Older Workers and the Search for “Good” Jobs

By Steve Vernon, September 22, 2016, CBS Money Watch

Working longer is becoming the go-to retirement plan for millions of older Americans who report they expect to keep working well into their retirement years. Many say they need the money and benefits, and most likely they’re right.

How many older workers are working at “good” jobs, compared with those who are desperately holding on for purely financial reasons? It turns out that defining “good” and “bad” jobs can have many subtleties, and it’s highly individualized to people’s goals and circumstances.

The Schwartz Center for Economic Policy Analysis (SCEPA) publishes a monthly report on unemployment for workers age 55 and over. Its August “older worker at a glance” brief noted that the unemployment rate for these older workers, as reported by the U.S. Bureau of Labor Statistics (BLS), is 3.5 percent, a historical low. This low rate is often cited as evidence that older people can continue working if their retirement income falls short. But simply focusing on this rate can be misleading. Note that this particular measure counts those who are unemployed as people without jobs who’ve been actively looking for work in the past four weeks.

The SCEPA brief also reports a total unemployment rate of 8.7 percent for workers age 55 and older. This rate is the sum of the BLS unemployment rate, workers who are working part-time but would rather work full-time and unemployed people who’ve recently given up looking for work. When you add jobless older workers who gave up looking after more than four weeks, the resulting unemployment rate is actually 12 percent. For these 12 percenters, just about any job might be considered a good one.

The SCEPA brief goes on to report that an increasing share of older workers are in “bad” jobs – 29.1 percent in July 2016 compared to 27 percent in July 2006. SCEPA defines a “bad” job strictly in financial terms. It’s a job for people working 30 hours per week or more that pays less than two-thirds of the median wage for such workers. In July, this median wage was $880 per month.

Other considerations can be used to define good and bad jobs. “Finding work that fulfills a sense of purpose is a major theme for older workers,” said journalist and author Mark Miller, who is also the editor of retirementrevised.com​. “Many people who have found themselves stuck in unfulfilling careers are looking for that second chance to get it right, and the research tells us they are happier, healthier and more likely to ultimately enjoy a successful retirement.”

Among the many other aspects for defining a good job are a harmonious work environment, friendly colleagues, flexible schedules or a short commute. A recent report by Merrill Lynch and Age Wave​ looked at the reasons retirees cited as motivation for working:

  • Staying mentally active (62 percent)
  • Staying physically active (46 percent)
  • Maintaining social connections (42 percent)
  • Keeping a sense of self-worth (36 percent)
  • Needing the money (32 percent)

Note that financial need ranked well below other considerations. As a result, it’s possible that many older workers may intentionally accept lower-paying jobs in exchange for increasing their fulfillment and freedom. In fact, many retirees report that they’re happy even though they have less income​ compared to when they were working previously.

What does all this mean if you’re approaching your retirement years? Spend the time doing the math and determine how much money you really need to support the life you want. Figure in how much income you’ll receive from Social Security, prudent withdrawals from savings and a pension if you have one. This exercise can help you find work that’s best for your unique goals and circumstances.

You’re much more likely to enjoy life in your retirement years if you’re working because you want to and not because you need the money. And if you really need the money, you might enjoy life more if your work keeps you mentally, physically and socially active. Work that’s flexible or part-time might also give you the freedom to pursue your hobbies, interests and travel.

If you’re in your mid-50s or early 60s, now’s the time to start planning for your retirement years​, including estimating your sources of income and determining how much you’ll be relying on work. If you need to continue working in your retirement years, it will take some planning and effort​, including taking care of your health, updating your skills and nurturing your contacts. But doing so will increase the odds that you’ll find good work and have a good life in retirement.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 


You Got a Pay Raise, Here’s How Not to Blow It

By Jeff Reeves, September 26, 2016, USA Today

Congratulations, you’re (probably) getting a raise!

According to Aon Hewitt’s 2016 U.S. Salary Increase Survey of more than 1,000 companies, base pay will rise 2.8% on average in 2016 and is expected to rise 3.0% in 2017. And that’s on top of the 5.2% boost in median household income — up to $56,516 in 2015 — that the U.S. Census Bureau recently reported.

