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Retirement Security Across Generations: Are Americans Prepared for Their Golden Years?
Retirement Security Across Generations: Are Americans Prepared for Their Golden Years?
Source: Pew Charitable Trusts
This report explores how the Great Recession affected the wealth and retirement security of baby boomers relative to younger and older age groups.
It also explores the retirement security of each group by calculating replacement rates, or the extent to which retirees can use their accumulated wealth and savings to replace preretirement income.
This research reveals that younger age groups face the greatest prospect of downward mobility in their golden years.
Ameriprise Survey Shows Retirement Savings Derailed by More Than Just the Recession; Financial Impacts are Measurable
Source: Ameriprise
Countless studies have shown that many Baby Boomers don’t believe they have enough savings to live comfortably in retirement, but why are so many financially unprepared? Data from the Retirement DerailersSM survey, released today by Ameriprise Financial (NYSE: AMP), helps answer the questions many have about the retirement crisis in America.
The Retirement DerailersSM survey found that the vast majority (90%) of Americans ages 50-70 with $100,000 or more in investable and retirement assets have experienced at least one “derailer” – an economic or life event that has made an impact on their retirement savings goals. The average respondent experienced four of these events, which range from derailers that are beyond their control such as the effects of the recession, to family and lifestyle choices that have lasting financial consequences. In the end, these events set respondents back $117,000 on average. In fact, nearly two in five of the respondents (37%) experienced five or more unanticipated events costing them approximately $144,000.
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Unexpected expenses come in all shapes and sizes both before and during retirement, but there are a few that rose to the top. The top three most cited derailers are, not surprisingly, related to the recession. Nearly two-thirds (63%) of respondents say low interest rates impacted the growth of their investments. More than half (55%) say their savings were significantly lowered due to market declines and one-third (33%) admit their home equity is now not going to help fund retirement as much as they expected.Still, many respondents experienced life events that derailed their retirement. One in four (23%) are supporting a grown child or grandchild and just as many (23%) say their pension plan is not worth as much as they’d thought or has been discontinued. What’s more, one in five respondents’ retirement goals have been thrown off track due to making bad investments (22%), taking social security before retirement age (19%) and/or experiencing a job loss (18%).
While it appears that Boomers have found a way to “make it work” in the short-term as they weather these unexpected derailers, they may not have the ability to be as resilient after they leave the workforce. Only 33 percent of respondents say they are extremely or very confident they would be able to afford an unexpected expense such as large home repairs in retirement.
The 4 Percent Rule is Not Safe in a Low-Yield World
The 4 Percent Rule is Not Safe in a Low-Yield World
Source: Social Science Research Network
The safety of a 4% initial withdrawal strategy depends on asset return assumptions. Using historical averages to guide simulations for failure rates for retirees spending an inflation-adjusted 4% of retirement date assets over 30 years results in an estimated failure rate of about 6%. This modest projected failure rate rises sharply if real returns decline. As of January 2013, intermediate-term real interest rates are about 4% less than their historical average. Calibrating bond returns to the January 2013 real yields offered on 5-year TIPS, while maintaining the historical equity premium, causes the projected failure rate for retirement account withdrawals to jump to 57%. The 4% rule cannot be treated as a safe initial withdrawal rate in today’s low interest rate environment. Some planners may wish to assume that today’s low interest rates are an aberration and that higher real interest rates will return in the medium-term horizon. Although there is little evidence to support this assumption, we estimate how a reversion to historical real yields will impact failure rates. Because of sequence of returns risk, portfolio withdrawals can cause the events in early retirement to have a disproportionate effect on the sustainability of an income strategy. We simulate failure rates if today’s bond rates return to their historical average after either 5 or 10 years and find that failure rates are much higher (18% and 32%, respectively for a 50% stock allocation) than many retirees may be willing to accept. The success of the 4% rule in the U.S. may be an historical anomaly, and clients may wish to consider their retirement income strategies more broadly than relying solely on systematic withdrawals from a volatile portfolio.
In a Divorce or Dissolution Who Gets the Pension Rights: Domestic Relations Law and Retirement Plans
In a Divorce or Dissolution Who Gets the Pension Rights: Domestic Relations Law and Retirement Plans
Source: Pepperdine Law Review
When a marriage begins, it is made in heaven and will last "forever." However, when a marriage is legally over there is the rough sundering of dreams and hopes for the future and the need to sort out amongst the former life companions what is legally the property of each. This article will explore the evolving legal process which divides the property rights acquired during marriage in a retirement plan which was, intended to act as a shield against deprivation of the marriage partners in their mutually shared old age.
