Posts Tagged "retire"

Video: Wisdom from Decades of Living

A Jewish child rides the Kindertransport out of Nazi-controlled Austria to safety in England, eventually coming to the United States. A Japanese-American mother is confined to an internment camp. A child of Mexican farm workers in California goes to bed hungry. A young African-American organizes sit-ins for Civil Rights.

Taken together, the early life stories shared by the individuals in a new PBS feature, “Lives Well Lived,” are a compendium of U.S. history. The trailer that appears above can’t do justice to the full video, which can be viewed free of charge on the PBS website until Sept. 29.

Despite their trials, these individuals have embraced life with a zeal and perseverance that are surely part of the secret to how they have made it into their 80s or 90s. And there is a growing body of scientific evidence that the healthy lifestyle and even the positive attitude these seniors display improve longevity.

“When I wake up in the morning, I expect something good to happen,” one woman said. “Sometimes it’s postponed to the next day or the day after, but inevitably something wonderful happens.” …Learn More

Not Everyone Can Delay their Retirement

Retirement experts encourage baby boomers to hang on to their jobs as long as possible to boost their monthly Social Security checks and add to their retirement savings. If they can delay retirement to age 70, they have good odds of maintaining their standard of living.

That isn’t always possible, however, for the baby boomers confronting disabling physical impairments or health problems. Add to that the generally declining health of the older population over the past 20 years.

Working to 67But a new study has revealed a deep socioeconomic divide. More-educated older workers are actually able to work longer than they did 15 years ago, while less-educated older workers – and Black men in particular – are mostly losing ground.

To estimate the changes in working life expectancy for various groups of older workers, Laura Quinby and Gal Wettstein at the Center for Retirement Research considered three factors: life expectancy overall, how long the workers can expect to remain free of a disability, and the rates of institutionalization in prisons and long-term care facilities. The incarceration rate is relevant, because the young adult men who received the longer prison sentences that started being imposed a couple of decades ago are now in their 50s and 60s.

Between 2006 and 2018, working life expectancy increased by about one year for older Black and white workers in the top half of the educational ranking. This makes sense because more educated people tend to be healthier and have seen stronger gains in their longevity.

But working life expectancy declined in the bottom half of the educational ranking for Black men and for white men and women. The exception is less-educated Black women – they have seen a small increase in working life expectancy, along with a more substantial increase in longevity.

The researchers also estimated the share of each group who, at age 62, could feasibly work until age 67, which would lock in their full retirement age benefit every month from Social Security, and until 70, which would provide them with their maximum monthly benefit.

A comparison of two extremes – more-educated white men and less-educated Black men – dramatizes the divide. …Learn More

No-Benefit Jobs Better than Retiring Early

Woman in taxiMany workers in their 60s lose some of their stamina. Either their bodies start showing signs of wear, or they don’t tolerate on-the-job stress like they used to.

People who find themselves in this situation but can’t afford to retire will appreciate the findings in a recent study: older workers who transition to a new job – and perhaps a less demanding one – have greatly improved their retirement finances, even if the new job lacks health and retirement benefits.

The starting point for the analysis was to identify 61- and 62-year-olds employed in career jobs and follow the changes in their retirement finances over time, as they break into three groups. Some retired, some remained in longstanding jobs with benefits, and some found no-benefit jobs, whether with an employer or as an independent contractor.

Matt Rutledge and Gal Wettstein at the Center for Retirement Research compared each group’s retirement prospects in their early 60s with where they ended up years later, after the majority of them had retired. The focus was on the people who, at 62, were falling short of what they would need to retire comfortably.

The financial assessments were based on so-called replacement rates – estimated retirement income as a percentage of employment earnings. The average target required for financial security in old age is about 75 percent of past earnings, though the precise number depends on how much the individual earned.

The researchers estimated replacement rates for the 62-year-olds who fell short of the targets and estimated the rates again when they were 67 or 68. Retirement security improved over time for the under-prepared people who continued to work – in contrast to an erosion in security for the people who, despite falling short, had retired at 62 and locked in a small Social Security check.

The most interesting finding concerned the older workers who had extended their employment by switching to no-benefit jobs. Their retirement income in their late 60s replaced 68 percent of their past earnings, on average – still less than what they need but up dramatically from 52 percent if they had retired early. …Learn More

Last will and testament

Retirees Intent on Leaving Homes to Kids

Every year, older homeowners leave billions of dollars worth of the wealth locked up in their houses to their adult children.

This is a paradox if one considers that home equity is one of retirees’ primary assets and could be a crucial source of income for people who are “house rich and income poor.” Retirement experts searching for an explanation have long wondered whether the deceased had intended to leave the house to family or simply died before they were able to cash in on the equity and spend it.

A new study has an answer: retirees have every intention of letting family members inherit their homes. The people in the study who expressed a stronger desire to leave an inheritance of at least $10,000 were much less likely to sell their homes before they died – with the intention that the house would be part, if not all, of that inheritance.

The foundation for this study is a precise estimate of the housing decisions being made in the final two years of life from a survey of older Americans. The researchers counted as many people as possible, including the deceased – their final living status came from interviews with next of kin – as well as people who continued to be homeowners after going into hospice or a nursing home.

The homeownership rate in the older population peaks around age 70 and starts falling precipitously after 80. But when the elderly in the study died, about half of them still owned their homes, while the other half had sold them and moved into rental housing.

