July 12, 2018
Why Less-educated Men Retire Younger
Men with high school diplomas are retiring around age 63 – three years before college-educated men. The gap in their retirement ages used to be smaller.
The reasons behind the current disparity are explained in a review of research studies on the topic by Matt Rutledge, an economist with the Center for Retirement Research. The trend for women is similar, though their story is complicated by a sharp rise in their participation in the labor force in recent decades.
Rutledge provides four reasons that less-educated men are still the lion’s share of early retirees:
Health. Older Americans are generally getting healthier and living longer – so why not wait to retire? Well, the health of less-educated people is poorer and has improved less over time than their more-educated coworkers. And health problems trump unemployment and other types of job losses as the single biggest reason for their early retirements – more so than for better-educated workers.
Labor Market. Two aspects of the labor market are relevant to less-educated workers. In the past, a large share of the retiree population could count on a guaranteed monthly income from a pension. Today, the workers who have a retirement savings plan have an incentive to delay retirement, because they will have to rely on the often inadequate and uncertain income that can be withdrawn from their 401(k)s. But less-educated workers haven’t been affected very much by the change, because they’ve never been big beneficiaries of employer retirement plans. In the 1990s, they could claim just 11 percent of the value in pensions, and today they hold 11 percent of the wealth in 401(k) plans.
A second change in the labor market is plummeting U.S. manufacturing employment since the 1980s, which reduced the physical demands of work. But myriad working conditions remain relatively poor for less-educated workers and are still a powerful reason for them to retire. …Learn More
July 5, 2018
Boomer Bulge Still Impacts Labor Force
A theme runs through the infographic below: aging baby boomers are still a force of nature.
Created by Georgetown University’s Center for Retirement Initiatives, the infographic uses demographic data to show that boomers remain important to the labor market even as they grow older.
More than 9 million people over 65 work – a steep 65 percent increase in just a decade.
Two things primarily explain this increase. One reason is hardly surprising: the post-World War II baby boom that created the largest generation in history also created the largest living adult population (though Millennials will soon catch up).
On top of this, baby boomers are working longer for myriad reasons – among them, better health, inadequate retirement savings, and more education – which drives up their participation in the labor force.
To see boomers’ other impacts on work, click here for the entire infographic.
June 28, 2018
Kids Figure into Retirement Plans
The grocery shopping for five is over, the family cell phone plan has been canceled, and the college tuition has been paid one last time.
So what’s next?
Newly minted empty nesters, having poured a couple hundred thousand dollars into raising each child, respond to their financial liberation in one of two ways. Some start saving more for their golden years. The others keep spending at that elevated level – but this time on themselves.
This personal decision, made at the critical juncture in the pre-retirement years, will have consequences for retirement – save more and things could turn out pretty well, or keep spending and jeopardize financial security in old age.
In the aggregate, at least some older households are taking the second approach. An analysis by the Center for Retirement Research at Boston College, finds that having children translates to “a moderate increase” in the risk that their standard of living will fall after they retire.
The researchers looked at the financial implications of kids from two angles. First, they used household data to estimate the sacrifices parents make – in the form of lower income – while they are raising children. Then they looked ahead to their retirement finances.
Compared with childless couples, parents in their 30s and 40s have about 3 percent less income for each additional child – some of this loss occurs when mothers work part-time temporarily or take time out for childbearing and childrearing. The income gap between parents and childless couples closes when parents reach their 50s and the kids start leaving the roost.
Less income over a lifetime translates to less wealth: parenthood reduces wealth by about 4 percent per child for workers ages 30-59.
The effects of children persist even after the transition from work to retirement. …Learn More
June 21, 2018
Despite Medicare, Medical Expenses Bite
Medicare pays for the bulk of the medical care for Americans over 65, but a lot of their income is still eaten up by medical expenses.
