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The Boston College Center for Retirement Research always has wonderful posts on their blog. It’s great for someone like me, who’s working on a dissertation that focuses on retirement. I can get a quick synopsis of the current research coming out of the CRR. They always make their information useful for the general public too, and I want to share with you a recent post  that highlighted a new tool for people planning for retirement. How do you know if you’re doing enough? Ask the calculator!

You can play around with the calculator here. I really liked the tool, and found it easy to use and visually appealing. I liked how the graphics instantly updated based on my changes. The calculator also took into account important information like what age I plan on retiring and what I expect to get from Social Security or my employer pension. The calculation gave me a good estimate of my monthly income in retirement because all my resources were accounted for. It also told me I’m not doing enough if I want to maintain my standard of living in retirement!

The best part was Step 3: Make a Plan. Unlike many of the other retirement income estimators I’ve seen online (which are often on the website of an investment company) this calculator helped me reach my retirement goals and come out with a plan for free! Nothing to sign up for or invest in. The site offered simple steps to increase my retirement income like asking me to consider spending less each month or retiring at 65 instead of 62. And the tool showed me exactly what will happen to my income if I take one or both of these steps. I came up with a plan that suited me and the site offered to help me develop an action plan for moving forward.

I encourage anyone who’s planning for retirement to give it a shot: Target Your Retirement

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A recent post by the CRR shows that non-working Baby Boomers age 55 to 61 (ages ineligible for Social Security benefits) are wealthier now than non-working 55 to 61 year olds of the past. The post explores how they’ve accumulated the wealth and why they chose to leave the labor force. An important point of the article is that, though they find themselves wealthier than non-workers of the past, they still only have a median wealth figure of $98,000. This “isn’t a lot of money for a boomer with a long spell of retirement ahead of them.  Boomers who leave the labor force often put themselves at risk of depleting their 401(k) assets too soon.”

Full post from the Center for Retirement Research.

Post Introduction: “Baby boomers who’ve left the labor force in their pre-retirement years are in better financial shape than they once were.

The wealth of non-working Americans between ages 55 and 61 increased from $83,000 in 1992 to $98,000 in 2008, according to new research from the Urban Institute in Washington.  (Comparisons are in constant dollars.)

Potential explanations for this trend range from greater U.S. inequality that launched more boomers into the top wealth tier to a rise in the numbers of married men who don’t work – but have wives who do.  Barbara Butrica, a senior research associate at the Urban Institute, said her study did not look into the “why” for the emerging group of voluntary non-workers who are approaching traditional retirement ages, married and single men in particular.  One possibility, she said, is that “they are leaving the labor force because they can afford to.”

…Read the full story

During my study of retirement income security something has always bugged me.  Countless articles and reports suggest smart asset allocations are the tried and true way to have a successful retirement (and still say this even after the economic recession). They talk about the value of investing and give financial advice that is clearly geared toward those with ample resources. Advice for the little guys is rarely provided, though arguably they need it more. Most people try to save for retirement but end up with little financial wealth. They’ll probably spend at least some of their retirement struggling financially.

A recent article by the Center for Retirement Research explores ways individuals can leverage their savings and assets so they are more likely to have a secure retirement. They suggest financial planning should not only include building retirement portfolios but:

  • Delaying retirement and taking more time to contribute to retirement accounts
  • Controlling spending and using the money saved to increase your savings
  • Investing assets in ‘riskless equities’ after retirement
  • Taking out a reverse mortgage

In other words, when all your financial adviser tells you is which stocks and bonds to put your money into, they are missing the big picture. There is an array of tools that people should explore and, based on their situation, employ to help them build a secure retirement. In fact, asset allocation was found to have the smallest effect on retirement security. The paper found working six months longer produces the same outcome as moving all investments into ‘riskless equities.’

However, I’d like to bring it back to my original point: do we provide advice to those who need it most? Recently, I gave a talk on women’s retirement security to a local Council on Aging community event. Community members had wonderful questions after the talk. One question struck me most: “I didn’t know about saving when I was young, my husband did that. But we spent most of it on his illness and now he’s gone. I have nothing but my Social Security check, do you have any financial advice for me?”  Later we had a chat and I asked her some questions about her situation. I found that she had been a homemaker, she did not own her home, and she was physically incapable of working. Her monthly check was also ‘too much’ for her to qualify for government services and benefits. What advice do we have for people like her?

