The Wall Street Journal looked at an issue near and dear to us by profiling four people who in middle age, had their hand forced into early or retirement or otherwise unexpectedly forced to find a new job. I remembered to use the gift link.
One small point that might make these articles a little more useful is to not focus on the numbers that someone believes they need to make their retirement work. The first profile was a guy who was head of retirement research at Bank of America. He was out of a job at 63 which was two years earlier than he expected. They spend $240,000/yr and have $5 million. Since getting let go from the bank, he has cobbled together an income that was about half of what he'd been making at the bank.
His numbers have no relevance to me but the percentages track in terms of sustainable withdrawal rates, $240,000 versus $5 million. Their plan is to wait until 70 to take Social Security which will be enough to remove a little of the burden off the portfolio as well as the $110,000 income.
He was quoted as saying “Had I known there were ways to transition into retirement and still work and be engaged, I would have thought about doing it earlier.” What? The head of retirement research at a huge bank didn't know this? My guy, what were you researching? The shortsightedness of this comment is astounding and something we can learn from. His comment drifts into the realm of waking up on day one of retirement and saying "ok, now what am I going to do?"
We have no control over something unexpected like a layoff happening but getting caught completely caught off guard in a planning context is an avoidable error.
A couple of the others profiled were one way or another mostly made obsolete at work. Another WSJ article this weekend painted a grim picture of CEOs starting some very early stage planning about workforce reductions as artificial intelligence continues to evolve.
Obviously we don't yet know the reality of how much job destruction or creative destruction will be caused by AI. As I mentioned recently, instead of denying that AI might take your job, I would focus on how it could take your job, how you can adapt to it taking your job (meaning figuring out how to work with it, not against it).
I've been using AI here and there as a more robust search tool than anything else. It's pretty easy to envision the job of providing investment advice changing to incorporate AI but would it be different than what the robo-advisors have been doing? One way or another, software has been recommending portfolios to robo advisory clients. AI doing the same thing seems like an evolutionary step. Maybe several steps down the line there will be fewer people involved, that seems plausible but it might take a while to get there.
The medical field is certainly evolving from advances in technology regardless of which of these advances are AI or not. There's changes to testing, reading test results and it's a very easy path to see robots doing more surgeries.
We've all seen numbers thrown around about how many jobs will replaced over whatever timeframe which has a couple of different top down implications. If 20% of the working population gets displaced by AI as some have said, one commenter on the above linked WSJ article noted, then we likely would have an economic depression. In that instance, so many people not working means fewer widgets get sold throughout the economy. I've seen theories that this outcome would be a path to universal basic income.
There is a point in the future where there is a fulcrum to this where there's not much that changes and then all of sudden a lot changes. I'm pretty sure that fulcrum is more than a couple of years away but maybe not more than ten years.
Someone in their mid-50's or older who is in decent shape with respect to accumulated savings probably doesn't need to worry as much about their job security from all this. A 57 year old with adequate savings accumulated (not rich even, just adequate), planning to retire at 67 but forced to do so 18 months early is not facing a calamity but that might be a different story if he's forced out at 59 or 60.
Do you have or can you create an income stream or two that might be able to survive AI displacement? My wife and I own a vacation rental. We will continue to own it for the foreseeable future which preserves the income opportunity. An AI-induced economic depression could mean fewer bookings but the opportunity would still be there for us. It seems like various forms of writing would compete with AI written pieces (blogs, books, entertainment) but I don't think AI means the end of all human content creation even if it is more difficult to compete.
Thinking through it a little bit, maybe that is a nearer term outcome where people have to compete with AI which sound difficult but not 100% unwinnable.
For financial advising, there is some age, a different fulcrum point, where people are or are not comfortable solely engaging with some sort of AI or other tech interface. I don't know what that age is but in terms of mass adoption it is hard to see older Gen-X and Baby Boomers pivoting en masse to robots over the next 18 months.
Take a practical look at whatever it is you do for a living without putting too rosy of a shine on it and figure out how you can adapt.
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
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