I don’t actually hear Millennials complain, but the media tells us all the time that Millennials bark about matters beyond their control.
The most recent report that crossed my path is that Millennials are finding it more difficult to get the job they want because Baby Boomers are not retiring like they are supposed to.
Whether the complaint is warranted is uncertain to me, but I am aware that many people who are at what was once called “retirement age" just aren’t retiring. And there is another segment of that generation that is straddling both worlds of working and retiring, living out the “semi-retired" dream.
The Bureau of Labor Statistics reports that by 2026, approximately 30 percent of citizens between the ages of 65 and 74 will still be working, either full-time or part-time. That is close to double the 17.5 percent in that age group that worked back in 1996. Segmenting further, 10.8 percent of citizens 70 years of age or older will still be working in 2026, which is actually more than twice the 4.7 percent of those in that age group that worked back in 1996.
The reasons for this increase in older citizens working are socio-economic. Older people are healthier than they were 30 years ago, they have longer life expectancies, and either need to continue to earn or just don’t want to start the macramé portion of their lives just yet.
The financial advantage of semi-retirement is that the money a person earns reduces the amount that person has to take from any retirement account they have set up for themselves for their actual retirement. It’s actually better than a 1-for-1 exchange; keeping the retirement fund fully funded adds interest income down the line, so the semi-retired are receiving multiple financial benefits from maintaining a work schedule.
There are financial costs to being semi-retired. Social Security payments can be impacted if the investors are not yet at the federally determined full retirement age, but only if that person is making more than $17,640 a year (that’s the 2019 limit). There is also an impact on Medicare premiums, but only if the recipient is making $85,000 a year, and that would be one terrific part-time job!
Spectrem research has always been segmented by working status, and that has always included semi-retired investors as one of three categorizations. In most cases, when retired investors offer an opinion or response on a topic that is notably different from that of working investors, the semi-retired investors sit in between.
But is it time now for advisors to start concentrating a bit more on the needs of the semi-retired?
As I stated earlier, there are investors with sizable retirement accounts who are certainly old enough to retire and probably financially stable enough to do so but who choose to keep working. Do they understand the financial ramifications of that decision?
It might seem like such a good idea. “I am still healthy enough to work, I want to be active, I am preserving my retirement account assets for a later time when my status might change.” That’s actually a great attitude, but it does come with a price related to the safety nets that exist for older people in America.
While it might look bad for advisors to tell their clients to stop working part-time, they can certainly advise their clients as to the full cost of that decision.
Millennials would certainly like it if you would do that.
© 2019 Spectrem Group