Researchers and financial experts are starting to explore ways low- and middle-income workers can make the most out of their savings and assets. But still, there are people currently in retirement who live on little income, own next to nothing, and would love some advice. This is particularly true of older women. Many never needed to care about their finances until their husband passed away. If anyone knows an organization or service that advises these people (for free!) please educate me…because I don’t know of one.

This post by Robert Powell from MarketWatch (The Wall Street Journal) discusses a bleak outlook for America’s state of retirement security. In my opinion, the most important thing mentioned in this article is how the lack of financial education among workers can directly affect their retirement wealth. Many people hold misguided expectations about their retirement portfolios and believe they have more in Social Security benefits, employer pension plans, or health and long-term care coverage than they really do (Helman, VanDerhei, & Copeland, 2007). What’s worse, this misinformation can actually drive planning behavior so much that ill-informed workers, rather than doing nothing, are losing significant portions of their pension wealth because they take inappropriate and detrimental action (Chan & Stevens, 2003). Not everyone has expendable income to play with, yet the financially-informed worker is 5 times more likely to respond to pension incentives accordingly and increase their pension wealth (Ekerdt & Hackney, 2002).

The article highlights many other topics that are important to educate yourself about. We need to fix Social Security, we need to contribute more to our own 401(k)s and retirement savings, we need to make sure more workers are covered by pension plans, and so forth. Yet, many of the suggestions for fixing these issues are based on what’s feasible for the typical, middle class worker.

Should you really force people to put part of their wages into an IRA when they need every penny of every paycheck to cover the costs of food, shelter, and clothing? If yes, can you tell them what percentage of their income they must contribute? Are you then required to financially educated them or give them free access to financial experts? Will they even live long enough to reap the benefits of their automatic IRA account?

Longevity may be increasing in this country but we should always be cautious of statistics. Longevity varies widely by gender, race, income level, health status, region of the country…I don’t know, pick something. In fact, life expectancy has actually declined for women between 1997 and 2007 which is extremely rare in developed countries. “The nation has experienced a widening gap between the most and least healthy places to live. In some regions of the country, men and women are dying younger on average than their counterparts in nations such as Syria, Panama and Vietnam.”

As with any policy change or “universal” action, all parties who will be affected by the changes must be considered. I encourage you to read Powell’s article and to approach his solutions cautiously. Though it cannot be the only answer, there is one that seems to me most helpful and realistic: Financial education for all.

 

One of my older posts told you how to find your lost pensions if you live in the New England area. Today I received an email from the Pension Action Center’s Director, Ellen Bruce, and I’d like to share their success story with you. If you considered contacting them in the past perhaps this will encourage to give them a call. The New England Pension Assistance Project reached a milestone: they’ve recovered a total of $40 million in pension income! Below please find Ellen’s email with more information.

 

Dear Friend, 

This month, the New England Pension Assistance Project, part of the Pension Action Center at the University of Massachusetts Boston, celebrates a significant milestone: $40 million in recovered pension income since opening its doors in 1994. Hundreds of retirees in New England have more money to live on today as a result of the Center’s work.

“Pensions enable individuals to remain financially secure in retirement, helping them stay out of poverty,” said Ellen Bruce, director of the Center. “Unfortunately, complex pension laws and corporate red tape sometimes make it difficult for people actually to receive the pensions they have earned. The New England Pension Assistance Project is here to ensure that workers and retirees receive what they have earned.” 

Assistance from the New England Pension Assistance Project is available free of charge to current residents of any of the New England states, and to people whose pension plans or former employers are based in one of these states: Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, and Connecticut. The Project handles a variety of issues relating to retirement income benefits, including eligibility and vesting, problems with 401(k) or other retirement savings plans, survivor benefits, and problems in finding pensions that have become lost due to corporate changes and bankruptcies.

Funded by the U.S. Administration on Aging, the New England Pension Assistance Project is part of AoA’s Pension Counseling and Information Program that currently serves 29 states.  The Project is operated by the Pension Action Center at the Gerontology Institute of the McCormack Graduate School of Policy and Global Studies at the University of Massachusetts Boston.  For more information, visit http://www.pensionaction.org or call (617)287-7307 or (888)425-6067.

