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Entries in Retirement (36)

Saturday
Apr132013

Student Debt Impacting US Economy

JupiterImages/Comstock Images(NEW YORK) -- According to a recent study, students should consider the statistics before taking out a loan to help pay for college.

Two-thirds of students take out loans to pay for college, and their combined debt could have a broad impact on the housing market and overall economy, according to new analysis from the Center for American Progress.

This is because people are taking out more loans than they used to, but their ability to pay them off hasn't kept pace. CAP notes that banks have written off billions of dollars and approximately 850,000 former students have defaulted on loans just in the first few months of 2013.

People used to take out loans, go to school, get jobs and pay off their debt in a reasonable amount of time. However, rising college costs paired with a struggling economy and high unemployment among young people has made that difficult.

In particular, Latinos and African-Americans are more likely to take out private student loans than in the past. That can be problematic because private loans often carry higher interest rates and repayment plans are less flexible than federal loans.

Many people now graduate and return home to live with their parents -- sometimes without a job -- which means they aren't buying their own homes. Home ownership rates among young people are at some of the lowest points in decades. Minorities, who are more likely to be burdened with student debt, are expected to represent more than 70 percent of net household growth between 2010 and 2020, CAP notes, but student debt could undermine that figure.

"By 2020, California real estate brokerage Movato.com predicts that half of all new homebuyers nationwide will be Latino—assuming Latino families are able to get mortgages," the think tank wrote in a letter to the Consumer Financial Protection Bureau this week.

The housing market isn't the only thing impacted by rising student debt.

As CAP notes, according to the Center for Retirement Research at Boston College, 62 percent of workers in their 30s likely will not have enough resources when they retire. That figure is particularly scary because it's gone up nine points in just three years, 2007 to 2010. It's hard to save for retirement when you're still trying to pay off loans, and nearly one in five people in their 30s has more than $50,000 in student-loan debt.

Complicating the issue is the fact that interest rates on some federal student loans are set to double on July 1. While the general consensus in Washington is that that's not a good thing, opinion on what should be done is anything but unanimous.

President Barack Obama on Wednesday proposed tying interest rates for federal student loans, which are currently fixed, to the government's cost of borrowing.

Three Republican senators recently introduced a bill that would set fixed interest rates on newly issued federal student loans, which would be pegged to the Treasury's 10-year borrowing rate, plus an additional three percentage points.

CAP suggests developing a refinancing program for student-loan borrowers and increasing income-based repayment programs, which would allow people to make payments based on their income instead of a predetermined rate. The organization also wants schools to certify private student loans.

Whatever is done, CAP warns that without action, "the growing student loan burden could make it more difficult for families to achieve future financial security and, if unchecked, could negatively affect the housing market and the broader economy."

Copyright 2013 ABC News Radio

Tuesday
Mar192013

Report: Americans' Confidence in Retiring Comfortably Hits New Low

Jupiterimages/Thinkstock(NEW YORK) -- Despite an improving economy and a boost for most 401(k) plans with the recent rise in the stock market, Americans' confidence in their retirement has fallen to a new low.

Nearly 60 percent of workers have less than $25,000 in total household savings and investments, according to a new report by the Employee Benefit Research Institute. 

Only 13 percent of those surveyed said they were very confident about retirement, while 28 percent said they had no confidence they'll be able to retire comfortably.  That's the highest level in 23 years of annual reports.

In the past five years, the percentage of workers saving for retirement fell from 65 percent to 57 percent.  The findings are in line with other surveys that suggest most Americans are saving too little for retirement.

Long life expectancies may add to the problem, with millions of people living at least 30 years after quitting full-time work.

Copyright 2013 ABC News Radio

Thursday
Jan172013

CEOs Propose Hiking Retirement Age for Benefits

Comstock/Thinkstock(NEW YORK) -- Some of the most affluent Americans in the country believe that the rest of us should work until we're at least 70 years old.

Chief executive officers who belong to an organization known as the Business Roundtable have issued a proposal that U.S. workers should not be able to benefit from the two sacred cow entitlements, Social Security and Medicare, until they turn 70.

Their reasoning is that Social Security and Medicare won't be able to sustain the ever-expanding number of people planning to get benefits at age 65.

The Business Roundtable contends its new recommendation wouldn't affect anyone currently 55 or older but if you fall under that age bracket, the CEOs say that Social Security checks for future retirees should be reduced.

