June 12, 2014
Government Workers See COLA Cuts
State and local government workers have long felt their pensions were more secure than the vanishing pension coverage in the private sector. But a spate of changes to cost-of-living protections should give them pause.
In the wake of the Great Recession, 17 states reduced, suspended, or eliminated cost-of-living increases (COLAs) in their defined benefit pensions for state and local workers, according to a recent summary of legislative actions around the country by the Center for Retirement Research, which sponsors this blog. And the courts are backing them up, deciding that the inflation protections – a fixture of the majority of public pensions – do not have the same constitutional or other legal protections that apply to core benefits.
The COLA changes, enacted to reduce government pension liabilities, generally affect both current retirees’ benefits and the future retirement benefits of active employees.
The above map shows where the cuts have occurred. The following is a summary of the specific change in each state: …
May 14, 2014
Low Income: Why Only 12% Save to Retire
A new study estimating that just 12 percent of low-income older Americans save in a 401(k) or similar employer retirement plan also suggests that many more would save – if only they could.
The researchers – April Yanyuan Wu, Matt Rutledge, and Jacob Penglase of the Center for Retirement Research – focused on individuals between ages 50 and 58 with household incomes below three times the poverty line. That was less than $36,357 in 2010 for a one-person household, for example, and less than $46,800 for two people. The period studied spans 1992 through 2010.
Retirement saving primarily takes place in workplace plans. But to participate in a plan, workers must clear four hurdles. First, they need a job. Next, their employer must offer a retirement savings plan. If there is a plan, they must be eligible to participate. And if eligible, they must sign up and contribute.
A failure to sign up can’t be blamed for the dismal savings rate of this low-income group. Instead, the problem is that many never get the chance. …Learn More
February 18, 2014
How Divorce Affects Women’s Earnings
In the aftermath of the women’s movement of the 1960s and 1970s, the incidence of divorce climbed, peaking around 1980.
Millions of women were suddenly on their own at a time when women were still having to prove themselves to many employers. But I remember being impressed by a college friend’s mother whose divorce wasn’t the disaster her family feared: she marched into a high-profile non-profit in Chicago and landed an impressive job.
It’s been well established in academic research that women often face financial struggles after divorce. Married women are typically better off, since couples can live more cheaply and since two incomes are better than one.
But a new long-term study of women who divorced during the mid-1970s indicates there were “positive effects of marital dissolution:” higher earnings. …Learn More
January 23, 2014
Retirement Delayed to Pay the Mortgage
Older Americans who are in debt are choosing to delay their retirement, researchers conclude in a new working paper.
In earlier findings released last summer, the researchers, Barbara Butrica and Nadia Karamcheva of the Urban Institute, documented the growing prevalence of borrowing since the late 1990s among adults ages 62 through 69. Median debt levels among those who owe also surged from $19,000 to $32,100, adjusted for inflation – and debts as a share of their assets increased.
Now comes the rest of the story. When the researchers controlled for health, financial assets, home values, and other forms of wealth, as well as spouses’ earnings and other factors that play into decisions about retiring, they found that individuals with debt, especially mortgages, behave differently than those who are debt-free.
Here are their main findings:
- Nearly half of all people in their 60s with debts continue to work, compared with only one-third of those who have no debt. …
January 16, 2014
Parents’ Longevity Sways Plans to Retire
Penny DeFraties, a teacher, shared her reaction to a 2012 article that appeared on this blog:
The day I hit my minimum retirement age, I’m gone. I look forward to traveling, gardening, spending time with my grandkids, and volunteering at church, the American Red Cross and USO. My first husband died of a heart attack at 49-years-old, and my current husband lost his first wife to MS at 50-years-old.
The notion that life is short is a valid reason to retire – to travel or enjoy the grandchildren before it’s too late. And the academic literature clearly shows that the age at which people exit the labor force is related to how long they expect to live.
Building on this research, a new study nails down how we arrive at our personal estimates of our life expectancy and provides new insight into the critical retirement decision.
Using data for individuals between the ages of 50 and 61, economists Matt Rutledge and April Yanyuan Wu with the Center for Retirement Research (CRR) and Boston College doctoral candidate Mashfiqur Khan confirmed that individuals estimate their own life expectancy based in part on how long their parents lived. (Full disclosure: the CRR supports this blog.)
They went on to link this “subjective life expectancy” with when older workers plan to retire, as well as when they actually do retire. …Learn More
December 10, 2013
Compare Your Retirement to Peers
How are your retirement plans going? If you’re a conservative Generation Y investor, are you in the mainstream? Baby boomers, how many in your generation are planning to retire at the same age you do?
Compare yourself with your peers in this cool interactive quiz developed by the Boston mutual fund company, Fidelity Investments.
Click here to check it out.
As you answer each question, you can compare yourself with your peer group’s answer to that same question, based on a prior survey for Fidelity by the polling company, Gfk. Your peer group is determined by your income and your generation – baby boomer, Generation X and Generation Y. Fidelity also provides useful information and tips with each question. …Learn More
December 5, 2013
Laid-off Boomers: Retirement as Default
The natural reaction to losing a job is to get a new one. But when older people become unemployed, some view it as a dilemma: look for work or just retire?
The presence of a financial safety net significantly increases the likelihood that an older, unemployed person will retire. And that decision often comes quickly after they lose their job, concluded a new study by Matt Rutledge, an economist for the Center for Retirement Research, which supports this blog.
“The brevity of [their] jobless spells suggests that older individuals have little tolerance for a job search” and will “make a quick exit” if they have financial resources backing them up, Rutledge wrote in a recent summary of his research.
His findings get to the heart of the difficult choices facing older workers when they are laid off, no more so than amid the Great Recession when the jobless rate among people over age 55 hit a record 7.3 percent. Rutledge tracked individuals between 55 and 70 who lost their jobs between 1990 and 2012. …Learn More