Thank you for your continued support,

Ellen Bruce Signature

Ellen A. Bruce, J.D. 

Director

Many older workers would like to retire slowly, decreasing their hours at work before completely retiring. With the current economic downturn, people are expressing interest in working longer. People have a lot of their identity wrapped up in their careers, so reducing your hours can be a smoother transition both psychologically and financially. But is this option available to everyone? The Boston College Center for Retirement Research answered this question in a report titled Phased Retirement: Problems and Prospect.

Phased retirement is a white-collar phenomenon and high income individuals who are White, wealthy and educated are more likely to be able to reduce their hours with their employer. Interestingly, 73% of employers interviewed said they would ‘work out’ a phased retirement plan for certain managerial or higher level employees. These informal policies dominate over formal procedures with older workers being kept on to train colleagues or new staff. Unfortunately, not all workers are given the same options.

Employers point to a variety of constraints that make it difficult for them to provide phased retirement options. Pension plans or paying health insurance for older part-time workers is a frequently named drawback. Employers also express interest in only keeping certain employees. In fact, phased options are often offered to the best or favored employees allowing the employer to weed out undesirable workers. Still, one of the main reasons a company did not have phased retirement was simply because their business did not want or need part-time work.

The good news is that phased retirement options continue to increase among companies. If you are interested in phased retirement talk to your employer. Many different arrangements can be made to accommodate both the worker and the company. Here are some tips:

  • Double check – does your employer already have a phased retirement program in place?
  • Determine your needs – what do you want and what options are realistically available to you?
  • Pension impacts – does your plan provide for phased retirement? how could it impact your benefits?
  • Health insurance – what will happen to your health benefits if you reduce your hours?
  • When can I start – does your employer have policies that could affect your decision? (for example: 6 months after you retire you can come back and work part-time)
  • Employer expectations – what will be expected of you and how will your role and responsibilities change?
  • Find more information from the Wall Street Journal and AARP’s Public Policy Institute

Today, after listening to the President speak, I started thinking about the economy’s impact on older Americans. I found an interesting report from The National Academies Press titled:  Assessing the Impact of Severe Economic Recession on the Elderly. You can read the document here, which summarizes a workshop called by The National Institute on Aging. The report’s main goal is to reflect on what we already know and what we need to learn about the current recession’s effect on older adults. Unfortunately, what we already know is quite bleak.

How People are Coping: All age groups are being affected by the recession but older workers are often unable to completely recover from these kinds of financial shocks. The most common ways people are coping with income loss are to reduce spending, reduce saving, utilize unemployment benefits, withdraw money from savings, get financial assistance from friends or family, and borrow money (i.e. credit cards, loans). Some older workers are also choosing to delay retirement as an additional coping method.

Our Health and Well-Being: Our health is being negatively effected by the economic recession. GDP is strongly, inversely related to mortality over the long term, and older workers who lose their jobs are at greater risk for certain health conditions than those who remain employed. Still the Gallup Well-Being Index found that people’s well-being significantly declined in the fall of 2008 but went back up substantially by May 2009. I am nervous, now that we lost our AAA rating and the current stock market is in turmoil, if people’s well-being will again decline.

Unemployment or Retirement: Unfortunately, older adults who lose their job are less likely to get hired back into the labor force compared to younger workers. Those who do find work are often making significantly less than they made at their previous job. Researchers find that age discrimination in the workplace continues to exist, particularly for older women. It is therefore not surprising that many older adults who lost their jobs are deciding to retire. This early retirement, however, could hurt future finances. Increases in Social Security’s full retirement age, less time to invest in your retirement accounts, fewer vested years with your employer, or simply having less in wages over your lifetime can all have negative effects on your finances in old age.

