January 19, 2017
People Lack Emergency Funds, Tap 401ks
When between 45 percent and 60 percent of Americans don’t have enough money for retirement, encouraging saving is a national priority.
A related issue is preserving the funds once they’re set aside.
A survey released last month by Transamerica indicates that workers frequently resort to hardship withdrawals and loans from their 401(k)s, because they lack the cash required in emergencies. The survey bolsters the argument made by some retirement experts and employers that until workers’ cash-flow problems are addressed, many will continue to view retirement funds as their best option in an emergency.
More than one in four U.S. workers in the survey said they have taken premature withdrawals from their 401(k) or IRA retirement funds. Catherine Collinson, president of the Transamerica Center for Retirement Studies, connected this “alarmingly high share” to a shortage of cash: 21 percent of workers reported having less than $1,000 saved for emergencies and another 14 percent have saved just $1,000 to $5,000. …Learn More
January 17, 2017
2.8 Million Seniors Have College Debt
The number of Americans over age 60 who are paying back federal or private student loans has reached a critical mass, quadrupling to 2.8 million over the past decade, a new report finds.
These older borrowers owe $23,500, on average, and two-thirds of them also have mortgages and credit card bills at a time their medical expenses are typically increasing, according to the report issued this month by the Consumer Financial Protection Bureau (CFPB). Separately, nearly 40 percent of those with federal loans have defaulted on their payments.
The response of many older student loan borrowers, the CFPB said, is to “skip necessary health care needs such as prescription medicines, doctor’s visits, and dental care because they could not afford it.”
Suzanne Martindale, a staff attorney at Consumer Reports, said CFPB’s report illuminates the link between the country’s college debt crisis and the retirement crisis. …Learn More
January 12, 2017
Financial Stress Rings in the New Year
Having dug ourselves out of the worst financial crisis since the Depression, the nation entered 2017 amid rising wages and record-low unemployment. Yet three out of four adults report being “financially stressed.”
And no wonder: half of the 2,000 adults in the December survey by the National Endowment for Financial Education (NEFE) said they are living paycheck to paycheck.
Americans’ specific financial issues are routinely documented in this blog and run the gamut from cash-flow shortages to poor retirement prospects.
The primary sources of financial stress identified in the NEFE survey were not enough savings and too much debt. This was consistent with a second finding in which respondents said that solving these issues would also provide the most “financial relief.” Here are the other findings: …
January 3, 2017
Our Readers’ Favorite Blogs in 2016
The 10 articles that received the most attention from our readers last year are ranked below in the order of their total page views. Retiree taxes and Medicare made up the top three:
Why Most Elderly Pay No Federal Tax
Medicare Advantage: Know the Pitfalls
Federal Taxation Drops for Retirees
Financial Fallout from Gray Divorce
Stress is One Reason People Retire
How Many Years Can You Do Your Job? …Learn More
December 13, 2016
Retirement Isn’t Always Fair
More than half of older Americans with the lowest socioeconomic status can expect to face an income gap if they retire when they’re planning to.
That finding is from a study by the Center for Retirement Research, which supports this blog. The researchers quantified and compared the gaps in the retirement preparedness of more than 3,000 older U.S. households, grouped by four levels of educational attainment.
First, the researchers estimated the target income that each working household will need in retirement to maintain its current standard of living. That target income will be less than its current income from working, because retirees no longer need to save money, and they pay less in taxes. Then, the researchers projected the income each household will actually have – at each different retirement age – from their Social Security, employer retirement plans, regular savings, and home equity.
When a household’s projected income reaches the target, that’s the age at which they can expect to retire comfortably. But people don’t necessarily make decisions that are in their best financial interest. …
December 8, 2016
Inside the Minds of Older Workers
A decade of research into the impact of cognitive aging shows that workers throughout their 50s and 60s are generally just as productive as the younger people working alongside them.
A new summary of this research, by the Center for Retirement Research at Boston College, explains how older people are able to adapt to the gradual loss of brain mass in the parts of the brain associated with memory and an ability to think on one’s feet – their “fluid intelligence.”
The highly skilled pharmacy profession is a good example of how workers in their 50s or 60s adjust to this changing dynamic. These pharmacists have an advantage over their younger coworkers in what psychologists call “crystallized intelligence,” which is the deep reserve of information stored up over decades of working in their profession. They can no longer process drug interactions and other new information as rapidly as they once did. But they can tap into their reserves to solve the myriad issues that crop up in their work. This crystallized intelligence – for pharmacists and many other types of skilled jobs – is effectively making up for their loss of fluid intelligence.
Interestingly, older workers who execute routine tasks usually aren’t at risk of aging out of their jobs for cognitive reasons either. That’s because even though their fluid intelligence is in decline, they have more than enough of it in reserve to complete their relatively simple tasks.
While the majority of older workers do not lose their productivity due to cognitive aging, two groups are vulnerable. One group is those for whom the work demands on their fluid intelligence are extremely high. A 2009 study of air traffic controllers highlighted this challenge – and demonstrates the logic behind a Federal Aviation Authority requirement that controllers retire at age 56. …Learn More
November 29, 2016
Caring for Her Elderly Parents 24/7
Taking care of her elderly parents is Vivian Gibson’s full-time job.
The last two weeks in October weren’t so unusual. She tended to her 86-year-old father for several days in the hospital – another episode in his unending battle with ankle sores stemming from service in the Korean War. Gibson also helped her mother, age 81, get through a medical procedure and chauffeured both parents to more than a dozen doctor’s appointments and to their dentist. Her mother has been dealing with a pulled tooth, along with abnormal cells in her bladder and an abnormal EKG.
In addition to their medical needs, Gibson helps them with everything else, from cleaning and dressing her father’s wound daily to buying their groceries and cleaning up the yard. Her parents live in Bartow in central Florida, about 20 minutes from Gibson’s home in the country, and she’s always on call in case her father falls again.
Yet she remains surprisingly upbeat, unfazed by a non-existent social life and a caregiving burden made heavier by the fact she is an only child. “There is never any respite,” she said. “I have to work my doctor’s appointments in around theirs. My mother keeps telling me, ‘Don’t get sick. You can’t get sick!’ ”
To help her parents, Gibson retired from a local hospital just shy of her 59th birthday. She’s now 61 and premature retirement has strained, though not broken her financially. She drained most of her $17,000 emergency fund to meet regular expenses and reluctantly dipped into her IRAs and past employers’ retirement savings plans. Her combined balance is down to $300,000 – or about $12,000 lighter than when she retired, despite a rising stock market. Her lifeline has been a $24,000 pension from her work in state government.
“I wanted to travel,” she said – Australia, New Zealand, Canada – “but I don’t have the money – or the time – for that.” …Learn More