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Really wanted to call this the problem for old people, but then you might not have clicked...
Thinking about the generational divide.
You know the one.
- Boomers are BAD cos they have all the wealth and houses
- Young people are fed up with dead-end jobs, no prospect of owning their own homes & desperately YOLOing into crypto and options trying to catch up.
All that stuff and more.
One thing I keep coming back to.
The older generation are trapped too, just in a different way.
Let's take a look at this on the age continuum.
Yes, it's a crude generalisation. No, it won't be the last...
Let's add some context.
The older generation are asset rich and cash poor...
Which has (supposedly) led to a load of early retirements...
Real net worth of Americans age 55 to 64 rose by 14.2% between the fourth quarter of 2019 and the second quarter this year, Faria-e-Castro calculated
Which is part of the reason labour force participation levels are so low... 👇
Some people of this age group will want jobs but they errrm, might not fit the profile for employers with more youthful tastes...
So, there's a load of 55+ people out there with a chunky net-worth but no/low income.
They're drawing down on savings & redundancy payouts, taking lump sums from pensions etc. all of which are finite.
Even when retirement age hits & monthly pensions are received, these usually cover the day to day living but not the unexpected one-off expenses such as home repairs, new cars and so on...
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Being asset-rich and cash poor when you're young is different.
Banks will lend to you. You can borrow against your asset, look for better paying work/take on a second job, get divorced and marry someone richer, the options are endless.
Not the case when you're older: No income, no mortgage.
Unless you take out a reverse mortgage...
In Canada, these types of mortgages are capped at around 55% of the home value.
You get the cash and keep your home but it comes at a high cost...
- Interest rates are higher than most other types of mortgages
- Costs associated with a reverse mortgage may be higher than a regular mortgage or other credit products
- The equity you hold in your home may go down as you accumulate interest on your loan
- Your estate has to repay the loan and interest within a set period of time when you die
- There may be less money in your estate to leave to your children or other beneficiaries
That's a pretty rough deal...
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Perhaps, although it's often easier said than done!
Unless you're moving to a far inferior property, or upping sticks to an entirely different area where property is cheaper (but family and friends are further away), the amount of equity released may not be worth the sacrifice.
Go back to work then!
Could be the best option.
And they don't even need to work full time.
Just enough to keep the bills paid without dipping into savings, supplement state pensions.
And I think I know just the jobs...
See, a lot of customer-facing work is relatively low-paid without much potential for career progress. Hence 'dead-end' jobs.
The younger generation are wasted in these roles. Many don't even enjoy the work, let alone have the people skills to flourish in them...
You can see where I'm going with this right?
Dead-end jobs for retirees!
Need to work on the slogan...
As an asset rich, cash poor retiree, why not work part-time if you can?
There are signs of unretirement already starting...
It's too early to say that those Covid retirements are permanent, and worth remembering that wealth and money are not the same thing.
We've done the Great Resignation now.
Is it time for the Great Unretirement?
(No boomers were harmed in the making of this article)
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