Why Do We Work?

On Labor Day it’s probably appropriate to ask yourself the question: Why are you working? Popular culture will tell us “Everybody’s working for the weekend,” but there must be more to it than that.

In reality we work to pay the bills, to put a roof over our heads, to eat and be comfortable most of the time, to pay for education and to afford transportation. (In the last two instances, many pay them off after the fact.) One important, less obvious reason – we work so that some day we can stop working. It’s called retirement. It’s not something that just happens by magic, and it’s getting to be more and more challenging. 

Although for ordinary people it is a fairly recent development, less than 90 years old, with the help of organizations like AARP, most of us take it for granted. But it’s not a right; it’s something that must be earned and planned for.

Social Security has been in place since 1935. We see the deduction from every paycheck. It’s easy to assume that retirement is taken care of. This Motley Fool article warns that is clearly not the case. Some struggle to get by on Social Security alone, however one emergency can put a senior behind financially with little hope of catching up; healthcare costs continue to rise, especially for older people; and the annual COLA doesn’t keep up with real cost increases. “Social Security benefits are clearly insufficient to live on under the current system – but things could actually get worse. Social Security's trust fund reserves are expected to be depleted by 2034, and if no steps are taken to fix funding shortfalls, Social Security will only be able to pay 77% of expected benefits.”

This is not because the government is stealing from the so-called trust fund. It’s a feature of the original design that did not account for the baby-boomer generation or for the trend toward fewer workers. (For those still stuck on the myth that “it’s my money and they owe it to me,” here is a clear explanation from about two and a half years ago of why that’s not the case.)

Another article from Yahoo Finance tells the stark reality of the current situation: “Despite the fact that it was never meant to act as a main source of income, nearly one in five married retirees and one in two unmarried retirees say they rely on Social Security for the bulk of their income, according to the U.S. Social Security Administration.” To make ends meet, they must rely on Food stamps and other government programs.

With traditional pensions disappearing and Social Security an inadequate replacement, retirement savings cannot be considered a luxury. No one can afford to wait.

On average Americans are far behind. To be on track, by the age of 30 workers should have saved the equivalent of one year’s pay. Most are behind but have time to make it up, unlike their parents. “According to the research, the average retirement savings for families aged 50 to 55 is $124,831. For families aged 56 to 61, it's $163,577. Those figures are far less than the $1 million that many experts recommend as a target for retirement savings.” The one-million-dollar figure may be high, and this site, complete with calculator, recommends only $480,000 – still a lot more than the average of $163,000.

The answer then is simple. You are working to some day not have to work any more. But it’s not automatic. It takes planning, perspective and discipline. Without it anyone could end up in the category described in this CBS report: Broke and Bankrupt in Retirement.