Here’s a similar study in the U.K. by insurance firm LV=, picked up by The Mirror and other financial websites. This study suggests new workers will retire seven years later than their grandparents. And 23% of today’s new workers will continue in the workforce well into their 70’s. They mostly blame the decline in pensions.

Today I’m writing to remind you that the assertion that you’ll work longer than previous generations, no matter what age you are today, is preposterous. You will not work longer than your parents and grandparents, as long as you set a goal to retire before them. This especially applies to recent grads, but anyone who sets their mind to it can stop working on their own terms, not the media’s.

* The study uses a standard loan repayment plan of ten years and average yearly loan repayment of $2,858. From this information I calculate they are using a 4.2% annual interest rate on the student loans.

You Won’t Work Longer than your Parents

My goal to retire before my Dad is not going to be easy. But I’m not going to submit to statistics and claims that say I’m more likely to work longer than him because the numbers are challenging.

So I’m briefly going to debunk some of these common assertions that will supposedly keep us all working into our 70’s.

Crippling Student Loans

Yes, the cost of college is a burden. I was lucky that my parents covered my tuition and it gave me a real advantage headed into the real world. Not to mention it allowed me to travel in my 20’s.

According to US News, 69 percent of college grads left school with an average of $28,400 in loans. I interpret that to mean 31 percent of students graduated with zero debt. So that’s a positive they didn’t mention. If you google debt pay down stories, read financial blogs, or listen to Dave Ramsey’s radio show, you know what can be done about debt if one puts their mind and budget to it. As long as graduates don’t run out and buy expensive cars and clothes (which young people often do), debt can be erased fairly quickly with the right mentality and work ethic.

I consider debt to be the least of all financial concerns because there are bigger fish to fry when it comes to long term wealth building. On the other hand, I like the way early retirement guru Mr. Money Mustache talks about debt in this interview:

If you have credit card debt, you should feel like your hair is on fire.

Due to varying interest rates, credit card debt and student loan debt are vastly different animals. But paying off each type of loan works the same way; you must first choose to pay them off, then follow through aggressively.

Better Life Expectancy

This is not a financial burden at all. It’s awesome we’re more likely to live longer! The way I see it, living longer provides more time for my assets and dividend portfolio to compound, growing my passive income faster than the rate of inflation. That’s one of the beauties of a dividend growth investment strategy.

The Job Market Sucks

The job market has sucked since the financial crisis of 2007. It has sucked worse for those without a college education. It has sucked worse yet for people that live in places where jobs are scarce.

But it sucked in 2000 too. And the early 90’s, the early 80’s, and most of the 70’s. The quality of the economy fluctuates and we deal with it.

As of February 2015, national US unemployment stood at 5.5%. I don’t know what you learned at school, but I was taught in economics class that 6% was full employment. So it’s not that terrible anymore, though it really depends on where you live, what city, state etc. According to this recent graphic from Business Insider, unemployment is 2.7% in Nebraska, and 7.1 in Nevada.

RejectBI UnemploySmall

What we definitely know, is that those with a college degree are much less impacted by unemployment than workers without a degree. And they earn higher salaries, giving them a bigger shovel to pay off those loans.

Older Workers Are Still Broke And Not Retiring

This is true to some extent, though some are retiring and returning to the workforce in new ways. Others, like some of my former coworkers, need to keep working or simply still enjoy it. Plenty of older workers can’t find work due to age discrimination and retire out of necessity.

The best thing young people can do is ask these workers what retirement planning mistakes they made, and don’t repeat them. There’s a whole generation of retirement savings mistakes that we can all learn from. Undoubtedly, the biggest regret is not starting to save early enough.

Today, with all the free information available to us on the internet, there’s no excuse. If you haven’t started investing for your retirement yet, the time to start is now. Enroll in your company’s 401k. Open an IRA or Roth IRA. Financial companies will beg you for your business.