What Can You Do: The report summarizes a depressing situation and then has limited suggestions (and most of them seem pretty intuitive to me). I don’t know if it will tell you anything new but here they are along with my own comments:

  • Buy low, sell high – Experts suggest raising your contribution rates (if you can) to your stocks, bonds and pension accounts while the market is doing poorly. If the markets bounce back before you retire you may gain substantially (the younger you are the more you are likely to gain). If you are retired and have spare cash, consider moving it into low-risk funds so that you too may gain from the markets being low (Please consult a financial adviser who will learn about your personal situation. Do not take this as professional advice).
  • Reduce your spending – A no-brainer but often hard to do. Consider what you really need now and what can wait. Did you know that “I don’t need it” is the most common reason eligible individuals refuse welfare? Figure out what you really need, what you can live without, and what is most important to you.
  • Stay in your home – Selling now is not a great idea, so consider modifications if your home is currently not a safe place to grow old.
  • Keep your job – If possible, consider waiting to retire. If you have been laid off, consider looking for new employment and working a few more years before you retire. Collecting your Social Security benefits early will mean a lower monthly paycheck for the rest of your life.
  • Utilize family – Your family may be able to provide some insurance against financial shocks. It’s important to have someone you can call on for help, even if you don’t use them.
The report highlights a ton of questions we need to research before we can understand what is going on. Unfortunately all that means is the recession’s impact on older workers will be understood after it’s all over, providing them little support in the meantime.

Employment over one’s life time is rarely with a single company. Individuals often change jobs or employers over their working years. People leave to have children, to go back to school, or to try their hand at running a business.  All these changes in employment could confuse retirees trying to determine what pensions they are entitled to. And let’s be honest, who couldn’t use an extra $100 a month.

For New England residents there is a free resource that I’d love to share with you. The Pension Action Center was launched in 1999 and is based out of the University of Massachusetts Boston. Its primary program, the New England Pension Assistance Project, brings together pension experts, pension lawyers and a group of dedicated, knowledgeable volunteers to help you understand or obtain your pension benefits.

As their website states, the goals of the Center are to:

• offer individual counseling and assistance
• help you negotiate layers of bureaucracy
• help locate pension funds
• explain the benefits and rights under your pension plan
• supply referrals to attorneys if needed
• supply a listing of financial advisers if needed

The Pension Action Center complied this informative booklet in 2009 to help retirees answer a few burning pension questions. Am I entitled to a pension from my former employer or my spouse’s former employer? Where do I start looking? What documents will I need to understand my situation? What resources are available in my state? I think I have a lost pension, now what?

Employers are not required to provide a pension, so everyone’s results will be different. But now more than ever it is important to make sure you are getting all the benefits you are entitled to from your years of hard work. Check out the booklet to read more or contact the Center if you’d like to talk to someone directly. No one should be missing out on their much needed and well deserved retirement income.

The New England Pension Assistance Project
Phone: (617) 287-7307 or toll free (888) 425-6067
Fax: (617) 287-7080
E-mail: npln@umb.edu

I don’t see the problem with issuing gay couples the same Social Security rights as married couples so long as documentation proves they have been together 10 years or more, as is the requirement for married couples expecting a spousal benefit. If both members in the heterosexual couple work, the system would treat them like a two-earner couple, unless they can get more by taking the spouse benefit based on their partners PIA. Again, I do not see the problem with this right being given to homosexual couples. They are paying taxing just like heterosexual couples but their deductions and their benefits are not the same.

While this seems logical, and both conservative and liberal politicians have spoken in favor of it, no steps have been taken to give these couples the same Social Security rights as heterosexual couples. The Equal Access to Social Security Act was introduced to Congress in 2004, but was never addressed in the two year period so was cleared from the books. Then it was introduced again in 2006, but again cleared from the books. It has not been brought back for Congress to discuss.

An article I found from USA Today reports on the risks same-sex couples enter once they are in their retirement years. Not only do they face a much greater risk of spending the end of their lives in poverty because they’re ineligible for a host of federal protections, ranging from Social Security survivor benefits to estate tax exemptions, but couples who have lived together for decades may be barred from sharing a room in a nursing home or an assisted living facility. They are also unable, in many hospitals, to have next-of-kin privileges during hospitalization which is terrible for anyone dealing with illness. While some states recognize gay marriage and give them the same rights as straight married couples, the federal government still does not recognize gay marriage. Being treated differently on provisions run by the federal government, like Social Security and estate taxes, could greatly affect them especially if they are already vulnerable to falling into poverty. The aging baby boomer population will be over 70 million seniors, and more people means higher numbers of all cultures, races, and sexual orientations. We have not had a large population of homosexual couples in retirement before and how our government treats them may have serious repercussions for our aging population.

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