December 1, 2015
What Derails a Planned Retirement Date
Workers are feeling very ambitious these days: one in three plans to retire after age 65. In the 1990s, just one in 10 did.
In reality, though, many older Americans today are retiring before they’d planned, resulting in lower monthly Social Security checks, slimmer 401(k) accounts, and more golden years to pay for.
There’s no shortage of research looking into what derails these plans. But, for the first time, a new study ran a statistical horse race among the various reasons known to impact older workers’ decisions. Health issues finished first in the race, followed by layoffs, and a spouse’s early retirement.
In an ideal world, eliminating these major shocks, along with a few less prevalent shocks that were also analyzed, would reduce the share of older workers retiring earlier than planned, from 37 percent to 27 percent. [The remaining factors that were still unaccounted for in this analysis could be anything from not liking one’s job to financial or health events that went undetected by the survey.] …Learn More
November 12, 2015
Mortgage Payoff? Freedom vs the Math
Financial planner Diahann Lassus views as misguided the “obsession” some baby boomers have with paying off their mortgage before they retire.
But Jane Rose, who has done just that with the loan on her home in Cherry Hill, New Jersey, has discovered how liberating it is. “I’m such a happy camper,” she said.
The math versus the emotion, the rational versus the irrational, head versus heart – that’s a simple way of framing a complex issue. Many boomers looking ahead to their retirement years are grappling with whether to pay off their mortgage before they retire or shovel any spare funds into their employer’s 401(k). Both arguments have merit for very different reasons.
First, the math. The alternative to paying off the mortgage – extra funds for the 401(k) – will provide more savings, more net wealth (assets minus debt), and more financial flexibility in retirement, according to many financial planners and an economist here at the Center for Retirement Research (CRR).
“There are few problems in life that aren’t mitigated by having a lot of money,” says Anthony Webb, CRR senior economist.
Indeed, directing extra contributions to a 401(k) is particularly attractive to well-heeled boomers in high tax brackets, who benefit the most from having both tax breaks: the federal mortgage interest deduction and the 401(k) tax deferral for contributions.
Other considerations, however, can tilt the balance toward paying more on the mortgage. …Learn More
November 5, 2015
Meaningful Work Improves Health
Older workers with jobs that give them a high degree of control and influence or a sense of achievement and independence tend to be healthier, new research finds.
The specific benefits of these “psychosocial” aspects of work include lower blood pressure, musculoskeletal agility, better cognitive functioning and improved mental health. They’re equivalent to the health benefits associated with vigorous exercise three times a week, the study found.
Researchers long ago established a strong connection between poor health and jobs requiring strenuous physical activity in harsh conditions. This new study looks at a wide array of psychosocial job characteristics increasingly relevant in the New Economy, as well as revisiting the grueling physical characteristics prevalent in the manufacturing-driven economy of the past.
Lauren Schmitz, a postdoctoral fellow at the University of Michigan, tracked 50- to 64-year-old men working full-time over an 18-year period. The researcher used the Occupational Information Network, which gauges some 970 occupations, to identify the current physical and cognitive demands of their jobs, as well as their physical environments. Controls included factors such as the workers’ childhood health, smoking, exercise, mid-career earnings, and their parents’ socioeconomic status.
The study revealed a strong association between the men’s health and the psychosocial characteristics of their employment. Further, workers who were required to make “high-stakes decisions” had better cognitive functioning. Interestingly, only weak links were found between declining health and the environmental hazards and strenuous physical demands that the workers faced late in their careers.
“Occupations that allow men to use their strongest abilities and give them a sense of achievement, independence, variety, authority, creativity, and status are associated with improved health at older ages,” Schmitz concluded.Learn More
October 29, 2015
Fewer Boomers Get Social Security at 62
The best way for most individuals to increase their retirement income is by delaying Social Security – each year they wait significantly boosts their monthly benefit check.
It seems that baby boomers are getting the message. The share of people who claim their Social Security benefits at age 62 – as soon as they’re eligible – is falling, and falling more rapidly than previously thought.
The share of 62-year-old men who claimed immediately dropped from 56 percent in 1996 to 36 percent in 2013, according to the Center for Retirement Research, which supports this blog. For women with the same birth years, the share of 62-year-old claimers declined from 63 percent to 40 percent.
The Center also confirmed that more people are waiting to sign up for their benefits until after their full retirement age under the program, which is 66 for most baby boomers. Waiting provides at least one-third more in their monthly Social Security checks than the 62-year-old claimers receive. …Learn More
September 15, 2015
401(k) Catch-up: Help for the Few
Longer lives, eroding Social Security benefits, and rising health care costs – these are just some of the reasons older workers need to save more in their 401(k)s.
To encourage them, Congress in 2001 approved a “catch-up contribution” for workers over age 50. The size of this additional tax-deductible contribution started at $1,000 in 2002 and jumped to $4,000 by 2005 and $5,000 in 2006. (After 2006, it continued to increase, though only at the rate of inflation, and is currently $6,000.)
But the catch-up contribution has not turned into a broad-based solution to Americans’ retirement woes that some proponents had claimed at its passage. According to researchers at the Center for Retirement Research (which supports this blog), it helps only a select group of older workers: those who were already contributing at or near the tax-deductible maximum allowed on their regular 401(k) contributions. It’s a group with higher-than-average incomes and wealth than the typical older worker. …Learn More
August 18, 2015
The Future of Retirement Is Now
Gray, small, and distinctly female.
This is what the director of MIT’s AgeLab, Joseph Coughlin, sees when he peers into the future of retirement.
“The context and definition of retirement is changing,” Coughlin said earlier this month at the Retirement Research Consortium meeting, where nearly two dozen researchers also presented their Consortium-funded work on a range of retirement topics. Their research summaries can be found at this link to the Center for Retirement Research, which supports this blog and is a consortium member.
Coughlin spooled out a list of stunning facts to impress on his audience the dramatic impact of rising longevity and graying populations in the developed world, and he urged them to think in fresh ways about retirement. In Japan, for example, adult diapers are outselling baby diapers. China already faces a looming worker shortage, and Germany’s population is in sharp decline. In 2047, there will be more Americans over age 60 than children under 15.
“The country will have the demographics of Florida,” Coughlin said. …Learn More
August 6, 2015
Retirement Researchers Convene Today
Why do older workers retire before they’d planned? How has the Affordable Care Act affected retirees in particular? And what’s known about U.S. immigrants’ wealth levels and Social Security contributions?
Researchers from around the country will present their findings on these and a range of other retirement topics during the 17th annual meeting of the Retirement Research Consortium, starting today at the National Press Club in Washington, D.C.
For the meeting agenda, click here.
The Consortium’s members are the Center for Retirement Research at Boston College (which supports this blog), the NBER Retirement Research Center, and the University of Michigan Retirement Research Center. The studies being presented are all funded by the U.S. Social Security Administration through the Consortium’s members.Learn More