Pensions Aren’t There To Help Anymore

I say GOOD. If a worker is “lucky” enough to have a pension, they’ll have money taken out of their paychecks and put into the hands of bureaucrats to invest it in a way that keeps the pension fund healthy. Then, many years later, at a retirement date that the bureaucrats set, the worker gets an annuity payment after a bunch of fees are taken out.

I sure don’t want bureaucrats investing my money or choosing my retirement date. I’ll take a 401k over a pension any day.

As for Social Security, it serves a different purpose. While not perfect, it provides a very basic minimum amount for the elderly, many of whom were not able to save. It’s more of a safety net. Again, I’d rather save and invest my own money, but I’m not everybody. Without Social Security, there would be widespread poverty. Minor changes in the laws will fix the insolvency fears.

Other Speed Bumps

You can add health care costs to the list of perceived retirement speed bumps. They’ve been rising for decades and it likely won’t stop. Every year, insurance rates rise too. But health insurance premiums are a fairly reasonable cost for families and individuals. And now the government is helping some people to pay for it.

Even with a catastrophic health event, costs to a family will remain under control with basic insurance. People without insurance are at the biggest risk for large expenses. So don’t be a person without health insurance.

Or what about saving for your kids’ college education expenses? Yes, super expensive. So expensive that it’s the biggest risk to reaching my retirement goal. But it’s not a parenting requirement, as saving for retirement always takes precedence. If a parent does choose to pay for college, there’s 18 years to get it done, so that helps.

Perhaps the biggest hindrance to retirement savings is laziness and not giving a shit until it’s too late. Some people simply don’t pay attention and time passes them by while retirement age sneaks up on them. These people are at risk for working into their 70’s, much later than their parents. Don’t be one of them.

Photo credit: Marie-Sophie Tékian via Unsplash

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  1. Completely agree. For recent college graduates there’s really no excuse to not be able to retire earlier than their parents or the mid-70’s. I imagine the problem lies in the fact that on average young adults are much more impulsive and will spend on more frivolous items. That’s perfectly fine if you want to do that but don’t then get mad 20 years down the road when you have nothing saved for retirement yet and can’t stand working anymore.

    1. JC,
      A lot of this stuff is a no brainer to people like you and me. But the mainstream media goes and writes that most people will work until they are 75, seems ludicrous from a common sense standpoint. But they print it anyways. Even if a big spender comes to their senses in their 30’s or 40’s, they still have a very good chance of retiring by 62 accounting for SS.

  2. Healthcare is my big early retirement speed bump. I don’t know what it is about it – but I have this fear of escalating health costs that will cost me millions of dollars (I know, unreasonable). I mean, right now I budget the full deductible into my future costs, even though it will be highly unlikely we would hit a high deductible every year. If one thing keeps me working longer than I need to – it will be healthcare!

    1. Insurance is definitely a factor, and the reason some people keep working. Worst case, Medicare kicks in at 65. But really, health insurance isn’t that expensive for high deductible plans. You have to budget for it like taxes, groceries and everything else.

  3. FIF,
    As you demonstrate, anyone that is willing to hustle, and maybe take a little risk here and there, is not susceptible to working into their 70’s. I was taken aback as to how matter of fact these studies are portrayed.

    Youth is all about having fun. No one is saying you can’t have some in your twenties, that’s for sure. I know a few people who regret not having more fun in their 20’s, and they’re no closer to FI than anyone else!

  4. Kids these days should have an easier time reaching FI than their parents. One of the main reasons I see is the ease of getting involved in the market. Nowadays its as simple as creating a new brokerage account, sending in a check or do it online and in a week, you can buy any company or fund you want. Back in the day, buying actual paper stocks and using a broker with high commissions seems to me it would limit college aged kids to invest.

    I just hope our blogs find more kids before its too late. Imagine a world where all the banks accounts are positive and the government has no debt…

    1. ADD,
      Good point. When I was in college I actually called a broker once to buy some stock. I think I bought $200 worth and paid a $60 trading fee. I had no idea what I was doing. Dripping was the better strategy back then. But online brokers nowadays have made things very easy. Definitely fits into the youth lifestyle of transacting online and on mobile devices. Thanks for stopping by.