New From the GAO
New GAO Reports and Testimonies
Source: Government Accountability Office
Reports
1. Bureau of the Public Debt: Areas for Improvement in Information Systems Controls. GAO-13-416R, May 9.
http://www.gao.gov/products/GAO-13-416R
2. Federal Reserve Banks: Areas for Improvement in Information Systems Controls. GAO-13-419R, May 9.
http://www.gao.gov/products/GAO-13-419R
3. Preliminary Results of Work on FAA Facility Conditions and Workplace Safety. GAO-13-509R, May 9.
http://www.gao.gov/products/GAO-13-509R
Testimonies
1. Transportation Worker Identification Credential: Card Reader Pilot Results Are Unreliable; Security Benefits Should Be Reassessed, by Stephen M. Lord, director, homeland security and justice, before the Subcommittee on Government Operations, House Committee on Oversight and Government Reform. GAO-13-610T, May 9.
http://www.gao.gov/products/GAO-13-610T
2. Federal Retirement Processing: OPM Is Pursuing Incremental Information Technology Improvements after Canceling a Modernization Plagued by Management Weaknesses, by Valerie C. Melvin, director, information management and technology resource issues. GAO-13-580T, May 9.
http://www.gao.gov/products/GAO-13-580T
Highlights – http://www.gao.gov/assets/660/654450.pdf
3. Missile Defense: Opportunity to Refocus on Strengthening Acquisition Management, by Cristina T. Chaplain, director, acquisition and sourcing management, before the Subcommittee on Strategic Forces, Senate Committee on Armed Services. GAO-13-604T, May 9.
http://www.gao.gov/products/GAO-13-604T
Highlights – http://www.gao.gov/assets/660/654457.pdf
Staying Ahead Of the Curve 2013: AARP Multicultural Work and Career Study
Staying Ahead Of the Curve 2013: AARP Multicultural Work and Career Study
Source: AARP
Staying Ahead of the Curve is AARP’s Multicultural Work and Career Study. These studies – performed in 2002, 2007, and 2013 – provide an in-depth look at workers ages 45-74: their reasons for working, perceived job security, differential treatment received because of age, their ideal work scenario, the challenges they face, their plans for retirement, and more. The entire set of 2013 results will be released in late April-early May 2013, but brief snapshots of the data will be available in February and March.
The 2013 survey was fielded in November 2012 and December 2012 with a national sample of 1502 adults ages 45-74 who were working full-time, part-time, self-employed, or looking for work. Oversamples were also collected in order to yield a total of 402 African Americans and 410 Hispanics.
Exit Discrimination in the NFL: A Duration Analysis of Career Length
Exit Discrimination in the NFL: A Duration Analysis of Career Length
Source: Research Papers in Economics
Using a panel study of annual NFL data (2000–2008) we test for exit discrimination on career length in the NFL. We focus on six positional groups: defensive backs, defensive linemen, linebackers, running backs, tight ends and wide receivers. We test for exit discrimination using both parametric and semi-parametric hazard models. In our analysis, in addition to race, we include performance variables to determine their importance in determining career length. Our analysis posits the question: Do team owners in the pursuit of championships keep talented players regardless of their race?
“Characteristics of the Population With Consumer-Driven and High-Deductible Health Plans, 2005–2012,” and “Retirement Plan Participation and Asset Allocation, 2010”
Source: Employee Benefit Research Institute
Characteristics of the Population With Consumer-Driven and High-Deductible Health Plans, 2005–2012
- Generally, the population of adults within both high-deductible (HDHP) and traditional health plans have been split 50–50 between men and women. In contrast, differences in gender have been found between consumer-driven health plan (CDHP) enrollees and those with traditional coverage.
- In most years, CDHP enrollees were less likely than those with traditional coverage to be between the ages of 21 and 34, and the CDHP population was more likely than traditional-plan enrollees to be in households with $150,000 or more in income in every year except 2009 and 2010.
- CDHP enrollees were roughly twice as likely as individuals with traditional coverage to have college or post-graduate educations in nearly all years of the survey.
- CDHP enrollees have consistently reported better health status than traditional-plan enrollees, exhibiting better health behavior than traditional-plan enrollees with respect to smoking and (except for 2010 and 2011), exercise, and sometimes obesity rates.
Retirement Plan Participation and Asset Allocation, 2010
- The likelihood of a working family head participating in a retirement plan increased with the size of his or her employer. In 2010, among family heads working for employers with 10–19 employees, 22.4 percent participated in a plan, compared with 67.2 percent of family heads who worked for employers with 500 or more employees.
