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Late-Career Job Changes Reduce Stress

Great news for older workers considering a career change – those who’ve done it are happier and less stressed.

People who attempted a career change sometime after turning 45 were surveyed last year by the American Institute for Economic Research (AIER) in Massachusetts.  Whatever the reason for making a change – voluntary or forced – the majority of those who did so felt their results were successful.

These late-career changers need to be put in a larger perspective.  Older workers are much more likely to stay put in a job than are younger people moving up the ladder, and older people also have a tougher time recovering and finding a new full-time job after becoming unemployed.

But when older workers can change their employment, the outcomes are positive.

“I feel like a new person” – 72 percent of job changers agreed with this statement, while 65 percent said their stress levels fell, according to the AIER.  There are also downsides to late-career transitions: a hefty minority of those surveyed advised others taking this path to be open-minded about their working hours and lower compensation, though half of those surveyed said their pay eventually increased in their new jobs.

“If you feel you need a change, then do it,” one survey respondent commented.

This survey provides a fresh take on a comprehensive 2009 AARP-Urban Institute study that reached similar conclusions.  The AARP-Urban study found that many older workers tend to move into less prestigious jobs when they make a change.  For example, managers often take non-management positions, which could partly explain why the share of people who said they felt stressed about their work dropped by almost half after a late-career change, from 65 percent to 36 percent. …Learn More

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Employer Bias Against Aging Boomers?

joanna_lahey photoThe job market is improving, but more than half of baby boomers surveyed felt age discrimination “prevented them from working as much as they would like.” Squared Away interviewed Joanna Lahey, associate professor at Texas A&M University’s Bush School of Government and Public Service, who says age discrimination is extremely difficult to “prove.”

Many older workers have legitimate complaints about being discriminated against.  But what does the research tell us about how pervasive it is?

Lahey: Before I answer that, let me clarify something.  Older people who are working do well compared to younger workers.  On average, they have more money and stability. It’s the older job seekers whose experiences worry policy makers and researchers.

The bottom line is we really don’t know how pervasive age discrimination is, and there’s a lot of room for more research on this. In one experiment I did, younger workers were 40 percent more likely to be called back for an interview than older workers – but that was only women, and they were applying only for entry-level positions.

Age and experience are correlated with each other, so it’s really hard for researchers to tell if someone’s being discriminated against because of their age or because of some sort of mismatch between older workers’ more extensive experience and the job requirements.

The U.S. unemployment rate was a low 5.5 percent in March.  Doesn’t age discrimination fade when employers are hiring? …Learn More

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Will Boomers Delay Social Security?

A 1983 reform to Social Security is now in full swing for baby boomers: they must wait at least until their 66th birthday to claim their full pension benefits.

But is the gradual increase in the program’s so-called full retirement age – it was 65 for prior generations – having any effect on when boomers retire?

Why people decide to retire when they do is complicated, and economists have tried for years to understand this.  Americans are working slightly longer than they did in the mid-1990s, with the average retirement age rising from 62 to 64 for men and from 60 to 62 for women (though this trend may be stalling). Myriad possible explanations for retiring later include the decline of traditional pensions, greater longevity, healthier older workers, and a more educated labor force.

Another reason could be the 1983 reform delaying the age at which baby boomers in this country are allowed to claim their full Social Security pensions, a reason supported by a new study of similar reforms to Switzerland’s government pensions.

The researchers found that a one-year increase in Switzerland’s full retirement age, or FRA, for women is associated with a half-year delay in when women retire and when they claim their full government pensions. …Learn More

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Even in Nursing, Men Earn More

The nursing profession is predominantly women, but it’s the male nurses who earn more – $5,148 more per year on average.

“Male RNs out-earned female RNs across settings, specialties, and positions with no narrowing of the pay gap over time,” according to a salary comparison from 1998 through 2013 in the Journal of the American Medical Association. Other research has revealed pay gaps in teaching, another women-dominated profession.

Today is Equal Pay Day, and the media is replete with reminders that American women earn 77 cents for every dollar that men earn. Nursing is the single largest profession in the growing health care sector, and the pay gap affects some 2.5 million women employed in a profession established in 19th century London by Florence Nightingale, who wrote “Notes on Nursing: What It Is, and What It Is Not.”

The importance of a woman’s earnings level goes beyond the obvious implications for her current standard of living.  Earnings are also key to how much she can accumulate over a lifetime.

