Posts Tagged "retirement"

To be Old is to be Happy

age and happiness chartAround age 58, people start getting happier. That’s what the research shows, and this blogger can attest to it.

In the new video displayed below, Rocio Calvo, a Boston College professor of social work, offers up theories for the happiness phenomenon – financial security is one. She also has some particularly striking “happiness statistics” on Hispanics and immigrants.

All over Boston College, academics are studying aging issues, which complement the financial and economic research turned out by the Center for Retirement Research, which sponsors this blog.   Calvo’s video is part of a series of videos by the multidisciplinary Institute on Aging at Boston College.

It’s interesting viewing for older people and their families, with apologies for the regression table (the significance of which quickly becomes clear if you stick with it).

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portlandia art

Portlandia Trashes “Instant Garbage”

Hilarious examples of “instant garbage” are offered up in this Portlandia clip by the show’s characters, Bryce Shivers and Lisa Eversman (played by Fred Armisen and Carrie Brownstein).

The price point for an unwanted consumer product that becomes instant garbage is $4.99.  “We found the exact point between price and hassle that guarantees you won’t bother returning” the product, Eversman explains in the video below.

Is the following theory a stretch? There seems to be a direct line between Americans’ relentless buying of stuff we do not need and our inadequate attempts at saving money.

Try walking into a craft superstore or browsing Target’s $1 shelf and suddenly imagining the stuff all piled up at its ultimate destination, the local landfill.

Then walk back out and save the money for retirement.


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Report: Healthcare a Middle Class Crisis

Chart: underinsuredThe state of the nation’s health care system includes these incredible facts:

  • Americans with health insurance who are “under-insured” have more than doubled to 41 million since 2013. They now make up 28 percent of adults.
  • Geographic disparities can be stark. Nearly one in three Floridians and Texans is under-insured, compared with one in five in California and New York. Not surprisingly, insurance deductibles are higher in Florida and Texas.

Much has been made of the fact that many Americans can’t afford their deductibles and out-of-pocket costs when purchasing polices under the Affordable Care Act (ACA).  The new report by the healthcare advocacy organization, The Commonwealth Fund, indicates that both ACA-insured and employer-insured Americans are frequently stretched to the limit.

Middle-class incomes for a family of four range from about $58,000 to $115,000.  The definition of middle-class people who have health insurance but cannot afford it is well-established in the research: their deductibles or other annual out-of-pocket costs exceed 10 percent of their annual household income. (For the poor, the threshold is 5 percent.) …Learn More

Flaming numbers

Older Savers Inch Ahead: $135,000 in 401k

The typical baby boomer couple had $135,000 in retirement savings last year, up from $111,000 in 2013 amid a rising stock market and a strong job market that has kept them employed, according to a report on the new Survey of Consumer Finances (SCF) by the Federal Reserve.

Yet $135,000 – the balance for working couples who have a 401(k) – won’t go very far. This amount, held in both their 401(k)s and IRAs, will generate about $600 per month, said the SCF analysis by the Center for Retirement Research, which supports this blog.  That’s obviously not enough to supplement most retirees’ primary source of income: their Social Security benefits, which are slowly eroding for various reasons.  The purchasing power of the $600 will also be eroded by inflation over time.

Another way to assess retirement preparedness for 60-year-olds couples hoping to retire in five years is that they need assets equal to 8.5 times their household income at age 60.  They actually have around 2.5 times income, on average, the researchers found. This assumes a replacement rate of 75 percent, a reasonable target for how much of a working couple’s income they will need to maintain their standard of living into retirement.

It’s Halloween today, and here is more evidence of just how scary Americans’ retirement prospects are: the $135,000 applies only to older people with retirement savings – about half don’t have a retirement plan at all at work. …
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Gen-X, Millennials: Now is the Time

figureGeneration X and millennials, there is time.

In contrast to baby boomers, who are now mostly too old to rack up appreciable increases in their 401(k)s – though they should try – younger Gen-X and millennials have time and compounding investment returns on their side.

