Donald Trump isn’t the only septuagenarian unwilling to ease into a traditional retirement. As they near the end of what’s traditionally been the working years, today’s Baby Boomers are entering into retirements that look a lot different than those of their parents. Thanks to increased longevity, retirement today is longer and more expensive than ever before, and it also very often includes some kind of work.
More than 70 percent of workers over the age of 50 say that their ideal retirement now includes working, and nearly half of current retirees say that they have worked or plan to work in retirement.
Eight in 10 of those surveyed say that they’re doing so because they want to, not because they have to, and they’re more likely to work part-time or volunteer. More than 60 percent of those who work in retirement do so because they want to work or stay mentally active, and 46 percent work in order to remain physically active.
While a working retirement may differ from the older dream of retirement, it’s not necessarily a bad thing. Retirees who work report more satisfaction and less stress about finances than their peers who have quit the workforce entirely. The most successful among them are able to find jobs in retirement that not only meet their financial needs, but are also meaningful in other ways and offer scheduling flexibility.
Many workers heading into retirement are woefully unprepared financially and have no idea of the tax impacts of taking on a part-time job to ease the fiscal pain, researchers warn.
Any of the Baby Boomers retiring every day who are contemplating a second job in their retirement may want to reconsider, due to an unfamiliar network of federal and state taxes that can serve as significant work disincentives.
Prospective retirees can forget the Social Security Administration-provided benefit calculations that come in the mail. They’re completely meaningless. They simply don’t factor in the implicit and explicit taxes that those ages 50 through 79 face from the offsets between income, age, and benefits.
There is a need for much more transparency in the nation’s retirement and fiscal systems. The Social Security Administration could provide the information, but likely needs a push to do so by someone in government who thinks it’s important. That someone could be in the presidential administration or in Congress.
Working longer, say an extra five years, can raise older workers’ sustainable living standards. Taking a second job to supplement income during retirement can prove costly. But the impact is far smaller than suggested, in large part due to high net taxation of labor earnings. Many boomers now face or will face extremely high work disincentives arising from the hodgepodge and uncoordinated design of the nation’s fiscal system.
Older workers typically face high, very high or remarkably high marginal net taxation on their extra earnings. Work disincentives are highest for those at the bottom and top levels of resource distribution.
Don’t let the door hit you. Uncle Sam is, indeed, inducing the elderly to retire. Of particular concern is Medicaid and Social Security’s complex earnings test and clawback of disability benefits. A clawback is the recovery of funds disbursed by a company, pension, or government. But an open question is the extent to which the elderly correctly perceive these disincentives. Indeed, it’s hard to believe that policymakers, themselves, are cognizant of the level and spread of the work disincentives they are imposing on the elderly.
The marginal net tax rate linked to a significant increase in retirement earnings, such as $20,000 a year from a part-time job, can for many elderly be dramatically higher than that associated with earning a relatively small, say $1,000 a year, extra amount of money. Many baby boomers face fairly grim financial realities in retirement, and more government transparency around taxes and benefits is needed to help them assess their futures.
For the 20 percent of the population aged 50 to 79 with the lowest incomes, earning an extra $1,000 raises a household’s expected value of lifetime spending by just around $700, which translates into a 30 percent marginal net tax rate. Even an extra $10,000 of lifetime earnings means another roughly $6,000 in lifetime spending, and a 40 percent remaining lifetime net tax rate on those additional earnings.
Other financial tradeoffs or exchanges include:
- Medicare income limits, Social Security earnings test limits for those retiring before the current full retirement age of 66 and Social Security income tax thresholds.
- Increased premiums for Medicare Part B for retirees earning more money.
- Rising out-of-pocket healthcare costs through higher premiums, higher Medicare Part B co-payments and outpatient care not covered by Part B, as well as projected increases in prescription drug expenses.
- Implicit taxes linked to government benefits such as food stamps.
All this is set against a backdrop of an already grim financial picture for many baby boomers’ golden years. Only 67 percent of them have any retirement account, and many of those have very low balances. Forty percent of boomers have no retirement savings at all.
While Social Security was designed as a basic floor for retirees’ living standards, it actually provides at last 90 percent of more than a third of elderly households’ income. Nearly two-thirds of older households rely on Social Security for at least half of their income.
Meanwhile, prospects of increased Social Security benefits to help boomers are dim. Social Security already is 32.2 percent underfunded.
Think newspapers’ obituary sections are just about dying? Think again. They’re celebrations of humanity — with lessons for us all, according to data analyst Lux Narayan.
New York City resident Lux Narayan jokes that he starts his mornings with scrambled eggs and a side of “let’s see who died today” — otherwise known as the death notices in the New York Times. While some people find them morbid, Narayan sees the obituary pages as a section that celebrates the successes of humanity. They highlight the pretty crazy, offbeat and interesting things that people do and that in a lot of cases make a difference.
