Posts Tagged "pension"

low-income older workers

Financial Survival of Low-Income Retirees

Watch these six videos and walk in the shoes of low-income older Americans. It’s an arduous journey.

Social Security is the primary or only source of income for the retirees who agreed to be interviewed for the videos. Since their income doesn’t cover their expenses, they live with family, frequent the Salvation Army, and continually stress about money.

“You’re lucky if you come out even or a little behind” at the end of the month, said Howard Sockel. The 81-year-old resident of Skokie, Illinois, supports two sons – one with autism and one unemployed – on his Social Security, a small Post Office pension, and credit cards.

The older workers who were interviewed are on the same road to a difficult retirement. Cathy Wydra, who was 64 when the videos were made, shares the expense of a two-bedroom apartment in a Chicago suburb with her daughter and grandson and sleeps on an inflatable mattress.

“It’s a little scary. I think, am I going to be able to retire in two years?” she says.

One out of three older people can’t cover their costs comfortably, often because they lack savings, said Sarah Parker with the Financial Health Network, which produced the videos in conjunction with AARP Foundation and Chase. “You often have to rely on debt, and that’s a very precarious financial situation to be in,” she said.

The video topics are: “When Fixed Incomes Fall Short,” “All in the Family,” “The Caregiver Conundrum,” “A Shock to the System,” “When Retirement Won’t Work,” and “Good Advice Never Gets Old.”

Some of the retirees admitted to making strategic mistakes around their retirement finances. Many other people have made these same mistakes, but they are catastrophic for people who were already on shaky ground. Verner Reid, a former Chicago teacher, was forced to retire when she became ill. Rather than a teacher’s pension, she took a lump sum and is now short on funds – “the mistake of my life.” …
Learn More

Photo from inside a factory

Hypertension, Arthritis? Keep Working!

The growing list of effective medications available for managing a variety of chronic conditions seem to be changing the way we work and retire.

For example, older workers at one company who suffer from arthritis and high blood pressure – two relatively easy conditions to treat – are able to keep working just like their healthier co-workers, according to a new study from a research consortium funded by the U.S. Social Security Administration.

In fact, the two specific groups in this study – employees with hypertension or a combination of arthritis and hypertension – actually worked an average of four to 10 months longer, respectively, than the healthy workers. This counterintuitive finding might owe to the fact that people with chronic conditions are motivated to work longer to maintain their employer health insurance. Another possibility is that, because of their condition, they pay closer attention to their overall health and take better care of themselves.

The researchers, who are from Stanford University’s Medical School and Princeton University, had the advantage of access to nearly 4,700 employees’ detailed medical records, which allowed them to track how their health progressed over an 18-year period, until they retired.

A limitation of the study is that the employees aren’t representative of the general working population. They were mainly white men employed in Alcoa smelters and fabrication plants around the country. And because it was very common for them to join the company in their 20s and qualify for a 30-year pension, their average retirement age was only 58.

But older workers in a wide variety of professions are reckoning with the need to work longer than they might have planned so they can afford to retire.

A chronic medical condition doesn’t have to be a barrier to working as long – or even longer – than everyone else. …Learn More

Paper airplanes in a row

Second Careers Late in Life Extend Work

Moving into a new job late in life involves some big tradeoffs.

What do older people look for when considering a change? Work that they enjoy, fewer hours, more flexibility, and less stress. What could they be giving up? Pensions, employer health insurance, some pay, and even prestige.

Faced with such consequential tradeoffs, many older people who move into second careers are making “strategic decisions to trade earnings for flexibility,” concluded a review of past studies examining the prevalence and nature of late-life career changes.

The authors, who conducted the study for the University of Michigan’s Retirement and Disability Research Center, define a second career as a substantial change in an older worker’s full-time occupation or industry. They also stress that second careers involve retraining and a substantial time commitment – a minimum of five years.

The advantage of second careers is that they provide a way for people in their late 40s, 50s, or early 60s who might be facing burnout or who have physically taxing jobs to extend their careers by finding more satisfying or enjoyable work.

Here’s what the authors learned from the patchwork of research examining late-life job changes:

People who are highly motivated are more likely to voluntarily leave one job to pursue more education or a position in a completely different field, one study found. But older workers who are under pressure to leave an employer tend to make less dramatic changes.

