Only about a third of the older people who are working full-time will go straight into retirement. Most take zigzag paths.
These paths include gradually reducing their hours, occasional consulting, or finding a new job or an Uber stint that is only part-time. Other people “unretire,” meaning that they retire temporarily from a full-time job only to decide to return to work for a while.
A new study finds that the paths older workers choose are influenced by their personality and by how well they’re able to hold the line against the natural cognitive decline that accompanies aging.
Researchers at RAND in the United States and a think tank in The Netherlands uncovered interesting connections between retirement and cognitive acuity and, separately, and a variety of personality traits. To do this, they followed older Americans’ work and retirement decisions over 14 years through a survey, which also administered a personality and a cognition test.
Here’s what they found:
Cognitive ability. The people in the study who had higher levels of what’s known as fluid cognitive function – the ability to recall things, learn fast, and think on one’s feet – are much more likely to follow the paths of either working full-time or part-time past age 70.
The probable reason is simply that more job options are available to people with higher cognitive ability – whether fluidity or sheer intelligence – so they have an easier time remaining in the labor force even though they’re getting older. …
A 1970 contract negotiation between GE and its unionized workforce is unimaginable today.
A strike then slowed production for months at 135 factories around the country. With inflation running at 6 percent annually, the company offered pay raises of 3 percent to 5 percent a year for three years. The union rejected the offer, and a federal mediator was brought in. GE eventually agreed to a minimum 25 percent pay raise over 40 months.
“They said we couldn’t, but we damn sure did it,” one staffer said about his union’s victory.
Former Wall Street Journal editor Rick Wartzman tells this story in his book about the rise and fall of American workers through the labor relations that have played out at corporate stalwarts like GE, General Motors, and Walmart.
Critics use examples like GE to argue that unions had it too good – and they have a point. But that’s old news. What’s relevant today is that the pendulum has swung in the opposite direction, and blue-collar and middle-class Americans seem barely able to keep their heads above water even in a long-running economic boom.
New York University economist Edward Wolff in a January report estimated that workers lost much ground in the 2008 recession and never recovered. The typical family’s net worth, adjusted for inflation, is no higher than it was in 1983 and far below the pre-recession peak. Granted, workers’ wages have gone up recently, though barely faster than inflation, but they had been flat for 15 years. Workers are also funding more of their retirement and health insurance.
Wartzman’s theme in “The End of Loyalty: the Rise and Fall of Good Jobs in America” is that the system no longer works for regular people, because companies have weakened or broken the social contract they once had with their workers.
The loss of employer loyalty is one way to look at the state of labor today. The loss of workers’ leverage against global corporations is another. …Learn More
After decades of study devoted to describing the negative effects of dementia, a new generation of researchers is pursuing a more encouraging line of inquiry: finding ways that seniors can slow the inevitable decline.
One vein of this research, still in its infancy, considers whether seniors could reduce the risk of dementia if they engage in volunteer work. Several studies focus on volunteering, because most of the population with the greatest risk of dementia – people over age 65 – is no longer working.
There’s no suggestion that volunteering can prevent dementia. However, one new study, by Swedish and European researchers, found that Swedes between 65 and 69 who volunteer had a “significant decrease in cognitive complaints,” compared with the non-volunteers. The seniors answered a survey questionnaire at the beginning and end of the 5-year study that gauged whether they had experienced any changes in each of four complaints: “problems concentrating,” “difficulty making decisions,” “difficulty remembering,” and “difficulty thinking clearly.”
The study didn’t go so far as to claim that volunteering actually caused the improvements either. But it highlighted how volunteering might reduce the symptoms, possibly because it keeps older people more physically and mentally fit.
Collection of the Supreme Court of the United States
Indeed, the cognitive benefits of exercise have been understood for so long that they’ve become a perennial topic in the mainstream media. Supreme Court Justice Ruth Bader Ginsburg, 85, has become the poster child for elderly exercisers, with a personal trainer overseeing her push-ups and turns on an elliptical machine in a CNN Films documentary, “RBG.”
The research confirms that she’s doing what she needs to do to stay sharp for her beloved job: aerobic exercise in particular protects seniors’ brain matter from deterioration; weight training and stretching exercises do not.