One way to achieve success: help other people succeed. Narayan and his team separated the obits into two groups, famous and non-famous people (their benchmark for fame: whether or not someone had a regularly updated Wikipedia page). While there was greater diversity in the professions and accomplishments of the non-famous, they noticed that almost everyone — famous or not — helped people in some way. And the obituaries showcased the many ways it’s possible to make an impact. Narayan points to Reverend Rick Curry, a Catholic priest who ran writing and acting workshops for veterans and disabled people. “Here’s someone who used drama and theater to distract people from the things they were going through,” he says. “And what he did wouldn’t fall under the purview of a nonprofit founder or of a medical practitioner.” Designer and urban planner Jane Thompson (with her husband) helped to revitalize derelict urban areas like the Chicago Navy Pier and Faneuil Hall Marketplace in Boston, preserving them by turning them into buzzing social and commercial hubs where people could congregate and do business.
It takes time to make a mark. We humans are fascinated by prodigies. “We can get so enamored of stories of dot-com millionaires and people who became millionaires in their twenties,” says Narayan, “and we forget those are the exceptions.” In fact, for the 2,000 obituaries he and his team analyzed, the average age of an individual’s first major accomplishment was 37. Take author Alan Cheuse. He published his first short story a month before his 40th birthday, he didn’t begin a stint as the book critic for NPR’s All Things Considered until his early 40s, and then he completed more than a dozen works of fiction and nonfiction before he died at the age of 75 in 2015. Acoustic engineer Leo Beranek was 55 years old at the time of one of his greatest achievements. That was when the R&D firm he co-founded, Bolt, Beranek and Newman, won a US government contract to build the first computer-based network: Arpanet. Arpanet, of course, is the foundation of the Internet.
The age of noteworthy accomplishments varies from field to field. Athletes, for example, usually reach their peak in their twenties (or even earlier). “If you remove the sportspeople, the average [for first achievement] from the obituaries would probably veer more toward 40,” says Narayan. “In this age of instant gratification, that’s a lesson in the value of patience.” And that patience is anything but passive — for the women and men in the obituaries, the decades before their big move were busy ones, filled with learning, trying, failing and persevering. “To get really good at something, to achieve a certain level of proficiency in it, and to make a difference and to get recognized for it, it takes time,” Narayan says.
Note to parents: artist can be a worthy profession. Bright young people, especially those from traditionally minded families, are often encouraged to channel their talents into career paths such as doctor, lawyer, engineer or business executive. However, obituaries provide another perspective on what we value. New York Times obit headlines always state a person’s name and age at the time of death and contain a descriptor, a phrase that attempts to capture their achievements in a handful of words. Narayan and his team examined the descriptors in the 2,000 obituaries using Natural Language Processing. They removed superfluous words like “the” and fed the descriptors into a software program,; an algorithm showed the most significant words used across the group. They found that the arts — film, theater, literature, music, dance and fine arts — accounted for 40 percent of the people in the obits. These descriptors also offer a master class in economical writing: Prince’s descriptor was “an artist who defied genre,” and puzzle constructor Merl Reagle was characterized as someone “whose crossword puzzles delighted clued-in solvers.”
Our lives can have great meaning without great recognition. One of the reasons that Narayan loves reading the NYT obituaries is the fact they don’t exclusively cover individuals in the public eye. “A lot of them are people you’ve never heard of who’ve done things that make them deserve to be remembered,” says Narayan. Consider Jocelyn Cooper. As a grassroots organizer in Brooklyn in the 1960s, Cooper helped pave the way for the 1968 election of Shirley Chisholm, the first African-American woman to sit in the US Congress. And what about Daniel Thompson? He automated the process of making bagels, allowing them to enter supermarkets and fast food outlets across the United States — something for which breakfast-eaters can feel thankful, daily.
The most fundamental lesson that Narayan learned? Humility. As he and his team worked on this project, he had the chance to learn about people whose names he’d never heard and who worked in fields far from his own. “I kept Googling and researching them and their work,” he says. “It was so colorful and beautiful.” He found himself awed by the breathtaking variety of human existence offered by the obits. When he came across the writeup for mathematician Joseph Keller, for example, Narayan was motivated to read Keller’s papers explaining why a runner’s ponytail swings side to side and what makes teapot spouts dribble. “It highlighted the diversity of the world we live in,” he says, “and I think that’s humbling. My mind is just a little cog in the entire scheme of things.”
THE LAST YEARS OF MY LIFE
By Basil Venitis
Gone are all the power years
Avoid now any strife
Shifting now slow gears
The last years of my life.
Life is a real game
Peace and prayer are now rife
Have accomplished my aim
The last years of my life.
Euthanasia is coming
Marching now with a fife
Thank you much for all the hugging
The last years of my life.
All alone and no wife
Looking back at my life
Wondering about afterlife
The last years of my life.