The Ticking Time Bomb of U.S. Retirements

Tim Sackett Benefits, Career Advice, Change, Change Management, Compensation/Cash Money, Current Affairs, Good HR, HR, Uncategorized 4 Comments

John Vlastelica, the founder of Recruiting Toolbox, was recently in Japan for work and posted a bunch of cool learnings on Facebook about a major problem Japan is facing regarding their aging population. Japan has a crisis on their hands and the U.S. isn’t far behind:

  • Japan’s population is living extremely long with the most citizens over 100 in the world.
  • Japan does not encourage immigration and it’s super difficult to be a non-citizen and work in Japan. 
  • Japan is expected to lose about 1 million citizens a year for the next 30 years. 
  • More retirees than workers by a lot, and getting worse. Who pays for all those retirees?

I remember when I first started realizing what retirement was all about. I was in high school and my grandparents were retiring around the age of 65 or so. 65 years old seemed to work for the U.S. for the longest time. It basically worked like this:

  • Retire at 65
  • Get Social Security and/or a pension
  • You die a few years later (few = max of 5)
  • The math worked out just fine

That was a great plan that was going to work out for everyone, for a very long time! Then people started retiring earlier than 65 and living to 85+.

Houston we have a problem!

We now have people who start working in a plant at age 20. Work 40 years, retire at 60 with a full pension and live to be 90. 30 years of pension payments will bankrupt the system!

A teacher who begins teaching at 21, works 25 years, retires at 46, and lives to 86, is a major problem! We don’t have a funding issue in public education, we have a ‘retired teachers are living to long issue’ in public education!

The pension math does not work out if you live 25 years after retirement. It doesn’t work out if you live 15 years past retirement! 

The reality is America is on the same path as Japan. We aren’t having enough babies to even keep up with replacement to pay the checks for our retirees. Immigration is the only reason our population is increasing. There will come a time in the near future when some really tough decisions will have to be made.

Are you ready to pay 70% taxes so our elders can keep on keeping on down in Florida?

So, what’s the answer? 

This made up retirement age of 65 years old is going to have to change in a major way. I would love to tell you the new age of retirement is 70, but it’s truly probably more like 75–we want to be real about funding what we’ll be facing.

If you don’t build your own nest egg, that’s probably what you’ll be facing. Which is why as HR and TA leaders we need to get our young people thinking about how they can take care of themselves in our company-sponsored retirement plans. 

We no longer have the luxury of just ‘educating’ our employees like HR pros in the past. We are at the point where we almost need to require employees to get involved in their own retirement as soon as they start working, or they’ll basically have to work their entire lives.

Have a better answer? I would love to hear it! Hit me in the comments. 

Tim Sackett

If you Google “Tim Sackett” you’ll find our Tim, and a truck driver chaplain. Our Tim is NOT the truck driver chaplain, although how awesome would that be if he was!? He is a prolific writer in the HR and TA space who just happens to also run an Engineering and IT contract staffing agency (HRU Technical Resources) out of Michigan. He also writes every day at his own blog, the Tim Sackett Project. Weirdly, he’s known as an expert in workplace hugging, which was kind of cool years ago, but now seems painfully creepy, but we still love him and he’s fairly harmless. Tim is also on the board of the Association of Talent Acquisition Professionals (ATAP), lifetime Michigan State Spartan fan, husband to a Hall of Fame wife, 3 sons, and his best friend Scout. He also wrote a book with SHRM called The Talent Fix, you can find it on Amazon.

Comments 4

  1. Hey! I definitely don’t agree with some of your framing, but as far as ideas, I’ve worked at a couple places now where we contribute to a retirement plan for staff automatically, usually 5% of annual salary. This isn’t a match, and it’s not a deduction from pay for staff; it is the organization calculating 5% of salary each month and contributing that to a retirement account, and then offering a match on top of that. Obviously it works out well financially for staff, and having the account open anyway does motivate people to contribute even a tiny bit of their own money, since they already have to deal with the administrative hassles of owning such an account. It’s worked well so far!

  2. You had the answer in your article. Immigration. It’s always positioned as a left v right political argument but ironically it’s an economic argument. Research shows in Canada that immigrants are greater contributors to the economy than naturally born Canadians. Added to which we have a worldwide refugee problem, they’re also contributors. Strangely, we have a program to bring in MexicNs as “stoop labour” to farms in the summer. They get paid a fair wage and then leave for the winter. It needs to stop being a political argument and become an economic imperative

  3. One of the big issues here is still that organizations often want people gone in their 50’s and are unwilling to hire those over that age. Not everyone can work at a national park in season as a way to keep working. We do need to advise employees but we also need to look at how are HR functions will deal with this issue. “THE 100-YEAR LIFE: LIVING AND WORKING IN AN AGE OF LONGEVITY by Lynda Gratton and Andrew Scott, is worth reading for ideas. But this is hard work for most of us to focus on – I have talked about this topic for 2 decades and it remains ‘interesting’ but not important to many firms. Thanks for the focus!!!

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