Are You Ready to Work Until You’re 80?

By Matt Nesto

A seemingly off-hand remark made by Robert Benmosche the CEO of AIG (AIG) has become a bit of a viral online debate, as people of all ages and walks of life weigh in on the idea of bumping up the retirement age to 80. While Benmosche’s comments to Bloomberg suggest the age increase is neededto maintain the level of benefits we have been promised and are accustomed to, not everyone is on board with the idea.

“There’s a difference between austerity and just moving out the retirement age,” says Lee Munson, Chief Investment Officer at Portfolio, LLC and the author of the book Rigged Money: Beating Wall Street At Its Own Game. “Most people aren’t functional at that age.”

As it is, the retirement age is already creeping higher and is up to 67 now for anyone born after 1960. In fact, one of the reasons people like Munson (and me) “don’t think it’s going to work” is as much about mortality rates as it is about expectations.

“The mortality curve is starting to flatten out,” Munson says. “I wouldn’t expect 20 years from now we are all going to live to be 100 or 110.” He adds that the last thing the U.S. needs now is to “end up like the Middle East, where we have a bunch of young, unemployed people getting pissed.”

Interestingly, his final point regarding unemployment would likely be the worst unintended consequence of sentencing grandma and grandpa to an extra 15 years of hard labor. In fact, delayed retirements brought on by a deep and prolonged recession and plunging asset values are already gumming up the normal and orderly transference of jobs from old to young. The latest payroll data released last week showed an 8.2% unemployment rate—but for individuals under 20, the rate tripled to 24.6%.

Munson’s message to anyone younger than 60 who might be shocked at the thought of their retirement getting pushed back by 15 years: it’s time to come to grips with reality.

“We have to realize that we need to lower our expectations, because, simply stated, the baby boomers didn’t save enough, and we’re running too big of a deficit,” he says. He argues that it is “disingenuous and dishonest” to suggest that we can maintain our current quality of life and level of spending into the distant future.

Such a plan also strikes me as socially divisive and politically lethal. It is often said that to mess with social security and medicare benefits is to touch the third-rail of politics. However, I can imagine that requiring future generations to work and pay-in to the retirement system for 25% longer (and presumably cash out for 25% fewer years) is not going to gain a lot of support either.

Even though a retirement age of 80 is merely a discussion at this point, if nothing else, it portrays how poorly we have manged our fiscal affairs, while recklessly leveraging the futures of the children, youth, and young families of today.