- In 2010, 18.9 percent of family heads who participated in an employment-based retirement plan had a defined benefit (DB) plan only, while 65.0 percent had a defined contribution (DC) plan only, and the remaining 16.1 percent had both a DB and a DC plan. This was a significant change from 1992, when 42.3 percent had a DB plan only, and 40.8 percent had a DC plan only.
- Asset allocation within a family head’s retirement plan seems to be affected by his or her ownership of other types of retirement plans. Those who own an IRA are more likely to be invested all in stocks if they also own a 401(k)-type of plan. Those who own a DB plan and a 401(k)-type plan are less likely to allocate their DC plan to all interest-earning assets.
Sticky Ages: Why Is Age 65 Still a Retirement Peak?
Sticky Ages: Why Is Age 65 Still a Retirement Peak?
Source: Center for Retirement Research at Boston College
When Social Security’s Full Retirement Age (FRA) increased to age 66 for recent retirees, the peak retirement age increased with it. However, a large share of people continue to claim their Social Security benefits at age 65. This paper explores two potential explanations for the “stickiness” of age 65 as a claiming age: Medicare eligibility and workers’ lack of knowledge about their future Social Security benefits. First, we analyze the impact of Medicare eligibility by comparing two groups – one has an FRA of exactly 65; the other, between age 65 and 2 months and age 66. We find that the group with later FRAs who do not have access to retiree health benefits through their employer are more likely to claim Social Security at age 65. We interpret this finding as evidence that Medicare eligibility persuades more people to retire, because they can begin receiving federal health coverage. Individuals without access to retiree health insurance at work are 7.5 percentage points more likely to retire soon after their 65th birthdays and are 5.8 percentage points less likely to delay retirement until the FRA than those with that insurance. This result fits into extensive research showing that access to health insurance is an important component of the retirement decision. On the question of whether misinformation about Social Security benefits may drive individuals to claim at age 65, we find that some individuals are unable to accurately forecast their retirement benefits. However, our analysis suggests that there is no relationship between this confusion and the age 65 peak for claiming Social Security.
Deloitte Report Uncovers Seven Crucial Leadership Conversations
Deloitte Report Uncovers Seven Crucial Leadership Conversations
Source: Deloitte
Success in most organizations depends on the commitment and talent of its workforce. According to Deloitte’s third annual Human Capital Trends report, Leading Indicators, C-level executives need to take a critical look at how their company’s talent is driving its business and address seven specific issues in order to remain successful over the next 18 to 24 months.
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The following seven Human Capital trends examined in the report offer leaders the opportunity to make more informed talent decisions going forward:
- The open talent economy – An organization that embraces the emerging concept of the open talent economy – a collaborative, technology-driven, rapid-cycle way of doing business – can be poised to exploit its opportunities and immerse itself more effectively in the global talent market.
- Creating an elastic workplace – Leading organizations are taking a fresh look at workplace flexibility through the lens of business strategy as the issue evolves into an opportunity that impacts all employees.
- Innovating the talent brand – In order to effectively retain and attract the best talent, companies should focus on their talent brand by building leading talent practices and communicating them in innovative ways.
- Finding the silver lining in the talent gap – The nature of retirement along with the changing ability of a generation to retire early is shifting the demographics of the workforce again. In fact, Deloitte found in a previous study that 34 percent of U.S. employees plan on delaying their retirement age. The combination of an aging workforce remaining actively employed, even when facing retirement age to an influx of talent from Generation Y, means that organizations need to determine the best way to continue to get value from older workers without holding younger workers back.
- Debunking the Superman myth – Given the ever-changing pressures on businesses today, including adopting new technologies, entering an emerging market country or adapting to new regulatory environments, companies need a bench of leaders who can operate across different environments and adapt to the unexpected.
- The performance management puzzle – To effectively motivate employees, some leading organizations are considering new performance management tools with social media characteristics that incorporate peer, customer and other stakeholder feedback.
- Thinking like an economist – HR and talent leaders should adopt an economist’s mindset and expand their use of economic data to make fact-based decisions, which not only increases their alignment with the other business leaders in their organization, but also helps put people in the right positions to unlock their most valuable talents.
Top Ten Myths of Medicare
Top Ten Myths of Medicare
Source: The Elder Law Journal (via SSRN)
n the context of changing demographics, the increasing cost of health care services, and continuing federal budgetary pressures, Medicare has become one of the most controversial federal programs. To facilitate an informed debate about the future of this important public initiative, this article examines and debunks the following ten myths surrounding Medicare: (1) there is one Medicare program, (2) Medicare is going bankrupt, (3) Medicare is government health care, (4) Medicare covers all medical costs for its beneficiaries, (5) Medicare pays for long-term care expenses, (6) the program is immune to budgetary reduction, (7) it wastes much of its money on futile care, (8) Medicare is less efficient than private health insurance, (9) Medicare is not means-tested, and (10) increased longevity will sink Medicare.