Of course, that’s the average. Unsurprisingly, the report from talent firm Aon Hewitt indicated that “low performers” will typically get nothing in the way of raises.

And bigger picture, certain industries are looking better for employees than others. Aon Hewitt found the 2016 budget for salary increases at property and casualty insurers was the brightest, with a 3.3% bump on average, while the outlook for workers in the oil and gas industry was the bleakest, with just a 1.5% increase in overall salary budgeted.

Getting a bigger paycheck is always good news. But finance experts say running right out and spending that extra cash may not be the best idea.

“If you have more money coming your way, I recommend you siphon it off,” said Charles Sizemore, chief investment officer of Sizemore Capital Management in Dallas. “Continue to spend at your current levels, and use the excess to save and invest.”

So where, exactly, should you put that cash instead of buying a new flat screen or a tropical vacation?

Here are some ideas:

Build emergency savings: A staggering 66 million Americans have zero saved up for an emergency like car repairs or a broken fridge. “An ideal savings cushion is enough to cover six months of expenses,” said Greg McBride, chief financial analyst at Bankrate.com. “Getting to this goal will certainly take time, but it is important to have a direct deposit from your paycheck into a dedicated savings account and increase the amount of that deposit with each pay increase.” This fund won’t just help you replace a broken appliance, but also help you avoid troublesome financing options, such as payday lenders or credit cards that can charge high fees or interest.

Increase your retirement fund. After a rainy day fund, the next must-have to finance is your retirement fund. That means taking advantage of a tax-deferred account like a 401(k) — particularly if your employer matches the funds you contribute. “In addition to building a nest egg for the future, you’re getting a tax break today,” said Sizemore, since contributions to a 401(k) lower your total taxable income and IRA deductions are tax deductible.

Pay down debt: If you have a high-interest-rate loan that’s outstanding, either for credit card debt or a car or tuition, then zeroing out that balance can be one of the most effective investments you can make. “Paying down a 16% credit card balance is a risk-free return of 16%,” said McBride.

To Your Successful Retirement

Michael Ginsberg, JD, CFP®


Use of Online Tools, Advice Boosts Savings

By Lee Barney, Sept. 26, 2016, editors@assetinternational.com

Mobile banking apps are the most commonly used online tool.  Investors who frequently use online tools and consult with a financial adviser have higher savings than those who do not, according to a survey by The PNC Financial Services Group, Inc.

The most digitally connected investors have the highest average household income and highest total investable assets. They spend an average of three hours and forty-two minutes a week reviewing their finances or looking up financial information on a computer or mobile device. Of the 45% of survey participants who say they are “very connected” to their finances, 50% look at financial headlines every day and 50% use a mobile application to access their accounts. More than one-third of these “very connected” investors would like even more information.

“The most digitally connected investors tend to be better informed, which contributes to their success and positions them well for the future,” says Rich Ramassini, director of strategy for PNC Investments. “For instance, they are more likely to know about the fiduciary standard for investment advisers, and are more likely to consult with an adviser who follows the standard. The information and advice they access should give them an advantage as they save and invest for retirement.”

The survey also found that 60% of the “very connected” investors rely on an adviser. Two-thirds of investors would like to hear from their financial advisers, particularly during an economic downturn.

“Making a change in a portfolio during periods of market volatility is the chief source of regret among investors,” Ramassinin says. “A financial adviser can be a steady hand in times of stress and help avoid panic selling or buying. When it comes to successful saving, information—particularly information gained through a combination of digital resources and expert advice—is powerful.

The most commonly used app is for mobile banking, which 58% of respondents have used in the past year. However, only 37% have used mobile apps to access their investment accounts, which indicates, PNC says, that firms could do more to promote these resources.

Artemis Strategy Group conducted the survey for PNC among 1,002 adults between the ages of 35 and 75 in May. Those age 45 or older had investable assets of $100,000 or more, and those between the ages of 35 and 44 had investable assets of $50,000 or more.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®


Are Clients In Denial About Retirement Readiness?

What Americans don’t know about their retirement needs could hurt them—but what they think they know could hurt them more, according to a new survey.

Almost two-thirds of Americans say they’re not concerned about running out of money in retirement, according to the 2016 TIAA Lifetime Income Survey.

