Nobel Laureate Robert C. Merton knows that times are changing fast. He’s a father of three and a professor of finance at MIT. Over the years, he has kept a close eye on financial developments around retirement and has had many financial conversations with the younger generation.
It can be broken down in simple terms and math. Because people live longer, 40 years of work that used to support 50 years of consumption now has to support 60 years. What does this mean for the average person?
“The arithmetic is equally simple,” says Merton. “Either, if you want to work the same number of years as your parents, you better live at a lower standard of living. If you’ve got the benefit of living longer, you’re going to work longer.”
“If I had one rule, one finance principle that I had to teach to every kid,” he says. “I would teach them there’s no free lunch. If it looks too good to be true, it’s probably not true.”
“There are a lot of good ways that we can do better at saving for retirement,” says Merton. “You shouldn’t have to get an education to try to figure out how to manage your portfolio. You should be educated to find someone to trust to do that.”