The latest US government jobs report showed that older Americans are working longer than ever. That’s an indicator that older Americans lack the ability to retire because they’re not in a sound enough financial position to retire. Not only that, but the trend of Americans working longer also bodes poorly for younger generations. More older workers mean less opportunity for advancement for younger workers, depressing their salaries and therefore their ability to save for retirement. What lessons can be drawn from this?
Older Americans Working at Highest Rate in 55 Years
Almost 19 percent of Americans 65 or older are now working at least part-time. That’s the highest rate since the late 1960s. In fact, 32 percent of Americans ages 65 to 69 are still employed, up from around 22 percent in 1994. And 19 percent of 70- to 74-year-olds were still working, up from 11 percent in 1994. The Bureau of Labor Statistics predicts that by 2024, 36 percent of 65- to 69-year-olds will be employed.
Because the baby boom generation is so large, the number of older Americans still working is far higher than the percentages would seem to indicate. Over 4 millions Americans 65 and over are still employed full time, nearly double the amount who were employed full-time a decade ago.
Financial Crisis Plays Role
Part of the reason that so many older Americans are still working is that their retirement savings were decimated during the financial crisis. For those hoping to retire within the past decade, the financial crisis was catastrophic. Between market peaks in late 2007 and troughs in early 2009, the Dow Jones, S&P 500, and Nasdaq stock indexes all lost over half their value. Anyone hoping to retire during that time period had to put off their plans due to their retirement assets losing value. That meant working longer into old age in order to make more contributions to retirement accounts and make up for lost value.
While some workers may have been able to ride out the crisis and benefit from the stock market rebound that occurred since then, there were many too who panicked as markets crashed, cashed out their investments, and held off from jumping back in once the limited recovery was underway. That locked in losses, once again hampering their ability to retire.
Younger Generations Working Less
What is most concerning is that at the same time older generations are working more, younger generations are working less. The number of working Americans aged 35-44 peaked at around 37 million in the late 1990s and has declined since then, and is now down under 32 million. The number of working Americans aged 45-54 peaked just before the financial crisis in mid-2008 at around 36.5 million, and is now down around 32.5 million. And all of that has occurred while the US population has increased by over 20 million people since the financial crisis and 45 million people since the late 1990s. That shows that there is a real employment crisis among middle-aged Americans, and that’s concerning.
The 35-55 age range is when most Americans hit the peak of their careers, maximizing their salaries and earning potential. That’s when they’re able to save the most and put away the most money they can towards retirement, college savings, etc. A labor market that is employing fewer people in that age group can’t be very healthy. If fewer people in those age groups are working, it doesn’t bode well when they reach retirement, especially if many of them expect to subsist on government assistance. Programs such as Social Security are already actuarially unsound and at risk of failure, and a decreasing number of younger workers paying taxes to fund the system will only hasten Social Security’s demise.
Because more and more older Americans remain in the workforce, it lessens the opportunities for younger Americans to move up and advance in their careers. Salaries will remain depressed as a result, leading to smaller retirement funds for many Americans. Because so many older Americans also continue to work part-time as consultants after they “retire,” they will continue to crowd out younger Americans, as they can provide expert part-time assistance at a lower cost than a younger full-time employee.
How to Overcome the Labor Problem
One of the factors that will continue to drive the trend of older workers crowding out younger workers is labor expense. Simplistic views of labor expense only look at the salary costs to employers, but that isn’t everything that employers have to pay. Mandatory employer contributions to unemployment insurance funds, workman’s compensation funds, payroll taxes, health insurance, etc. tack on extra costs every month. Throw in other benefits that many employers offer and the average total cost per worker is around 40 to 50 percent higher than their actual wage.
As health care costs continue to increase, younger workers are no longer a clear advantage for those employers who offer health insurance. Health premiums for younger workers are rising significantly, as they are being treated as a cash cow to subsidize other people’s health care. While health care premiums rose for young people, health care costs for older people were capped under Obamacare. Since they’re not nearly the resource burden that they were before, and because younger workers have now become so much more expensive, older workers under the current system will continue to work in ever-greater numbers. Unless health care costs can be reined in, the trend of employment growth among older workers and less employment among middle-aged workers will continue.
What Can You Do to Retire Earlier?
There are two important lessons to learn from the trend of Americans working longer to make sure that you won’t have to work into your 60s and 70s before you’re able to retire. The first is that you need to save as much money for retirement as possible. Nobody ever complained about having too much money when they retired, it’s always having too little money that is the problem. Having more money saved up when you retire also helps with the second issue, namely, exposure to financial markets.
Stock and bond markets are notorious for their volatility. The business cycles caused by central bank monetary policy are most visible in financial markets. When stock indexes rise 20-30% in a single year, you can tell that markets are overheating and that a correction will inevitably come. That’s why it’s important to have your assets diversified so that you’re not 100% exposed to financial markets. That way you still have assets to fall back on that not only won’t lose value during the crash but will actually gain value.
One of the best ways to do that is by investing in precious metals. Holding gold and silver isn’t a get-rich-quick investment scheme, it’s a wealth protection program to ensure that in the event of a stock market crash your assets won’t be completely wiped out. Gold is the ultimate buy-and-hold investment, as it should be the last investment you sell should you need money. It will provide wealth protection for decades or longer if you need it. Gold keeps its value in the face of inflation, stock market crashes, financial crises, war, etc. Since the closing of the gold window in 1971, gold’s value has averaged a 7.6% increase per year.
With the development of gold IRAs, investing in gold is easier than ever. Gold IRAs enjoy all the tax advantages of conventional IRAs while still allowing you to use pre-tax dollars to purchase and own gold coins or bullion. Don’t wait until the next stock market crash before you decide to protect your assets with a precious metals IRA.