See: Retirement Expert: Medicare Already Means-Tested (Science Daily)
Pension Funding Policy; New guide provides key facts about public pensions for elected officials
Pension Funding Policy; New guide provides key facts about public pensions for elected officials
Source: International City/County Management Association
The “Big 7″ state and local government associations and the Government Finance Officers Association (GFOA) have released Pension Funding: A Guide for Local Officials to provide key facts about public pension plans and a brief overview of the issues that state and local officials should address. The guide explores why developing a pension funding policy is essential and offers guidelines to follow when developing that policy.
New From the GAO
New GAO Reports
Source: Government Accountability Office
1. Private Pensions: Timely Action Needed to Address Impending Multiemployer Plan Insolvencies. GAO-13-240, March 28.
http://www.gao.gov/products/GAO-13-240
Highlights – http://www.gao.gov/assets/660/653385.pdf
2. NextGen Air Transportation System: FAA Has Made Some Progress in Midterm Implementation, but Ongoing Challenges Limit Expected Benefits. GAO-13-264, April 8.
http://www.gao.gov/products/GAO-13-264
Highlights – http://www.gao.gov/assets/660/653627.pdf
New From the GAO
New GAO Report
Source: Government Accountability Office
401(K) Plans: Labor and IRS Could Improve the Rollover Process for Participants. GAO-13-30, March 7.
http://www.gao.gov/products/GAO-13-30
Highlights – http://www.gao.gov/assets/660/652882.pdf
Subsidies vs. Nudges: Which Policies Increase Saving the Most?
Subsidies vs. Nudges: Which Policies Increase Saving the Most?
Source: Center for Retirement Research at Boston College
The brief’s key findings are:
- To encourage retirement saving, policymakers use two types of tools: tax subsidies and automatic contributions.
- Both tools are effective at increasing retirement saving, but such increases could simply be offset by a reduction in a household’s non-retirement saving.
- A recent study, using Danish data, addresses this issue:
- A revision in the Danish tax subsidy led to a change in retirement saving, but it was almost fully offset by a change in non-retirement saving.
- In contrast, automatic contributions boosted retirement saving with only a small impact on non-retirement saving.
EBRI’s 2013 Retirement Confidence Survey: Perceived Savings Needs Outpace Reality for Many
EBRI’s 2013 Retirement Confidence Survey: Perceived Savings Needs Outpace Reality for Many
Source: Employee Benefit Research Institute
• The percentage of workers confident about having enough money for a comfortable retirement is essentially unchanged from the record lows observed in 2011. While more than half express some level of confidence (13 percent are very confident and 38 percent are somewhat confident), 28 percent are not at all confident (up from 23 percent in 2012 but statistically equivalent to 27 percent in 2011), and 21 percent are not too confident.
• Retiree confidence in having a financially secure retirement is also unchanged, with18 percent very confident and 14 percent not at all confident.
• One reason that retirement confidence has remained low despite a brightening economic outlook may be that some workers may be waking up to a realization of just how much they may need to save. Asked how much they believe they will need to save to achieve a financially secure retirement, a striking number of workers cite large savings targets: 20 percent say they need to save between 20 and 29 percent of their income and nearly one-quarter (23 percent) indicate they need to save 30 percent or more.
• Aggressive as those savings targets appear to be, they may not be based on a careful analysis of their individual circumstances. Only 46 percent report they and/or their spouse have tried to calculate how much money they will need to have saved by the time they retire so that they can live comfortably in retirement.
• Retirement savings may be taking a back seat to more immediate financial concerns: Just 2 percent of workers and 4 percent of retirees identify saving or planning for retirement as the most pressing financial issue facing most Americans today. Both workers and retirees are most likely to identify job uncertainty (30 percent of workers and 27 percent of retirees) and making ends meet (12 percent each).
• Cost of living and day-to-day expenses head the list of reasons why workers do not contribute (or contribute more) to their employer’s plan, with 41 percent of eligible workers citing this factor.
• Debt may be another factor standing in the way; 55 percent of workers and 39 percent of retirees report having a problem with their level of debt, and only half (50 percent of workers and 52 percent of retirees) say they could definitely come up with $2,000 if an unexpected need arose within the next month.
• Worker confidence in the affordability of various aspects of retirement continues to decline. In particular, increases are seen in the percentage of workers not at all confident about their ability to pay for basic expenses (16 percent, up from 12 percent in 2011), medical expenses (29 percent, up from 24 percent in 2012), and long-term care expenses (39 percent, up from 34 percent in 2012).
