This is Part 3 of my review of Die Broke.  You can read parts 1 and 2 by clicking on the following links:

Die Broke, Part 1 - Quit Today

Die Broke, Part 2 - Pay Cash

Step 3: Don’t Retire

Don’t retire?  I thought we should be planning for retirement from the time we start working.  In Die Broke, retirement as we know it is portrayed as a fairly new concept, which has worked properly for one generation only.

Social Engineering?

The authors argue that retirement is a form of social engineering that was a byproduct of the Industrial Revolution.  At the end of the 19th century, the demand for jobs shifted from rural to industrial, and older workers were encouraged to “make room” for their younger replacements.  Pensions were bestowed upon workers aged 60 or better in an effort to increase efficiency.  The New Deal created Social Security, where the benefits would be paid for by taxing the younger replacements.  This tax wasn’t as great a burden as it is today, as the average life span was 63, and the retirement age was 65. This led to:

Enabling

Parents of Baby Boomers benefited from a real estate boom, as their children drove up home prices in a scarce market.  Their living expenses were covered by pensions and Social Security, and their health care was covered by Medicare and Medigap policies.  Everything fell into place, as evidenced by:

The Impossible Dream (for Baby Boomers at least)

The parents of Baby Boomers had retirement income from the following sources:

• Government assistance: 42%
• Personal wealth: 20%
• Pensions: 20%
• Current wages: 15%
• Other sources: 3%

What Boomers Can Expect

• Government Assistance - Boomers will get a lot less money, and receive it later
• Personal Wealth - Boomers will see a 34% income increase over their career, while their parents experience 524% growth
• Pension Income - The shift from pensions to 401K plans, where less than half of those eligible participate
• Wages - Boomers will have to work longer, and live on less
• Other Sources - Inheritance?  Don’t count on it, as longevity increased health care costs may decimate any expected inheritance

A Fiction Built on Four Lies

1. Age 65 is old - People are living longer, more healthy lives
2. Leisure is more fulfilling than work - It’s nice to have a reason to get up each day
3. Older people need to make room - With the workforce decreasing, the need for productive workers increases
4. Younger worker = better worker - Older white-collar workers make fewer mistakes, have fewer absences, and an eye for efficiency

My Take

I’m years away from retirement, and I enjoy going to work.  This may change as I get older, but I find that I need somewhere to go each Monday.  Given the economic future that the authors have laid out for me, I may take a non-traditional retirement, and work part-time or even full-time.  The advice is to move the finish line from age 65 to death, which allows for a greater period of investment in equities.  The authors also advise us to keep an emergency fund, and have adequate health and disability insurance.

Part 4 of this review will cover the fourth and final step, called Die Broke.

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