November 6, 2012
Dicey Retirement: The Long Ride Down
No one really needs confirmation of how tough the Great Recession was. But the Center for Retirement Research at Boston College has quantified the decline – and it’s brutal.
Investment losses and falling home prices placed 53 percent of U.S. households in danger of a decline in their standard of living after they quit working and retire, reports the Center, which funds this blog. That’s up sharply from 45 percent in 2004, prior to the financial boom, which created a strong – albeit fleeting – increase in Americans’ wealth.
The longer-term erosion in Americans’ retirement prospects is even more troubling and reflects deeper issues. The Great Recession just hammered the point home.
In 1989, just under one-third of Americans faced such dicey retirement prospects. The steady erosion since then coincides with the near-extinction of traditional employer pensions that guaranteed retirees a fixed level of income. It turns out that the DIY system that replaced them, a system reliant on Americans’ ability to save in their 401(k)s, is not working.
Older baby boomer households with 401(k)s have just $120,000 saved for retirement, according to the Center. That’s not even enough to pay estimated medical costs not covered by Medicare. Retirement savings for all older boomer households is a paltry $42,000 – that means a lot of people have no savings…Learn More
October 11, 2012
Boomer Moms, Here’s A Radical Idea
Research shows that when children leave the nest, married couples spend 50 percent more on discretionary spending like eating out and vacations. But whether you’re ready or not, retirement is bearing down hardest on women.
Here’s a radical concept for moms whose children have suddenly grown up: focus on your own financial needs. Women usually out-live their husbands and need to be on top of the situation. So getting a handle on your financial priorities should be at the top of your list.
Squared Away interviewed financial experts to come up with five priorities for baby boomer women whose kids have flown the coop.
Get Smart. If you haven’t had time to pay attention to the household finances, start simple. Financial expert Wendy Weiss, on her blog, Hot Flash Financial, said the first thing to do is track down and inventory the types of accounts and the financial institutions that hold your money: savings, retirement plans, insurance documents, your and your husband’s latest Social Security statements – add them up and determine what you’ve got. Then get a handle on the size of the credit card debts and mortgage.
“Just find out what you have,” Weiss says. “There are questions you can ask later.”
Talk to Your Kids. You’ve poured your heart into nurturing your offspring. So turn the tables and ask them to have a conversation about your needs once you retire.
Financial advisers swear by these wide-ranging discussions, the content of which reflects the diversity in families. The children will be reassured if you’ve saved enough or will share your concern if you haven’t. Perhaps they’ll have opinions about whether you should purchase long-term care insurance. They should also know the beneficiaries on your financial and pension accounts and insurance…Learn More
October 4, 2012
The Long-Term Care Insurance Gamble
A good friend in Houston recently emailed me to ask whether she should buy long-term care insurance. Let me be very clear about my answer: I have no idea.
This writer is like baby boomers everywhere trying to get a grip on this long-term care stuff. Where to start?
First, let’s look at the prices for long-term care. Squared Away used data from Genworth, one of the nation’s largest insurers in this market, to generate a U.S. map with the median cost in each state of a semi-private room in a nursing care facility.
Genworth’s goal is obviously to sell insurance. But I ran its data by a few people, and it held up well, with a few observations and caveats discussed later…Learn More
September 20, 2012
Social Security: There is a Better Way
Married couples have up to 567 options for deciding when and how to file for their Social Security benefits. Yes, 567!
“They are faced with a bewildering array” of choices, said David Freitag, vice president of Impact Technologies Group Inc. in Charlotte, North Carolina, which just released a spiffy, user-friendly Social Security calculator to help.
No wonder people just throw up their hands and claim their benefits at 62, when they first become eligible. But in the midst of the baby boomer retirement tsunami, oodles of calculators are coming online to simplify the decision for couples. Impact is offering a 14-day free trial to anyone who wants to test its calculator.
Couples’ strategies have become more complex, because today’s boomer wives have spent a lifetime working and because they may earn wages rivaling or exceeding their husband’s, said Jim Blankenship, a financial planner in New Berlin in central Illinois. There is also more money at stake in making the right decision, he said.
“Before, it was much easier to have a rule of thumb to go by,” he said. “The decisions are different than what they used to be.” …Learn More
September 6, 2012
Campaign Discourse Misses Major Issue
Retirement-income security is receiving little attention as the presidential campaign heats up, despite a mound of evidence that Americans’ retirement prospects are stagnating – or worse.
While Medicare has been at the center of the debate, there has been little emphasis on the broader topic of income security for what remains the largest demographic bulge in U.S. history – the baby boomer generation – and now the largest block of retirees.
In the retirement community, however, debate swirls constantly about how bad the situation really is. These debates are slicing the onion awfully thin when one research paper or report after another contains a new aspect of the troubling fallout from the final years of a transition from secure, employer-guaranteed pensions to DIY retirement. Sometimes it seems that Wall Street’s collapse in 2008 was just the kickoff for the bad news on the retirement front.
A new report from Boston College’s Center for Retirement Research, which funds this blog, finds that just 42 percent of workers in the private sector had pension coverage in their current jobs in 2010 – that’s coverage of any kind, including the defined-contribution plans that now dominate. Yikes!…Learn More
September 4, 2012
Flatline: U.S. Retirement Savings
Baby boomers’ balances in 401k and IRA accounts have barely budged for most of the past decade.
In 2004, the typical U.S. household between ages 55 and 64 held just over $45,000 in their tax-exempt retirement plans. Plan balances for people who fell in that age group in 2007 rose but settled back down after the biggest financial crisis in U.S. history. In 2010, they were $42,000, a few bucks lower than 2004 balances.
These are among the reams of sobering data contained in the Federal Reserve’s 2010 Survey of Consumer Finances released in June. The $42,000 average balance is for all Americans – it includes the more than half of U.S. workers who do not participate in an employer-sponsored savings program.
There’s more bad news buried in the SCF: the value of other financial assets such as bank savings accounts dropped in half, to $18,000. And hardship withdrawals from 401(k)s have increased, to more than 2 percent of plan participants, from 1.5 percent in 2004.
So, where did all that wealth created by the longest economic boom in U.S. history go? The 2008 financial collapse didn’t help. But we can also blame the baby boom culture. Click here to read a year-ago article that examines the cultural reasons for the troubling condition of our retirement system.
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August 14, 2012
Hard Labor Spells Earlier Retirement
Men with the most physically demanding jobs retire earlier – by choice or due to exhaustion or chronic pain – increasing the financial pressures facing this segment of the workforce once they reach old age.
The retirement age for most Americans continues to float upward as people delay the date so they can sock more money away or boost the eventual size of their Social Security checks. But that’s often not a viable option for people with highly physical jobs, such as the 1,500 Alcoa plant workers in a new study.
The retirement pattern for Alcoa workers studied by the Stanford University School of Medicine suggests that men in manufacturing jobs face a unique set of retirement issues related to the physicality of their work. Most of the workers in Stanford’s 2001-2008 study were employed in aluminum smelters. The study found that men in these demanding jobs retired, on average, at age 60 and six months – a full year earlier than their male Alcoa coworkers with jobs such as floor inspector or shipping clerk.
“Those with heavier jobs retire earlier. Those with more sedentary jobs retire later,” Sepideh Modrek, a Stanford medical school lecturer, said at the recent Retirement Research Consortium conference, where she presented the results of her working paper. [The Center for Retirement Research, which sponsors this blog, is a consortium member.] … Learn More