This blog examines how they are faring – millennials, because saving and investing well now poises them for a secure retirement, and Gen-X because this “ignored” generation is sandwiched between the financial demands of parenting and parent care.  Their own assessments of their retirement preparedness appeared in a recent report by the nonprofit Transamerica Center for Retirement Studies (TCRS).

Millennials

“Millennials have heard the word that they need to save for retirement,” TCRS declared in its report summarizing its 2016 online survey of more than 4,000 workers.

Millennials’ ages are up through 37 in this survey.  Nearly three out of four who have 401(k)s at work are already saving for retirement. They typically started saving at 22, indicating impressive foresight about retirement dates far in the future.  Gen-X, ranging in age from 38 through 51, didn’t get started in earnest until they were 28.

While it’s great that millennials are saving for retirement, women in particular are not saving enough, said Catherine Collinson, president of TCRS. Among workers who participate in their employer’s 401(k) or similar plan, the survey finds that the typical millennial woman contributes only 5 percent to her plan, compared with 10 percent for millennial men.

Millennials aren’t taking advantage of their uniquely long investment time horizon, the survey finds. Retirement experts encourage younger adults to more aggressively invest 401(k)s in the stock market to enjoy decades of the long-term growth and compounding investment returns and potentially ride out the market’s inevitable volatility. Theoretically, if the stock market’s history proves true, equity-investing millennials can build up substantial retirement accounts, accumulating employers’ contributions and their own contributions and investment earnings over time.

But many millennials came of age during the 2008 financial crisis and still seem to be “in a state of shock with their concerns about the stock market,” Collinson said.  One in five millennials say they are investing conservatively in bonds, money market funds, and cash.

Generation-X

Baby boomers will be the last generation with substantial access to traditional pensions. Gen-X is the first generation to heavily rely on defined-contribution accounts. …Learn More

401(k) Nudges and Course Corrections

Nudge book coverBehavioral economist Richard Thaler, winner of the 2017 Nobel Prize for economics, regards his field’s greatest contribution as showing that people are more likely to save if the saving happens automatically.

“I’m all for empowerment and education, but the empirical evidence is that it doesn’t work,” he said in a 2015 Wall Street Journal interview. “That’s why I say make it easy.”

To make saving for retirement easier, employers have increasingly turned to automated 401(k)s. Automation has taken two basic forms.  The first, automatically enrolling each employee, is pervasive and has had notable success in increasing participation in retirement savings plans.  The second form, automatically increasing the amount employees save – a concept originated by Thaler and economist Shlomo Benartzi – is catching on. It’s hoped that the second will correct a problem created by the first.

Last year, 45 percent of Vanguard’s client base used auto-enrollment plans, according to its “How America Saves 2017” report.  Historically, employees were asked to enroll in their employer’s 401(k). Today, more employers are – as Thaler would say – “nudging” workers by automatic enrolling them, usually when they are hired.  Although they then have the freedom to opt out, inertia tends to keep them in the plans.

Participation in all types of 401(k)s has roughly increased in lock-step with the spread of auto-enrollment.  Last year, 79 percent of workers participated in Vanguard-administered plans, up from 68 percent a decade ago, when a new federal pension law made auto-enrollment more appealing to employers.

The irony, however, is that while auto-enrollment encourages more people to save, Vanguard partly blamed a 2016 drop in employee contributions on their popularity. The average employee contribution in all types of 401(k) plans declined from 6.9 percent in 2015 of pay to 6.2 last year, well below the 7.3 percent rate prior to the Great Recession, according to Vanguard. …
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Before Retiring, Do this Homework

If you don’t know this chart on the Social Security website, you should:

Social Security table

The chart shows the so-called Full Retirement Age (FRA), which is the age at which you’re entitled to your full monthly Social Security benefit, a pension based on your earnings history.

Many boomers see their FRA as the time they ought to retire. But the question they should be asking themselves is: will the monthly benefit I’ll get at my FRA be enough?

At a time when many Americans are in danger of not having enough money for retirement, the answer is frequently no. …Learn More

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