Should unemployment benefits b phased out after a certain age? Or is that just ludicrous thinking?
I wrote this article in 2011, a couple years after the worst of the global financial crisis. The government provided generous unemployment benefits up to 99 weeks. Meanwhile, I was burning out from my investment banking job at age 33, wondering what else is there to life.
Should Unemployment Benefits Be Phased Out After A Certain Age?
An AP article highlighted how several 45-50 year old people were so thankful to have unemployment insurance extended further. They talked about how it was “their life line” after being out of work for over a year. I’m really proud that unemployment benefits are working and going to people who need it most. The people profiled all sound like hard working people who just need a little bit of help during tough times. As you know, I’m all for a 5-year “Shock & Awe Yeah” unemployment program, which probably will never pass.
Part of me wonders what happened though? If I was 50 years old and got laid off, I would have 28 years worth of savings and investments to hold me through for potentially the rest of my life. In fact, I would hope that I’d be about to double dip by collecting 99 weeks of unemployment while also living off the interest and dividends from my savings and investments!
Time Can Make You Very Wealthy
If you saved just $10,000 a year on average for 28 years, you’d surely have more than $500,000, if not millions due to compounding! If you save just $5,000 a year for 28 years, you’ll still have over $250,000 dollars thanks to the miracle of compounding. If you don’t save and invest, it simply means you don’t think you’ll need money in retirement or during unemployed periods, hence perhaps helping out isn’t necessary? Or maybe life just happens.
So I got to thinking, perhaps the government should skew their unemployment benefits more towards younger unemployed workers and less towards older unemployed workers. Each year after 15 years of work experience the benefits get reduced by several percentage until they get phased out over 40 years of experience since there is Social Security. After all, we have massive budget deficits and can’t help everyone. What say you? Should unemployment benefits be phased out?
Let’s Help Our Youth
If you are 28 years old and get laid off, chances are you don’t have much savings to hold you over for a long time. After only 6 years of working, you are still at the bottom of your earnings power, while the fixed cost of living is relatively high compared to your salary. You might even have school loans to pay off as well. As an unemployed 28 year old, your last resort is to move back home with mom and dad after your friends get sick of you for sleeping on their sofas.
Some may say the younger you are, the more resilient and resourceful you are. Perhaps. Or maybe it’s just an excuse older people make? If you’re older, you’ve got that many more connections and that much more knowledge. I know I am way more resourceful and savvy now than I was 15 years ago. Aren’t you?
Others may highlight that when you’re young, you have much less responsibility, debt, and dependents. True, but you also have much lower savings and income. Whatever the case may be, there always seems to be an excuse for everything. All I know is that the longer you work, the more you have time to compound your savings.
Phased Out Benefits Supported By Simple Math
It is a tautology that a younger person is at a disadvantage when it comes to the compounding miracle of savings and investing that older people have. Hence, if you look at any demographic wealth chart, you will see that younger people are worth less! There’s no gray areas here.
Since younger people are disadvantaged by time, perhaps they should get even higher benefits from unemployment than older people.
After working for 30 years, maybe you shouldn’t even be allowed to get unemployment since Social Security and Medicare are just a decade away? It sounds cruel, but this post is a thought exercise in allocating resources efficiently.
What’s great is that even if you have investment income, you can still collect unemployment benefits. Unemployment benefits are tied to W-2 job income, and not to investment income.
Therefore, it behooves everyone to try and build as much passive investment income as possible for financial independence. It’s not good enough to just contribute to your tax-advantage retirement accounts. You must focus on building up your taxable investment accounts and real estate portfolio.
Arguments To Support The Elderly
When it comes to respecting one’s elders, I am all for it. When we ask should unemployment benefits be phased out after a certain age, we must respect our elders.
But, do we disrespect our elders by giving them unemployment benefits? Or do we disrespect our elders by not giving them unemployment benefits? On the one hand, perhaps our elders don’t want government benefits because they know they’ve had decades to save and invest for themselves.
We don’t want to insult them by giving them money they don’t really need. On the other hand, some of our elders might say that they deserve unemployment benefits because they are our country’s elder statesmen.
Perhaps you are an older person who poured their entire savings into raising a wonderful family so that your kids can lead a wonderful life. Money spent fixing the house and paying for education is expensive after all these years.
Meanwhile, you might have to pay a lot in medical bills, weddings expenses, and funerals. Yes, living life and providing for a family is not cheap, which is why you should always be paying yourself first, in the first place.
Is It Up To The Government Or Family To Support The Elderly?
Should unemployment benefits be phased out? After all these years of providing for your family, leaving you with not so much in savings, should it be your family who pays you back and helps you in times of need, or the government? One would argue that your grateful kids should be there for you 1000% to provide whatever financial assistance you need if hard times ever occur.
In my own case, if my parents were down on their luck, I will be the first person to send them any amount of money they need. It would be my absolute honor to help them since they gave me so much for two decades growing up.
Clearly, the government needs to give some money back to those who paid the most taxes over their career. Sure, we have infrastructure and public education that we have all benefited from. Perhaps our elder unemployed should get even more unemployment from the state given they have been paying federal income taxes all these years.
There’s no easy answer to this debate. However, the more I think about it, the more it makes sense to help our youth because our youth are our future. We obviously don’t want to cultivate a bunch of dead beats, but let’s face facts. Life ends for us all. Who should we invest in the most?
Be smart: Negotiate a severance so you can get a severance and unemployment. Read my book: How To Engineer Your Layoff: Make A Small Fortune By Saying Good-bye
Should Unemployment Benefits Be Phased Out After A Certain Age? is a Financial Samurai original.