The largest pay disparity is for nurse anesthetists: men earn $17,290 more than their female counterparts. The only category in which women out-earn – by $1,732 – is university professors in the nursing field. The researchers isolate the role a nurse’s sex plays by controlling for demographic characteristics such as education level, work experience and other factors that also influence how much someone earns.  Only about half of the gap between men and women was explained by these identifiable factors, leaving half unexplained.

The chart below shows pay gaps, by type of nurse specialty.

Pay gap chartLearn More

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Retirement Coverage Expanded: UK vs US

President Obama signed a January memo officially launching his MyRA program to encourage saving by low-income and other Americans who lack a retirement plan through their employers.

The United Kingdom is also addressing pension shortfalls for uncovered workers in a much more ambitious way.  The U.K. program, put in place in 2012, has two key provisions that MyRA lacks: it automatically enrolls workers so more will save in the first place, and it provides them with matching contributions.

The U.K. program has enrolled 1.8 million of the 4 million workers targeted, primarily at small employers. A 2014 study by the Center for Retirement Research, which supports this blog, described the program and compared it with MyRA.

The United Kingdom’s retirement income problems largely stem from the contraction of the government’s retirement system.  A first stab at improving retirement income security came in 2001, when the government mandated that employers with five or more workers offer a low-cost retirement savings plan that workers could volunteer to join.  That program gained little traction among workers or financial firms.

The 2012 reform was much bolder.  In addition to mandating a 3 percent employer match (starting in 2017), the government matches 1 percent, with both matches contingent on the employee saving 4 percent of his earnings. To manage the program and offer a low-cost savings plan to employers, the National Employment Savings Trust, or NEST, was established. …Learn More

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Kids’ College Trumps Parents’ Retirement

Parents have spoken: paying for college is affecting their retirement planning.

Two new surveys indicate that the surge in college costs is impinging on Americans’ retirement finances.  One survey, by the research firm Hearts & Wallets, found that boomer parents who support their adult children are more likely to delay retirement than parents of financially independent offspring.  The second survey, by the mutual fund manager T. Rowe Price, found that half of parents are willing to delay retirement or dip into their retirement savings to fund college.

college grads chartThe surveys included young, idealistic parents as well as parents staring down the barrel of the retirement gun, and parents whose children achieved financial independence years ago. Nevertheless, these responses consistently show a willingness to trade retirement security to pay for their children’s college education.

The findings aren’t shocking, since parenthood is defined by sacrifice. But financial planners offer some tough advice about parental financial obligations, especially for clients zeroing in on retirement. Parents – as opposed to their offspring – have relatively few years left in the labor force to save for retirement.

“There’s going to be a day when you can’t work anymore,” said Kelley Long, a financial planner with Financial Finesse, which provides independent financial education programs and a financial helpline for U.S. workplaces. …Learn More

Grads With Student Loans: Rent or Buy?

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Some college graduates are so overburdened with student loan payments that they struggle just to stay afloat.  But for those who can make their payments and even save some money, the logical next question might be: when can I buy a house?

This is a weighty question for 20-somethings new to the labor force and carrying unprecedented levels of student debt, which puts them at greater financial risk than previous generations of graduates.  Squared Away asked two financial planners from the sensible Midwest – Danielle Schultz and Mark Zoril – to help young adults work through the difficult financial tradeoffs they’ll face as they juggle student loan and car payments, retirement saving, and homeownership.

Here’s their advice:

Danielle L. Schultz, a financial planner in suburban Chicago, believes buying a house should be a 20-something’s lowest priority.

The highest priorities are building up an emergency fund and contributing regularly to an employer’s retirement savings plan.  The minimum emergency fund for a young, healthy adult who earns, say, $36,000, is around $6,000 – $10,000 would be better. [The standard emergency fund equals at least three months of necessary living expenses, excluding splurges like vacations or restaurant meals with friends.]

Schultz feels strongly about the emergency fund, especially if buying property is the goal. When something goes wrong – a car accident, a job loss, a house fire – renters “can always move in with mom and dad or a friend, but when you’ve got a mortgage, it’s not easy to get out of,” she said.  Schultz also is not wild about real estate as an investment, since property values aren’t rising appreciably in many areas.

After the emergency fund is established, it’s wise to knock down the student debt first by paying off the loans with the highest interest rates, she said.  Many graduates have multiple loans, so don’t sweat the loans with interest rates at, say, 2 percent – that’s effectively “free money” when inflation is running at 2 percent. …Learn More