• Just 23 percent of workers (and 28 percent of retirees) report they have obtained investment advice from a professional financial advisor who was paid through fees or commissions. Of these workers, 27 percent followed all of the advice, but more disregarded some of it and followed most (41 percent) or some (27 percent).
Juggling Current Priorities and Long-Term Security: Every Woman Needs Her Own Retirement Strategy
Juggling Current Priorities and Long-Term Security: Every Woman Needs Her Own Retirement Strategy (PDF)
Source: Transamerica Center for Retirement Studies
The Transamerica Center for Retirement Studies®, as part of its 13th Annual Retirement Survey, has uncovered the staggering truth that nearly half of women (48 percent) do not have any retirement strategy at all, despite the fact that 56 percent of women expect to self fund their retirement through 401(k)s, retirement accounts, or other savings and investments. The Center’s latest study, “Juggling Current Priorities and Long-Term Security: Every Woman Needs Her Own Retirement Strategy,” sheds light on women’s attitudes and behaviors related to saving and planning for retirement, and offers details about how they compare to their male counterparts.
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The study found that women’s retirement dreams include traveling, spending more time with family and friends, and pursuing hobbies; however, the majority of women (53 percent) plan to retire after age 65 or do not plan to retire. And the majority (53 percent) plan to continue working after they retire, including 45 percent of women who plan to work part-time and eight percent who plan to work full-time. Most of these women will do so for reasons related to income or health benefits.
Women’s expectations of delaying retirement and/or working in retirement illustrate a serious crisis of retirement confidence. More than half of women (54 percent) are “not too confident” or “not at all confident,” compared to only 44 percent of men who share that sentiment. Only seven percent of women are “very confident” in their ability to fully retire with a comfortable lifestyle.
Part of what may be fueling this lack of retirement confidence is a lifelong concern about taking care of family. Women most frequently cite their single greatest retirement fear (26 percent) as not being able to meet the financial needs of their family. More than one in four women (28 percent) expect to take time or have already taken time out of the workforce to act as caregiver for a child or aging parent. Of these caregivers, 73 percent believe that this time out will impact their ability to save for retirement. Further, many reported that their retirement may involve financial caregiving; one in three women (31 percent) expects that when they are retired, they will need to provide financial support for a family member other than their spouse.
New From the GAO
New GAO Report
Source: Government Accountability Office
PRIVATE PENSIONS
Multiemployer Plans and PBGC Face Urgent Challenges
GAO-13-428T, Mar 5, 2013
New From the GAO
New GAO Reports
Source: Government Accountability Office
FEDERAL PENSIONS
Judicial Survivors’ Annuities System Costs for 2008 to 2010
GAO-13-236, Feb 22, 2013
SPECTRUM MANAGEMENT
Further Consideration of Options to Improve Receiver Performance Needed
GAO-13-265, Feb 22, 2013
VETERANS’ HEALTH CARE
Improvements Needed to Ensure That Budget Estimates Are Reliable and That Spending for Facility Maintenance Is Consistent with Priorities
GAO-13-220, Feb 22, 2013
FINANCIAL AUDIT
Federal Deposit Insurance Corporation Funds’ 2012 and 2011 Financial Statements
GAO-13-291, Feb 21, 2013
HUMAN SERVICES
Sustained and Coordinated Efforts Could Facilitate Data Sharing While Protecting Privacy
GAO-13-106, Feb 8, 2013
Reinventing retirement: New pathways, new arrangements, new meanings
Reinventing retirement: New pathways, new arrangements, new meanings
Source: Human Relations
Retirement involves a set of institutional arrangements combined with socio-cultural meanings to sustain a distinct retirement phase in life course and career pathways. In this Introduction to the Special Issue: ‘Reinventing Retirement: New Pathways, New Arrangements, New Meanings,’ we outline the historical development of retirement. We identify the dramatic broad-based changes that recently have shaken this established construct to its core. We describe the main organizational responses to these changes, and how they have been associated with shifting, multiple meanings of retirement. Finally, we present a model that frames two general forms of reinvention of retirement. The first involves continuation of the idea of a distinct and well-defined period of life occurring at the end of a career trajectory, but with changes in the timing, the kinds of post-retirement activities pursued, and meanings associated with this period of life. The second represents a more fundamental reinvention in which the overall concept of retirement as a distinct period in an individual’s life is challenged or rejected, whether because it is not appealing or no longer realistic. We provide examples of how both types of reinvention may manifest in individuals’ careers and lives, and suggest future research directions that follow from our model.