The survey reflects a general optimism among U.S. households—65 percent of the respondents were unconcerned about a retirement shortfall—but TIAA’s chief income strategist, Diane Garnick,  says the results likely reflect a population in denial about their personal finances.

“That means that only 35 percent are concerned about running out of money in retirement, and we think those numbers should be completely opposite—two-thirds of us should be worried while one-third of us shouldn’t be,” Garnick says. “There’s a huge disconnect. Because we’re living longer and because the do-it-yourself saving strategy isn’t working like it was expected to, I think it’s more likely that 65 percent of Americans are living in denial.”

Still, most respondents, 58 percent, felt confident that they could successfully generate income from their savings during their retirement. Other survey responses suggest that these respondents are also in denial. Just 46 percent of respondents knew how much they have saved in their retirement accounts, and fewer, 35 percent, know how much income they’ll be able to generate each month in retirement.

“We kind of saw this at the end of the financial crisis in 2008, people were suffering from the five stages of economic grief and stage one was denial,” Garnick says. “How many people decided that they didn’t even want to open their retirement account statements anymore? They didn’t even want to know what the balance is.”

Americans seem to harbor mistaken assumptions about retirement, according to TIAA. Most of the survey’s respondents, 63 percent, assumed that they’re going to need less than 75 percent of their current income to live comfortably in retirement, yet TIAA claims that most experts believe that retirees will need to replace 70 to 100 percent of their retirement income.

“I think people are able to intellectually recognize that they have a personal retirement problem, but until they are able to emotionally acknowledge that this is a problem that needs an immediate fix, they’re able to remain in denial,” Garnick says. “People are naturally afraid of complexity, so they take mental shortcuts.”

When asked what they were looking for from a retirement plan, nearly half of the respondents, 49 percent, said lifetime income to cover their costs of living and another 24 percent said protection from market volatility.

TIAA also found a lack of awareness of annuities as products that could provide a retirement income stream. Just one-in-10 Americans have purchased an annuity, according to TIAA. Two-thirds of the survey respondents, 66 percent, say they are unfamiliar with annuities, and only 23 percent of the respondents said they have a favorable opinion of them.

That unawareness comes through when TIAA’s respondents were asked about where their retirement income would come from—annuities fell behind defined benefit plan payments, retirement account withdrawals and Social Security as a plan’s income source.

The survey was conducted by telephone among a random sample of 1,000 U.S. adults in June.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 


Majority of Today’s Retirees Have a Pension

By Lee Barney, September 26, 2016, editors@assetinternational.com

Eighty-one percent of today’s retirees receive some income from a pension plan. For 42% of these people, their pension provides half or more of their retirement income, according to a study by the Insured Retirement Institute (IRI). However, for those not yet retired, only 24% have a defined benefit (DB) plan.

IRI estimates that as many as 56 million Baby Boomers will not receive retirement income from a pension, and that future retirees will need upwards of $400,000 to make up for this income shortfall. “Replacing pensions and achieving financial security these plans provide to retirees will be a key issue for future generations,” says IRI President and CEO Cathy Weatherford. “As Baby Boomers retire in greater numbers over the next decade, and as Gen Xers begin to leave the workforce, financial professionals have an historic opportunity to help Americans create their own pensions, through Social Security optimization and the use of lifetime income strategies, to help their clients attain the same security, lifestyles, confidence and positive outlooks as the participants in this study.”

The study also discovered that nearly 60% of retirees have worked with a financial adviser, and 93% of these people say the advice they received has been effective. Seventy-two percent of retirees who own an annuity are satisfied with it. Retirees also face unexpected expenses; 40% have suffered a major health event, such as a heart attack or stroke, and 25% have faced a major non-medical event, such as a major home repair.

More than one-quarter, 27%, have relocated their primary residence in retirement, and of these people, 60% did so for lifestyle reasons, and 30% in order to lower their cost of living. While 67% of retirees think their chance of requiring long-term care is less than a 25% chance, the Department of Health and Human Services (HHS) believes that 70% of those turning 65 today will need such services. Sixty-percent think that Medicare will pay for their long-term care expenses.

Greenwald & Associates conducted the survey among 806 retirees between the ages of 65 and 80 who retired with at least $50,000 in investable assets and have been retired for at least five years.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®