older workers

Future ‘Retirees’ Plan to Work

Most people used to sign up for Social Security when they were fairly young – around 62, which is the earliest age allowed. Not today: fewer than 40 percent are filing for benefits at that age.

text box calloutSo what else are we doing differently?  Well, working in retirement is high on the list.

About one in three Americans calling themselves retired in a new AARP survey have worked or now work in part-time, seasonal and sporadic jobs or sometimes full-time.

Keeping in mind that people don’t always do what they’d planned, boomers’ expectations for work exceed what current retirees are doing. Well over half of workers over 50 plan to find some kind of work after they retire.

The seeming oxymoron – working “retirees” – plays out in various ways.  State and local government workers retire as early as their 50s if they’ve worked enough years to max out their pensions. Some of these civil servants find other jobs while collecting a pension. Boomers who’ve left career jobs but lack a pension cut back to part-time work in their field or find a full- or part-time job in a new field.

Money is a major reason, with a notable exception. Some people work into their late 60s or 70s because they just enjoy it. They’re usually the most educated and frequently see their jobs as a labor of love that sustains their personal growth, professional identities, or relationships. …Learn More

champagne toast

Changes in Marriage Increase Class Divide

marriage rates by classIn the 1960s, half of all wives were housewives, and their husbands often earned enough money to support a family. Today, these traditional families are a rarity and two incomes have become essential to surviving economically.

A new joint report by the American Enterprise Institute and the Brookings Institution argues that poor and working-class families’ increasingly fragile family structure – despite the rise of dual-income spouses – often leaves them “doubly disadvantaged.” And lower marriage rates among poor and low-income couples help to explain why “America is increasingly divided by class,” write the authors, W. Bradford Wilcox, a professor and director of the National Marriage Project at the University of Virginia, and Wendy Wang, research director for the Institute for Family Studies.

They explain that higher rates of divorce and of couples cohabiting affected the poor’s marriage rate first and most harshly in the 1960s; working-class couples were next, though to a lesser extent in the 1980s. Marriage is far more common among the middle and upper classes.

The authors cite several economic and social forces behind these trends. The losses that less-educated, lower-income men “have experienced since the 1970s in job stability and real income have rendered them less ‘marriageable.’ ”   Stagnant or declining wages for middle- and working class couples impede their ability to afford a home, which is the most valuable financial asset most households own.  Couples lacking property may “have fewer reasons to avoid divorce.” …
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Boomers’ Mortgage Debt Predicament

You’re not going to like this, baby boomers.debt_home

You have more debt than the two generations born during the early Depression and World War II, much of it compliments of the mortgage bubble that financed your larger, more expensive houses. The housing bubble popped in 2008, but the mortgage on the new house or perhaps a second mortgage continues to plague many.

It should be no big surprise that a new study finds the “substantial” debts taken on specifically by those born in the late 1940s and early 1950s will gobble up more of their not-always plentiful retirement income.

“The evidence clearly shows that many Americans” on the cusp of retiring “continue to be burdened by debt and to be financially vulnerable,” the researchers said.

The lead researcher, Annamaria Lusardi at the George Washington University School of Business, is a national expert in financial literacy. As part of her study, she also wanted to understand how these early boomers manage their debts.  It turns out that people overburdened with debt more often have lower levels of financial literacy. However, debt is also an issue among older workers in poorer health or those who’ve seen their incomes decline, which is fairly common over 50. …Learn More

Retirees say ‘Ugh’ to Medicare Shopping

medicare chartIn terms of popularity, reviewing Medicare plans during the open enrollment, going on now, ranks right up there with doing taxes.

Retirees on Medicare view healthcare as their most burdensome expense.  But they are less likely to comparison shop for Medicare plans than for their groceries and gas, even though plan shopping would probably save more money.

Deciding on a Medicare Advantage plan or deciding to switch to traditional Medicare, with or without a Medigap supplement, is “overwhelming, scary, and has consequences, so we put it off,” said Bart Astor, a spokesman for the insurer WellCare Health Plans, whose nationally representative survey quantified just how much retirees dread Medicare enrollment.

Selecting one path over another also necessitates predicting the impossible: their future health and how much coverage they will need.

Squared Away can’t predict your medical needs in 2018 either.  But perhaps one of these blogs will help you decide which path to take:

  • Free help navigating Medicare’s maze
  • 10 rules for Medicare Advantage shopping
  • Know the pitfalls of spotty hospital coverage in Advantage plans
  • Advantage premiums reflect physician networks
  • Fewer, clearer Medicare Part D choices
  • Avoid initial Medicare enrollment mistakes
  • Medicare primer: Advantage or Medigap?

If you haven’t shopped yet, why not get started on Black Friday?Learn More

logos

The Lyft Economy: it’s a Side Job

platform economyDriving around major U.S. cities, it seems like every other car has a Lyft or Uber logo in the back windshield.

These ride-sharing apps are prominent players in the increasingly popular “platform economy,” which links sellers with buyers of their goods and services, from used couches and basement junk to handymen and car rides. This is one corner of the fast-growing gig economy, which also includes freelancers and the self-employed.

But who takes on these jobs, are they long-term or short-term endeavors, and how reliant are participants on the income they generate through online platforms or apps?

Scouring its database of transactions in the bank accounts of 240,000 bank customers who participate in the platform economy, the JP Morgan Chase & Co. Institute has put together a completely anonymous but interesting profile of the participants in this ever-present, but little-understood part of the economy.

Despite a proliferation in platforms, Fiona Greig, director of research at the JP Morgan Institute, said it’s fairly clear from these data this usually is not U.S. workers’ first choice for earning a living.  Most people, “are not relying heavily on this,” she said.  While users have to sell their wares on a piece-rate basis, “the flexibility that this offers makes for the perfect opportunity to add income.” …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

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