Women Lag in Retirement Readiness

When it comes to retirement, we women are in lousy shape.

We live longer, so will need more money when we retire. Yet we work less over our lifetimes and earn 80 percent of what men earn while we are working. As a result, we’ve saved less in our 401(k)s and IRAs.

Not surprisingly, the rising economic insecurity among all Americans ushered in by the Great Recession is more pronounced among women, according to reports Monday by the Institute for Women’s Policy Research (IWPR) in Washington:

  • 58 percent of women interviewed by IWPR were concerned they would not have enough to live on in retirement, compared with 43 percent of men;
  • 47 percent of women lacked confidence that their resources would last throughout their retirement, compared with 35 percent of men;
  • 51 percent of women worried they would not be able to afford retiree healthcare, compared with 44 percent of men.

Financial data support women’s concerns. In 2010, the average balance in defined-contribution plans managed by Vanguard Group, one of the nation’s largest mutual fund companies, was $58,833 for women and $95,675 for men. The median balance was $21,499 for women and $33,547 for men.

Women’s personal retirement savings are even lower, relative to men’s, when one considers that women live much longer. Among women born in 1935, 51 percent are expected to live until age 85 – just 36 percent of men will, according to the Center for Retirement Research at Boston College, which hosts this blog. Fully 13 percent of women will make it all the way to 95 – only 6 percent of men will. …Learn More

A woman laying on the ground, exhausted.

Financial Decisions Wear Us Down

Are Americans suffering from financial-decision fatigue?

After the relative calm of rising financial markets though the 1980s and 1990s, Americans have lived through a series of booms and busts. First came the Internet boom of the late 1990s, which busted. Then the real estate market took off just as “emerging markets” plummeted. That was only a prelude to the worst financial-market collapse since the Great Depression. The stock market is now bouncing around like a bungee jumper.

Roiling markets in recent years have spurred decision after decision – about retirement, home buying, downsizing, mortgage refinancing, spending on large purchases such as a car, and where to find a good job.

Investors are advised to stick with a long-term plan and not react to every market fluctuation. In reality, there’s a history of research showing that dramatic gains and losses do cause people to change their behavior. Many Americans decided to abandon the stock market after the 2008-2009 decline, which pummeled 401(k) balances.

Researchers at Boston College’s Center for Retirement Research (CRR), which hosts this blog, identified a related set of decisions. The Center surveyed people who had lost 10 percent or more of their retirement savings: 57 percent decided to delay retirement, save more money, or both.Learn More

Why Baby Boomers Can’t Retire

A centuries-old trend of retiring at an earlier and earlier age has completely reversed, concluded a July report by the TIAA-CREF Institute.

In 1910, men didn’t retire until they were about 73 but that dropped to age 63 by the mid-1980s, the golden era for generous union- and employer-sponsored pension plans. Then the retirement age and labor force participation ages started heading back up, according to TIAA-CREF’s report, “Early Retirement: The Dawn of a New Era?” Women experienced a similar though less dramatic trend.

The report provided numerous explanations for this, including the demise of the mandatory retirement age for most American workers; the improved health of older Americans; and technology that has created options about when and where they work. Many retirees go from full-time work to part-time “bridge” jobs.

But what about the economic and cultural forces that have left baby boomers, myself included, financially unprepared for retirement? Delay for us isn’t a choice but a financial imperative. …Learn More

A woman looking at a Guggenheim art exibit where an entire room is wallpapered with 100,000 $1 bills.

Money Is What You Make of It

Hans-Peter Feldmann, winner of the prestigious Hugo Boss Prize for contemporary art, displayed the precise amount of his $100,000 prize in this wall of overlapping dollar bills on display at the Guggenheim Museum in New York.

Feldmann’s art often groups similar items found in daily life to unearth their meaning. “Bank notes, like artworks, are objects that have no inherent worth beyond what society agrees to invest them with,” the museum said. “At its core, this formal experiment presents an opportunity to experience an abstract concept — a numerical figure and the economic possibilities it entails — as a visual object and an immersive physical environment.”

The exhibit is on display through November 2.Learn More

Over 50 and out of work logo.

Widows Have Social Security Options

Julie Taylor-Cooper, who worked for decades as an accounting manager, now scrapes by on her late husband’s Social Security checks and a $145-a-week job.

Many baby boomers like Taylor-Cooper may not realize there are various strategies for claiming full Social Security benefits that can have a dramatic impact on their retirement security.

“There are eight or nine options for retirees, spouses, and widows,” said Stephen Richardson, spokesman for the Social Security Administration. (Full disclosure: SSA funds this blog.)

Julie Taylor-Cooper from Over Fifty and Out of Work on Vimeo.

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Unseen Risks Challenge Consumers

Financial-product complexity isn’t talked about on Capitol Hill, where Congress is arming itself for battle royale over the appointment of Harvard Law School professor Elizabeth Warren to head the new Consumer Financial Protection Bureau.

But some economics and business professors are sticking up for the financial consumer, who they say faces an “ever-widening set of financial options” and “dizzying amount of information.”

“Households are expected to make decisions about pension plan contributions and payouts, to choose from a wide array of credit instruments to fund everything from home purchase to short-term cash needs, and more generally to assume a greater level of responsibility for their financial well-being,” Harvard economists Brigitte Madrian and John Campbell, Harvard Law professor Howell Jackson, and Peter Tufano at the Harvard Business School wrote in a recent paper.

“There is growing evidence that consumers make avoidable financial mistakes” with “nontrivial financial consequences,” they said.

Published in the latest issue of the Journal of Economic Perspectives, the paper used three case studies to support their call for more creative regulation: mortgages, payday loans, and 401(k)s. …Learn More

Identical cartoon men looking confused, all are in black and white except one.

Complexity Dogs Financial Consumers

There is a race between financial companies and their consumers, and the consumer is dead last.

It has become virtually impossible for regular folks to keep pace with Wall Street’s increasingly complex financial products or the confusing bells and whistles being attached to once-familiar products. Look no further than the “basic” checking account, which is no longer basic, according to a recent study by The Pew Charitable Trusts. And forget about deciphering “universal variable life insurance.”

Evidence of this complexity abounds in the personal finance section of The Wall Street Journal, which recently ran an article about the profusion of “draw-down” products to help retirees use their 401(k)s to lock in a steady stream of income. The newspaper also warned about the banking industry’s new push to sell “professional credit cards,” which aren’t subject to regulations that limit controversial billing practices.

Even with checking accounts, the devil is in the details. In “Hidden Risks: The Case for Safe and Transparent Checking Accounts,” Pew analyzed fees in 250 checking accounts – that’s how many were offered just by the nation’s 10 largest banking companies. Learn More

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