At younger ages, the retirees had been asked to estimate the probability, from 0 (no chance) to 100 (definitely), that they would leave a financial inheritance. Based on this information, the researchers found that those who had said they had a high probability of leaving an inheritance remained in their homes.

There is also a financial advantage to the owner of not selling the house to avoid the capital gains tax, especially if the price appreciated dramatically during their lifetimes. The researchers didn’t account for this incentive in their analysis.

But they did find that the desire to leave a bequest is so compelling that parents held on to their homes even after predicting they might need to pay for nursing home care within a few years. …Learn More

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Big Picture Helps with Retirement Finances

The prospect of retiring opens a Pandora’s box of questions. But one big question dominates all the others: How will I manage my finances when I retire?

This is a vexing problem, and baby boomers could use some help thinking it through. To ease the process, a team at UCLA and Cornell University led by David Zimmerman, a UCLA doctoral student, created an online decision tool. In an experiment, they found that the tool might help future retirees understand how to smooth out their income over many years and make their savings last.

The results are preliminary, and the researchers are refining their analysis. But for the initial experiment, they recruited 400 people, ages 40 through 63. The participants were instructed to use the tool to make three big retirement decisions: starting Social Security, choosing a 401(k)-withdrawal strategy, and deciding whether to purchase an annuity. Their decisions would be on behalf of a 60-year-old who is single and plans to retire in two years. He earns $55,000 and has $250,000 in savings to work with.

The participants were split into two comparison groups. One group received immediate feedback on the impact of each separate decision. For example, when the participants picked a Social Security starting age for the hypothetical person, a chart showed a horizontal line tracking the fixed annual benefit locked in by that decision.

When they moved on to another page and selected a plan for 401(k) withdrawals, a chart showed the age when the savings would probably run out. The final decision was whether to buy a deferred annuity with some portion, or all, of the 401(k) assets. The chart on this page displayed the fixed income the annuity would generate every year for as long as the person lives.

The participants were encouraged to change their decisions as much as they liked to see how a change affected that particular source of income. But the researchers suspected that seeing each decision in isolation doesn’t help to clarify how various decisions work together to determine total retirement income over time.

So, the second group got to see the big picture. The chart in this case displayed the impact of any single decision on the annual income from all sources.Learn More

New York during COVID-19

Struggling Workers’ Financial Woes Mount

The COVID-19 economy is really a tale of two worlds.

The stock market and housing market have largely shrugged off the economic slowdown. But severe financial problems are brewing for millions of workers who have lost their jobs or are earning less in a lackluster economy.

The assistance passed by Congress will certainly help. Still, half of all workers reported in a Transamerica Institute survey late last year that they are experiencing at least one employment disruption, whether a layoff, reduced work hours, shrinking paychecks and commissions, or an early retirement. A crisis also looms for thousands of renters if the Centers for Disease Control allows its eviction moratorium to expire at the end of this month.

Paying taxes is another big worry. When the pandemic struck and unemployment spiked last spring, the IRS postponed the deadline for filing federal taxes by three months, to July 15.

COVID-19 hasn’t gone away – and neither has concern about paying taxes. More than half of taxpayers said they might have to borrow money to pay their 2020 taxes this April, according to a LendEdu survey last month.

Other aspects of Americans’ financial problems were captured in two more surveys about the pandemic’s impact:

The Millennials who are still saddled with student loans have struggled for years to pay their other living expenses. The COVID-19 relief bill gave them a respite by suspending their monthly payments for most of 2020, and the U.S. Department of Education extended that at least through January. But one financial problem has been replaced by others for the young adults who are unemployed or earning less.

About one in five people in their late 20s and 30s reported in a 2020 survey by Georgetown University’s business school that the pandemic forced them to take a variety of stopgap financial measures. These have included dipping into retirement funds, delaying or reducing credit card payments, and getting food and rental assistance from non-profits. …Learn More

Cash from Kids Slows After Parents Retire

Family laughingIt’s not unusual for workers who grew up in lower-income households to help their parents out financially.

But a new study uncovers a twist in this familiar story: once the parents are old enough to collect Social Security, the money flowing from adult child to parent slows down. And when this occurs, the offspring are able to start saving money.

Social Security, by reducing disadvantaged parents’ reliance on their children, “may be able to interrupt the cycle of poverty between generations,” Howard University researcher Andria Smythe concluded from her analysis.

To chart changes over time in cash transfers within families, Smythe followed U.S. households’ finances between 1999 and 2017 using survey data from the Panel Study of Income Dynamics.

She found that the financial support going to parents in the bottom half of the U.S. income distribution was substantial. These parents received about $8,000 from their offspring over time. In contrast, among the higher-income families, money consistently flowed in the opposite direction – from parent to child.

After the lower-income parents turned 62 and started their Social Security, the likelihood the adult children would continue to support them declined, according to the study, which was conducted for the Retirement and Disability Research Consortium.

This, in turn, had a positive effect on the adult children’s wealth. People who grew up in lower-income families saw the biggest bump in wealth, adding about $13,000 in the years after their parents turned 62.

Social Security benefits, Smythe concludes, “may contribute to wealth-building among the adult children’s generation.”

To read this study, authored by Andria Smythe, see “The Impact of Social Security Eligibility on Transfers to Elderly Parents and Wealth-building among Adult Children.”Learn More