One seminal study, by the Urban Institute, that followed people over time estimated that 27 percent of full-time workers in their early 50s at some point moved into a new occupation – say from a lawyer to a university lecturer. However, the research review concluded that second careers are more common than that, because the Urban Institute did not consider another way people transition to a new career: making a big change within an occupation – say from a critical care to neonatal nurse. “Unretiring” is also an avenue for moving into a second career.

What is clear from the existing studies is that older workers’ job changes may involve financial sacrifices, mainly in the form of lower pay or a significant loss of employer health insurance. But they generally get something in return: more flexibility. …Learn More

Video: Retirement Prep 101

Half of the workers who have an employer retirement plan haven’t saved enough to ensure they can retire comfortably.

This 17-minute video might be just the ticket for them.

Kevin Bracker, a finance professor at Pittsburg State University in Kansas, presents a solid retirement strategy to workers with limited resources who need to get smart about saving and investing.

While not exactly a lively speaker, Bracker explains the most important concepts clearly – why starting to save early is important, why index funds are often better than actively managed investments, the difference between Roth and traditional IRAs, etc.

Bar graph showing percentage of workers without a 401kSome of his figures are somewhat different than the data generated by the Center for Retirement Research, which sponsors this blog. But both agree on this: the retirement outlook is worrisome.

The Center estimates that the typical baby boomer household who has an employer 401(k) and is approaching retirement age has only $135,000 in its 401(k)s and IRAs combined. That translates to about $600 a month in retirement.

Future generations who follow Bracker’s basic rules should be better off when they get old. …Learn More

Public Pension Cuts Hit Recruitment

West Virginia teachers started the wave of strikes over pay.
Photo courtesy of Janet Bass, American Federation of Teachers

Teachers’ strikes and walkouts over inadequate pay – in Arizona, Kentucky, Louisiana, North Carolina, Oklahoma, and West Virginia – are making news this spring. In Oklahoma, half the people who’ve left teaching recently said pay was their top reason for moving on.

A wave of reductions in another significant form of compensation – pensions – also appear to be making state and local governments a less appealing place to work, according to researchers Laura Quinby, Geoffrey Sanzenbacher, and Jean-Pierre Aubry at the Center for Retirement Research, which publishes this blog.

Pensions have traditionally been the great equalizer for governments trying to recruit people from the higher-paying private sector. But benefit cuts, which had been fairly uncommon, gained momentum after the 2008 stock market crash that battered pension funds’ already declining finances.

The pace of cost-cutting reforms peaked in 2011, when 134 state and local government plans made some type of cuts that year. They run the gamut from increasing the tenure requirement or retirement age applied to new employees’ future pensions to trimming the cost-of-living adjustment on all pensions. …Learn More

detective

‘Do I Have a Pension?’ Sleuths Can Find it

Diane Taylor

Betty Taylor is 74 and retired from a job she held for more than a decade filling Spiegel catalog orders and packing them up for shipping – she left in 1984. Diane Taylor, 70, was a packer and then a keypunch operator there between 1982 and 1995.

But the sisters, who live together in their late mother’s house on Chicago’s Southwest Side, couldn’t track down anyone who could confirm that their low-paying jobs entitled them to Spiegel pensions.

This is more common than one might think.

When a single employer or union has continued to maintain its pension plan over several decades, retiring workers know where to go to sign up for their benefits. But the sisters’ pensions got lost amid the confusion and paperwork shuffle around a series of mergers, bankruptcies, and name changes at Spiegel.

Betty Taylor

The confusion dates back to 1988, when the catalog company, which was founded by Joseph Spiegel after the Civil War, purchased Eddie Bauer. By 2003, Spiegel, loaded down with debt, was filing for bankruptcy protection and was subsequently acquired by the investors in Spiegel’s sole remaining asset, Eddie Bauer. The investors later transferred Spiegel’s pensions to Eddie Bauer’s corporate entity. In 2009, Eddie Bauer also went into bankruptcy, sending the pension funds to their final resting place: the federal Pension Benefit Guaranty Corporation (PBGC), which insures the pensions of failing companies.

Diane felt that a pension, if it existed, could really help out with her precarious finances. And she was pretty certain she remembered a pension from her years at Spiegel. So she started calling around.

“I got the runaround for four years,” she said. “I was persistent, and I was going to keep on until I had one foot in the grave,” Diane said. …Learn More