The Power of Working Longer

[Huskie87]

Abstract:

This paper compares the relative strengths of working longer vs. saving more in terms of increasing a household’s affordable, sustainable standard of living in retirement. Both stylized households and actual households from the Health and Retirement Study are examined. We assume that workers commence Social Security benefits when they retire. 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. The calculations of the relative power of working longer and saving more are done for a wide range of realized rates of returns on saving, for households with different income levels, and for singles as well as married couples. The results are quite invariant to these circumstances.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3106667

[Bucksandreds]

Abstract:

This paper compares the relative strengths of working longer vs. saving more in terms of increasing a household’s affordable, sustainable standard of living in retirement. Both stylized households and actual households from the Health and Retirement Study are examined. We assume that workers commence Social Security benefits when they retire. 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. The calculations of the relative power of working longer and saving more are done for a wide range of realized rates of returns on saving, for households with different income levels, and for singles as well as married couples. The results are quite invariant to these circumstances.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3106667

Intuitively I realized a long time ago that partial retirement early in life is far more attainable than full retirement a number of years later. I plan to work part time for 15-20 years (about 2 days per week) as I also believe that I’ll be physically and mentally healthier if I have something that I ‘must’ do every week. FIRE for me is having enough in retirement savings that I can earn just enough to cover my expenses so that 15-20 years of compound interest in tax advantaged accounts will have me set up. Working Tuesday and Thursday 40 some weeks per year as a dentist will likely have NO negative impact on my life.

[ReadySetMillionaire]

Intuitively I realized a long time ago that partial retirement early in life is far more attainable than full retirement a number of years later. I plan to work part time for 15-20 years (about 2 days per week) as I also believe that I’ll be physically and mentally healthier if I have something that I ‘must’ do every week. FIRE for me is having enough in retirement savings that I can earn just enough to cover my expenses so that 15-20 years of compound interest in tax advantaged accounts will have me set up. Working Tuesday and Thursday 40 some weeks per year as a dentist will likely have NO negative impact on my life.

This is exactly my plan as well.  I'm accumulating as much wealth as humanly possible for the next 10-12 years (until I'm 40-42), then let those assets accumulate for a long period of time. 

Then I'm going to have my own firm, delegate as much as humanly possible, hopefully earn just enough to pay the bills, but keep myself active and involved.  My wife will intend to work 25 hours a week, which takes care of health insurance and most of our bills anyway.

[SC93]

Yeah, I tried the full retirement thing and it was not for me. Then I tried a number of businesses, ended up selling them quickly when I would decide that was not what I wanted to do. I love what I do now even though I swore I'd never have another employee but the workers I have now are GREAT! I hope I don't lose them for a long time.

Retirement is for some people, I'm just not one of them. Maybe in 30 years when I'm 80.... but I doubt it.

[burninglights]

I'm attempting to run the numbers backwards based on info only found in the abstract...

If one saved 1% of one's income from ages 25-55, one could retire 3-6 months earlier than otherwise. Therefore every 1% saved for 30 years = 98 working days of 'early retirement' (3-6 months is an average of 98 working days).

So if one saved 50% of one's income during that time, then one could retire 4900 days/217 months/18 years earlier than otherwise. These numbers seem pretty close to the generally understood FIRE theory of early retirement.

I'm no math whiz though so I'd be interested to see if someone else could do a better job at reverse engineering this...

[Slee_stack]

I really like the idea of PT work.  The trick is obtaining relatively decent paying PT work.  Thankfully, that is something that most of us here have some control over making happen.

Somehow it seems easier (lazier?) to just run the FT gambit longer and just fully sever the cord...and that's what I'm currently doing.  I've only made initial inquiries and steps into getting PT which have largely been rebuked from my current employer.  Need to do more on this.  Lots of other employers out there.