The list of expenses is long. The lion’s share goes toward various insurance premiums – for Medicare Part B coverage, Part D prescription drug coverage, and supplemental insurance, whether Medigap, a Medicare Advantage plan, or employer health insurance for retirees. The remaining costs, for copayments and deductibles, are also significant.
These out-of-pocket costs, when added together, averaged about $4,300 annually per person, finds a new study by researchers Melissa McInerney, Matthew Rutledge, and Sara Ellen King of the Center for Retirement Research.
Out-of-pocket costs consume a third of the amount that retirees receive from Social Security, which is the most significant source of retirement income for a wide swath of the nation’s seniors, including many people in the middle-class. Half of seniors get at least half of all their income from the federal program.
The Medicare Part D prescription drug program has given some relief to retirees. After it became effective in 2006, the share of seniors’ income consumed by out-of-pocket costs declined slightly and then declined again after a follow-up reform of Part D began to close a big gap in drug coverage – known as the donut hole – in 2010. …Learn More
June 19, 2018
Work-Life Imbalances Spur Retirement
When young people are dissatisfied with a job or feel it intrudes too much on their personal lives, they find a new one. Not so easy for older workers.
Their decision is complicated partly because they have fewer employment options as they age, but also because they must ask themselves whether or not it’s time to retire.
A study out of the University of Michigan’s Retirement Research Center found that people in their 50s, 60s, and 70s often choose to retire when long hours, inflexible schedules, and work responsibilities don’t allow them to do what’s required to help a family member or a sick spouse or to enjoy more leisure time.
Many things are constantly pushing and pulling older workers toward retirement, from lower pay, job stress, or unrealistic job demands to accumulating their required pension credits or having enough money in the bank. But the focus here is on lifestyle.
Marco Angrisani and Erik Meijer at the University of Southern California and Maria Casanova at California State University used a survey of some 6,000 older workers that asks about work-life conflicts and then followed them for nearly a decade to see if such conflicts led to decisions to reduce their hours of work or retire altogether.
The main takeaway was that both older men and older women who’ve had a work-life conflict in the past two years are far more likely to retire. This may not be surprising for women, who are typically the default caregivers for an ailing spouse, parent, or even a grandchild. …Learn More
June 14, 2018
Health in Old Age: the Great Unknown
This cartoon, by Vancouver Sun cartoonist Graham Harrop, hits on one of retirees’ biggest mysteries: their future health.
The elderly live with the anxiety of getting a grave illness that isn’t easy to fix, such as cancer or a stroke. And despite having Medicare insurance, they also have to worry how much it would cost them and whether they would run through all of their savings.
They’re right to worry. Health care costs increase as people age from their 50s into their 60s and 70s. About one in five baby boomers between 55 and 64 pays extraordinary out-of-pocket medical expenses in any given year. But by 75, the odds increase to one in four, according to a report summarizing the reasons that some seniors’ finances become fragile.
Large, unexpected medical expenses are one of two major financial shocks that threaten their security – widowhood is the other. A small and unlucky share of retirees will find it difficult to absorb a spike in their medical costs, forcing them to cut back on food or medications, the report said.
Harrop’s cartoon is the product of his cousin’s inspired suggestion that he fill a book with cartoons about the humorous accommodations made between couples who’ve lived together for decades. The book – “Living Together after Retirement: or, There’s a Spouse in the House” – reveals his personal knowledge of the subject. Harrop, who is 73, has lived with his partner, Annie, for more than 20 years.Learn More
June 12, 2018
Luck – or a Deliberate Path to Wealth
It’s usually not talent or street smarts or brains that make people wealthy and comfortable. It’s the luck of having rich parents.
But there is another way to get there, one that is within reach: becoming the first generation in the family to earn a college degree.
A new study by the Federal Reserve Bank of St. Louis, using the latest federal data on household finances, measures the impact of having that degree – or not having one – on wealth and income.
Although the ranks of college-educated Americans have grown over the past quarter century, people lacking a degree still make up a substantial majority – two out of three Americans. …Learn More