    2. American Div. Dream,

      Completely agree! I just graduated 4 months ago and have begun investing with a roth IRA. With sites such as Loyal3, there is absolutely no reason people cannot sock away $10 – $50/mo, thats less than what most people spend on eating out in a given month. There is infinite more resources available to us today than what was available for our parents.

      However, experiencing the 08 crisis has probably made many young people fearful and untrustworthy of the finance industry and financial markets, which could be a reason people are not looking/wanting to learn about investing. A terrible mistake though.

  5. Just read Walden on Wheels, which provides two great case studies for paying off huge student debt quickly, in addition to being a brilliantly poetic read.

    You’re so right, of course. The biggest barrier to retirement is expectations — when you think you can retire, based on what society tells you (or what you choose to disregard), and how you plan accordingly. If we all collectively decided that we all retire at 50, people would accelerate their savings and make better choices, and in a generation, no one would even remember that we used to talk about retiring at 60, 70, and beyond.

    We wish blogs like yours had been around when we got out of college… we could have skipped making several years of bad decisions financially before getting in line in our late 20s.

    1. Thanks ONL,
      I should have asked readers to suggest their own favorite debt pay-down stories and put them into the comments section. If anyone reads this, please add!

      A funny thing is, I knew all this stuff when I was in college, and after I graduated. But I wasn’t intense enough. Not to mention I was going out and spending, and later traveling. While I knew it, it still didn’t hit me hard enough until I met my wife. I guess at that point I could see how my future was panning out, and not looking for a partner anymore.

      Thanks for stopping by. I’m enjoying your blog now. Great goal to stop working in three years to travel. I’m rooting for your big time!

      1. Thanks for cheering us on! It’s super funny to look back sometimes, because I was super determined to go to college for free, and worked hard to earn that, but then I proceeded to rack up credit card debt and make horrible money decisions in college and for a while after. Oh well… better late than never, right? 🙂

  6. I would like to say I took a year off work and hated it. I don’t want to retire early at 40 or 50 and travel.Retiring early is a recipe for disaster. I do not understand why people want to retire so early. I took a year off from work for grad school (at age 27) because I had investment income. (call me luck).

    It’s not fun as great as I thought. I missed being around coworkers the most. I live frugally and do not care about the money or the prestige of a high-powered position. People think all kinds of things when you are not getting up in the morning like everyone else, not to mention employers. I am 27 and do not want to retire at 61 or 65. I want to retire at 70 or longer but realistically may be forced out due to health problems. Work keeps you going and getting up in the morning. In my current job I see all kinds of retired people passing away just because they retired early, or got on disability. Work isn’t a bad thing and I love it. I love working and want to work all the time, this is the opposite idea of this blog.

    1. Air687,
      To each his own. You sound like some of my coworkers who came back to the office after retiring, no due to need for money. You must have a great career that you love. Kudos to you, you are one of the lucky ones.

      Work does keep a person going each day. For me, I have other ideas of what I want to do with my time, aside from travel. Exercise, yard work, reading, eating out, golfing, skiing are all things I’ll do when I retire. Those things will definitely keep me busy each day.

      Typically my readers have a similar mindset to me, in that they are pursuing financial independence so they can avoid the 9-5 grind. It’s nice to have some disagreement with that, so thanks for your comments.

  7. SavvyJames says:

    Great topic and I absolutely agree with you. My biggest pet peeve with respect to personal finance/retirement planning is the oxymoronic idea, often phrased something like the following, “more people will be working in retirement.” As you note, many in the media seem wedded to the idea that retirement – at least in the traditional sense, where people actually are able to stop working – is becoming less of an option for people and they feel a need to redefine retirement and somehow merge it with working.

  8. You know, I am pessimistic too. Not because of lack of opportunities but because of lack of ambitions and goals. I do not meet too many kids to judge, but those I met so far I am sad to see that they are basically wasting their life. Only a few have a goal like yours and look for ways to get there. I always hear excuses why something cannot be done instead of asking questions how it can be done. And that’s alarming imho.