Young Americans get a lot of grief from oldsters like me. But they face a lot of obstacles that we boomers didn’t have to deal with: student debt, a tightening job market – and the possibility that their job will eventually be taken over by a robot.
Still, most young adults are adapting. The unemployment rate for workers aged 25 to 35 is only slightly higher than the national average.
That will change, and quickly. Researchers at Oxford University estimate that a stunning 47% of US jobs could be eliminated in the next two decades. If you‘re a young person, you need to consider your options very carefully. That means planning for a future where technology could replace your job.
In the next few years, you’ll be served by automated wait-staff when you visit all but the most high-end restaurants. You’ll use a touch screen to order your meal, with no human interaction. (At least you won’t need to leave a tip!). Hotels will use automated check-in systems and robotic maids. And the vast majority of vehicles will be driverless.
Millions of white-collar workers will lose their jobs in the next two decades as well. According to Shelly Palmer, an advisor to digital media, content, broadcasting, and technology firms, these five occupations are vulnerable to being replaced by robots or machine-learning technology in the near-term:
Report writers, journalists, authors, and announcers
Accountants and bookkeepers
And according to a report published by the Obama administration in 2016,
“There is an 83% chance that workers who earn $20 an hour or less could have their jobs replaced by robots in the next five years. Those in the $40 an hour pay range face a 31% chance of having their jobs taken over by the machines.”
This trend is unstoppable. And the speed of the transition is increasing exponentially. Especially if you’re under 50, you’ll need to adapt.
Above all, that means making intelligent investments. And the biggest investment needs to be in you. As a start, you need to become intimately familiar with technology. In the not-distant future, the jobs that remain will mainly be man-machine partnerships. To adapt, you’ll need to develop skills that make you indispensable to these partnerships.
Some of the white-collar jobs humans will probably still need to perform in 20 years include remote operators for unmanned vehicles, cyber-crime professionals, blockchain experts, and data analysts. There will also be an increasing role for individuals to help aging boomers negotiate the increasingly complex health care system.
And no matter how smart robots get, it’s hard to imagine a world in which you can’t talk to a human customer service agent, even if there are fewer of them. Nursing is another occupation that won’t be obsolete in 20 years. If you’re hospitalized, would you rather have a robotic nurse looking after you or a human one?
Some blue-collar jobs will be plentiful as well. Robotics technicians, handyman-type positions, and personal caregivers will be in high demand. Technicians to service renewable energy installations will also be needed. Technology will eventually end some of these jobs but not all of them.
If you have an entrepreneurial bent, have the ability to entertain others, and are comfortable with technology, the world could be your oyster. One of the most democratizing features of the internet is that literally anyone can build themselves a following and become a celebrity almost overnight. Justin Bieber, Logan Paul, Kate Upton, The Weeknd, and thousands of other young people have successfully leveraged their talents to build an international following online.
Even if you’re not cut out to be an internet celebrity, you can still be an internet entrepreneur. Make yourself an expert on a subject you’re passionate about and build a following on social media. Eventually, you’ll be able to leverage your expertise by selling subscriptions, consultations, webinars, etc.
Young Americas need to face another reality: The social safety net your parents and grandparents relied on will mostly be gone by the time you need it.
Consider Social Security. The Board of Trustees for the Social Security Administration (SSA) publishes an annual report on the sustainability of Social Security benefits. As recently as 2012, the board projected that full benefits could be paid through 2038. In 2016, the board projected social security would be insolvent in 2035. Meanwhile, the Congressional Budget Office, a non-partisan federal agency, projects an insolvency date of 2029.
Insolvency means the system won’t be able to pay all the benefits promised to retirees. And even the 2029 insolvency projection is wildly optimistic, because as technology eliminates jobs, tens of millions fewer workers will be paying into the system.
I’m 62, and I anticipate receiving much lower Social Security payments than what I’m currently entitled to. In my retirement planning, I’m counting on:
A 50% cut in Social Security benefits in 2028
Another 50% cut in 2038
An additional 50% cut in 2048 (if I live that long, I would be 93 years old)
At best, social security will be able to pay out no more than 50% of promised benefits to anyone retiring in my lifetime. And well before that date, the entire system will likely collapse. Young workers will revolt over paying into a system they’ll never benefit from.
Medicare is in even worse shape. Each year, the Board of Trustees for Medicare publishes a report summarizing the financial status of the program. The most recent report states that the portion of Medicare funded with payroll taxes will be depleted by 2029. Payroll taxes are projected to pay 88% of Medicare hospital insurance costs. That percentage will slowly decline to 81% by 2041 and will gradually grow as boomers die off in increasing numbers.
At first glance, the worst-case scenario for Medicare is that by 2029, payroll tax revenue will cover only 88% of expenses for Part A. But again, that’s wildly optimistic. There are no adjustments for the near certainty that tens of millions of working Americans will lose their jobs in the next few decades. These individuals will no longer be paying into the system, which will increase premiums for everyone else.
So, you’ll not only need a Plan B for your job but for your retirement and medical care as well. And the younger you are, the more likely it is that the safety net won’t exist at all when you need it. If you’re under 45, you’ll need to self-finance essentially 100% of your future retirement income and medical care.
That means you need to save as much money as you can, by any means at your disposal. How should you invest the money you save? For the short-term, there’s nothing wrong investing in CDs paying 2% or so annually. Just make sure the issuing bank has a solid Tier 1 capital ratio (the higher, the better) so it’s less vulnerable to a bail-in.
Once you save enough money, buy a house or apartment. Try to avoid a mortgage or get the smallest mortgage possible. Your objective is to always have a place to live, even if you lose your job.
As you accumulate more money, avoid the nonsense investment advice the talking heads parrot online and on television. That means generally avoiding stocks and (especially) bonds. The vast majority of companies listed on stock exchanges will cease to exist in the next 20 years, because the products or services they offer will be obsolete. Bonds are even worse. My colleague Doug Casey once called bonds “instruments of guaranteed confiscation.” I couldn’t agree more.
Two of my personal favorite investments are mortgages and trust deeds. I write them for high-risk borrowers through a broker and charge 9% or higher interest annually. I never finance more than 70% of the value of the property and always put myself in the first position. So the worst-case scenario is that I wind up owning a property for 30% less than what the buyer was willing to pay for it. At that point, I can either sell it or rent it out. Even if the value of the property goes down, rental costs never fall as quickly or as far as property prices do.
It also makes sense to buy some gold, although with rising interest rates, the short-term outlook for gold is bearish.
My Plan B for medical care is legal residency in a country – Panama – that has first-class medical care available at a much lower cost than the US. Panama has a network of private hospitals staffed by physicians trained in the US, Canada, and the EU. So if Medicare won’t or can’t pay for a knee replacement or other non-emergency procedure, I can fly to Panama and have the surgery done in a matter of days. And since I have a residency permit, I can stay as long as I need to.
One thing is for sure. If you’re young, you’re vulnerable. Today wouldn’t be too soon to start your own Plan B.