Archives for February 14, 2018

Study: Working Longer vs. Saving More

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

savebuttonbankHere’s a working paper titled The Power of Working Longer by Gila Bronshtein, Jason Scott, John B. Shoven, Sita N. Slavov which compares the effect of working longer (delaying your retirement date) and increasing your savings rate while working.

The basic result is that delaying retirement by 3-6 months has the same impact on the retirement standard of living as saving an additional one-percentage point of labor earnings for 30 years. The relative power of saving more is even lower if the decision to increase saving is made later in the work life. For instance, increasing retirement saving by one percentage point ten years before retirement has the same impact on the sustainable retirement standard of living as working a single month longer.

Update: I read the full paper and here’s my view. For most households earning less than $100,000 a year with average savings rates, Social Security changes matter more than returns on investment portfolio. What really matters is delaying Social Security and getting the resulting higher monthly income for life. For most people, that’s the same as working longer as they can’t just wait around without a paycheck.

If you are close to retirement, chances are that working longer is the best practical solution to improving your financial outlook. Working longer means your portfolio grows a bit more hopefully, your Social Security check gets bigger, and your retirement length gets shorter (annuities pay more).

However, if you are young, it is quite easy to tell yourself today that you’ll simply work a bit longer far in the future. When the time comes, you may not be given the option of working longer either due to job loss or disability. If you take this too far, you could just tell yourself that you’ll simply work until you die and you won’t have to save anything at all.

You can pay $5 for the full paper, or you may be able to get free access if you have a .edu or .gov e-mail address.

Keep Moving In The Right General Direction

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

compass200Here is some career advice by longtime Silicon Valley executive Ben Fathi in his post What I Learned from Working for Both Bill Gates and Steve Jobs. An excerpt (bold added):

What I can tell you as a piece of career advice is to only work on things you are passionate about. As long as you’re learning, keep at it. There is so much to learn and this industry moves so quickly that you will fall behind if you stop learning even for an instant.

As long as you’re moving in the right general direction, I used to tell people, it’s all good. Don’t try to plan out your entire road trip from New York to LA before you start out. (If I’d done that, I would have lived an entirely different life — never having even signed up for that first computer science class.) Instead, on your way to LA, just make sure you’re driving in a generally westerly direction, then keep going. And keep learning along the way, course correcting as necessary. You’ll eventually end up in the right place; and you’ll have a lot of fun along the way. I know I did.

You could make parallels between career and financial advice. Keep yourself moving in the right direction. As long as you’re learning, your career will progress. As long as you keep saving and investing in quality productive assets, your portfolio will grow over time. If you find something you don’t mind working feverishly on for 60-80 hours a week (ideally when you are young and don’t have a family to ignore), go for it. Add in some luck, and both your career and finances will be zooming along. If you aren’t zooming right now, don’t worry. Just keep moving forward in the right general direction.

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