How not to go 40 years without a paycheque

Marketwatch.com has just published a scary piece based on a research study that warns 44% of all early baby boomer households are likely to run short of money in retirement. It refers to an Allianz Life study in the U.S. that found 61% of respondents were more scared of outliving their assets than they were of dying. It raises the spectre of couples retiring in their early 60s and living another four decades and doing so without a paycheque.

Citing a 2012 brief from the Employee Benefit Research Institute, we’re told that a healthy 65-year-old male has a 50% chance of living to 85, while a female of 65 has an even chance of reaching age 88. And if the pair are a couple both aged 65, the odds are 50/50 that at least one of them will reach age 92 and one in four that one will reach age 97.

Fewer guarantees these days

So a couple hoping to retire in their early 60s could easily have to make their financial resources last 35 or 40 years, possibly as long as was spent in the workforce. In the good old days of secure employment in large corporations with defined-benefit pensions, it was reasonable that a lifetime of employment would lead to a few decades of secure pension income. But these days, either such pensions are harder to come by, or it’s less likely that employment with such a firm would last long enough to enjoy such guaranteed pension income.

None of this will surprise MoneySense readers. In addition to advocating annuities, Marketwatch suggests delaying the receipt of Social Security benefits as long as possible. Canadians can do the same with CPP and Old Age Security, and probably will have less reason to fear the loss of employer health benefits than do their American counterparts. As the June 2014 issue of MoneySense pointed out, the longer retirement is delayed the better, whether you’re talking enhanced government benefits, larger employer pension payouts, or merely the continued growth of registered or non-registered savings and investments. In other words, my mantra for anyone unsure about whether to keep working or to quit is to “just keep working.”

One solution: Just keep working

I’m not convinced full retirement is wise or feasible in one’s late 50s or early 60s, even though early retirement may be temporarily thrust upon you despite plans for more years in the workforce. Thirty or 40 years of enforced idleness is not the answer, even if you find your current profession less than fulfilling. Far better to work at least part-time or retrain for an entirely new career that will keep the little grey cells firing well into your 60s and 70s.

Regular readers of this blog already know the distinction I make between full retirement and financial independence. The latter includes some paid work in the mix, along with the usual alternate sources of government and employer pensions, personal savings, rental or business income, royalties and other sources we looked at a few weeks ago in this space.

Boomers may be leaving the womb of full corporate employment but my expectation is that most will become self-employed free agents. We’ll look at that in more depth in the near future.

About Jonathan Chevreau

As MoneySense’s Investing-Editor-at-Large, he is also author of Findependence Day and co-author of Victory Lap Retirement. Reach him at [email protected], where he is the founder of Financial Independence Hub.