Americans once defined success mainly by whether they owned a house or were better off than their parents. Today, it’s a debt-free college education and a comfortable retirement.
U.S. adults feel that their top indicator of financial success is having enough money in the bank to retire (28 percent of adults), followed by sending their kids to college without having to borrow to pay for it (23 percent), according to a telephone survey sponsored by the American Institute of CPAs. Homeownership and upward mobility each came in at a distant 11 percent of the adults, age 18 and up, randomly surveyed by Harris Poll.
“No longer are homeownership and upward financial mobility the hallmarks of financial achievement,” said Ernie Almonte, chairman of the CPA Institute’s Financial Literacy Commission. “Americans have changed the benchmarks for their financial success.” …Learn More
Several new books are pertinent to topics frequently covered by this blog. Three worth noting are about low-income savers, older workers, and small employers with retirement plans that are overdue for an upgrade.
Here are brief descriptions:
“A Fragile Balance: Emergency Savings and Liquid Resources for Low-Income Consumers:”:
For low-wage workers in fast food, retail, and similar jobs, just finding enough money for living expenses is like squeezing blood from a turnip. Research shows that many want to save, and the absence of this backstop only increases their financial fragility. The default is often to resort to high-cost debt, which further confounds their ability to pay the bills, much less weather the next emergency such as a car repair.
Finding effective savings interventions to help low-wage workers may be the toughest personal finance challenge there is. It’s also the mission of the Center for Financial Security at the University of Wisconsin in Madison and its director, Michael Collins. In this volume, edited by Collins, leading researchers review various interventions and policies – from mortgage reserve accounts and impulse saving to programs that encourage low-income workers to save their tax refunds. [Watch for future blogs about specific findings in this volume.] …
Here’s a sobering thought: by the time most workers get into their 50s, their earnings are declining.
Although older workers don’t necessarily see smaller paychecks, their earnings are effectively shrinking, because they no longer keep up with inflation, according to a study charting the inflation-adjusted, or “real,” earnings of some 5 million U.S. workers over their lifetimes.
The first decade in the labor force, between ages 25 to 35, is crucial – that’s where the wage gains are concentrated, the researchers find. Real earnings plateau sometime between 35 and 45, and this plateau occurs earlier than previous research had indicated. By the time most people move into the oldest age group in the sample – 45 to 55 – their earnings are falling.
The chart below shows the percentage changes during three discrete decades in the labor force for people whose earnings are in the middle of all U.S. workers’ earnings. For the 45-55 age group, other data in the study pinpoint the earnings decline as actually beginning around 50.
Economists have been refining their analyses of lifetime earnings patterns for decades. The researchers’ methodology improves on past techniques and then applies it to an extremely robust data set: the Social Security Administration’s earnings records for U.S. workers from the 1970s through 2011.
When they looked at all workers, they found that earnings, adjusted for inflation, rise by 38 percent over a typical person’s lifetime. But these lifetime patterns vary dramatically by a worker’s income bracket. …Learn More
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
The 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
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.
The 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
In this video by KUTT-TV in Anchorage, Alaska, Fred Keller and Judy Foster show off their retirement project: they transformed a 1976 pickup truck into an oversized replica of a Radio Flyer wagon they can drive around town.
While a new red wagon isn’t for everyone, it illustrates an important point: retirees need to find ways to remain active. Older people warn that retirement shouldn’t be viewed exclusively as a time to “relax,” a well-deserved break. People who enter retirement expecting nirvana often find they’re bored stiff, or even depressed, due to an abrupt drop in productivity after decades of working. Retirees also spend a lot of time alone or watching television.
This blog often promotes the benefits of financial health and mental health that come with working longer. When making financial preparations for retirement, preparation should also include thinking about pursuits such as working on a long-neglected project or hobby, writing a family history, or finding a social group, part-time job, avocation, or volunteer work to add structure and purpose to one’s life.
It took Keller and Foster nearly a year to build their vehicle, KTUU reports. When they took it on the road, they discovered another benefit: talking to the people who invariably ask them about their Radio Flyer is a constant source of fun.Learn More