A research team’s 2014 review of 73 prior studies on volunteer work found multiple benefits: “volunteering in later life is associated with significant psychosocial, physical, cognitive, and functional benefits for healthy older adults.” The paper, which appeared in the Psychological Bulletin of the American Psychological Association, defined psychosocial well-being as having greater life satisfaction, higher executive function, being happier and having a robust social network. …Learn More
This blog has spilled plenty of ink over the problem of so many workers having inadequate retirement savings.
One theory is that they don’t understand the urgency. But a new survey makes clear that they not only are fully aware of the problem but are very worried about it.
The vast majority of the 1,000-plus baby boomers and Generation-Xers who conceded to being behind on their saving wish they could save more – Allianz, which conducted the survey, calls them “chasers.”
These chasers recognize that if they don’t make adjustments, it’ll be too late to repair their finances. Two out of three fear the worst: they’ll run out of money at some point in old age and will be forced to eke out a living on their Social Security checks alone.
Their fears are warranted. The typical boomer household approaching retirement who has a 401(k) has saved just $135,000 in its 401(k) and any IRAs combined. At retirement, this amount equates to only about $600 in monthly income
Half of the workers put the blame on a single culprit: “too many other expenses right now.”
This sentiment dovetails with mounting evidence that many workers are overwhelmed by the increasing costs of health insurance, college, and housing, which are far outpacing their pay raises. Low-paid workers are especially hard hit, according to 2017 research. If they save at all, they set aside only 3 percent of their paychecks – half of what top-paid people are able to save. …Learn More
When a marriage ends in divorce, there are no fewer than seven ways that it could damage a person’s finances.
Divorce can rack up costly legal fees; force a house or stock sale in a down market; increase living expenses; increase tax rates; hamper the ability of the primary caregiver – mothers – to earn money; require fathers to pay alimony; and reduce each partner’s access to credit.
A new study looking at their impact on workers’ future finances concludes that divorce – the fate of four in 10 marriages – “substantially increases the likelihood” that their standard of living will decline after they retire. …Learn More
One of Americans’ biggest financial challenges is proper planning to ensure that their standard of living doesn’t drop after they retire and the regular paychecks stop.
A new study has practical implications for baby boomers in urgent need of improving their retirement finances: working a few additional years carries a lot more financial punch than a last-ditch effort to save some extra money in a 401(k).
This point is made dramatically in a simple example in the study: if a head of household who is 10 years away from retiring increases his 401(k) contributions from 6 percent to 7 percent of pay (with a 3 percent employer match) for the next decade, he would get no more benefit than if he instead had decided to work just one additional month before retiring.
Of course, this estimate should be taken only as illustrative. To get their retirement finances into shape, many people should plan to work several more years than is typical today. Baby boomers tend to leave the labor force in their early- to mid-60s, even though more than four out of 10 boomers are on a path to a lower retirement standard of living. …Learn More
Despite the mounting pressures on Americans of all ages to save for retirement, our saving habits haven’t changed in 10 years.
The combined employer and employee contributions to 401(k)s consistently hover around 10 percent of workers’ pay, according to “How America Saves 2018,” an annual report by Vanguard, which administers thousands of employer 401(k)s and other defined contribution plans.
Retirement account balances aren’t going up either. The typical participant’s 401(k) balance is no larger than it was in 2007, even though accounts grew 7 percent last year, to $26,000, thanks to a strong stock market. The balances, when adjusted for inflation, are slightly smaller.
The growing adoption of 401(k) plans that automatically enroll their workers is having both negative and positive influences on the account balances. Employers tend to set employees’ contributions in these plans at a low 3 percent of their pay. This has had a depressing effect on balances, but it has been offset somewhat in recent years by a modification to auto-enrollment plans: more employers are automatically increasing their workers’ contribution rates periodically.
Baby boomers with a few short years left to save are particularly under pressure to increase their savings. The typical boomer has accumulated only $71,000 in his current employer’s retirement account, according to Vanguard. Total account balances are generally larger, however – though still often inadequate – because many baby boomers have rolled over savings from past employer 401(k)s into their personal IRA accounts.
Overall, the situation for all workers hasn’t really changed and neither has Vanguard’s message to future retirees.
“Going forward, we need to reach for higher contribution rates for more individuals,” Jean Young, senior research analyst says in the company’s video above. …Learn More