Meanwhile, the group says that it would be better if Medicare was voluntary and that health benefits ought to be at least partially privatized.

John Engler, president of the Business Roundtable, adds, "Implementing changes now and implementing them gradually over a long period of time realizes dramatic savings down the road without putting an impact on individuals."

Copyright 2013 ABC News Radio

Tuesday
Nov202012

Older Workers Still Punching the Time Clock at Age 75 and Beyond

Ingram Publishing/Thinkstock(WASHINGTON) -- At age 81, Thomas Cooper has had a bout with cancer, and endured a back operation, but neither has convinced him to retire.

Instead, five days a week you'll find him selling men's shoes at a Nordstrom store in Bethesda, Md., just outside Washington D.C. "I would go crazy sitting around the house," Cooper told ABC News. "So I work."

A new study indicates he is hardly alone, according to government data analyzed by the AARP Public Policy Institute.

"The number and the proportion of people, 75 and older, in the workforce, they are on the increase," said Sara Rix, a senior strategic policy advisor with the Institute. "What we're seeing is really quite a remarkable increase in attachment to the labor force over the past 20 years or so."

According to the AARP analysis, in 1990, just four percent of the 75-plus crowd worked; now that's up to seven percent. That equates to nearly 1.3 million people in this age group who are employed. It's a small percentage of the overall workforce, just less than one percent, but that's still more than double the percentage a few decades ago.

Perhaps even more astonishing is that their unemployment rate has jumped as well, meaning a lot of these folks are looking for work. AARP's analysis found the unemployment rate for the 75 and older group was 2.3 percent in 1990. It was 5.6 percent last year.

Rix says there's a host of reasons behind the increases. For one, individuals can continue to work because they're staying healthier longer. "I suspect most people are there because they're doing something they really want to do. They enjoy their work. They're making a contribution."

There are also financial considerations. With the drop in home prices, the fluctuating stock market, and the decline in pensions, some older workers simply have to work.

For Cooper, that's definitely part of the equation. "When you get my age, you have a lot of doctor bills and different ailments. You have to pay the doctors and hospitals, so I am here," he said.

A recent survey by Wells Fargo found that nearly a third of Americans figure they'll need to work until age 80, in order to retire comfortably. The federal government estimates that by 2020, 10 percent of those aged 75 and older will be in the labor force. Rix believes the number is likely to be even higher.

Just last week the issue of older workers hit a chord on Capitol Hill, when House Minority Leader Nancy Pelosi was asked whether she should give up her leadership position to make way for younger lawmakers. Pelosi, who is 72, later told ABC News's Martha Raddatz that she was "amused" by the question, although at the time she called it "quite offensive."

Pelosi questioned whether male lawmakers would be asked the same age question.

Rix agrees, "So it may have been not only age discrimination implicit in that question, but perhaps also sex discrimination, as well. If someone can do that job, that's what we ought to be focusing on."

Shoe salesman Cooper believes older workers offer an advantage. "They have more experience, they know the products better, they know how to talk to people, and that's what matters."

Cooper, who's been in the shoe business for decades, but got his current job 17 years ago at the ripe young age of 64, says he has no plans to retire.

"I've been very fortunate that most of the managers here have been very good to me," he said. He was worried that "you get to a certain age and they want you out of here," but that hasn't happened to him. So his plans are to stay on the job. "I am going to keep working until I can't do it anymore," he said.

Copyright 2012 ABC News Radio

Tuesday
Oct232012

More Americans Worried About Not Having Enough for Retirement

Jupiterimages/Thinkstock(NEW YORK) -- Perhaps it's not so great to be young after all, especially if you're worried about what things will be like when you're older.

A new Pew Research Center survey says that about 40 percent of Americans are concerned that they won't have enough put away in savings when it comes time to retire.

When Pew asked the same question in 2009, about one in four respondents felt that way.

The group feeling the most anxiety aren't people closer to retirement age -- as in the previous Pew survey -- but Americans ages 36 to 40, with just over half believing that their nest eggs won't be sufficient enough to enjoy their golden years.  That's three times the number of younger adults who worried about the same situation three years ago.

To some extent, their fears are justified.  Pew found that the median wealth of those 35- to 44-year-olds today is under half of what that same demographic enjoyed in 2001.

Many of the retirement concerns of the young have to do with the unavailability of guaranteed pensions that their older counterparts received, meaning they'll need to rely more on their own assets to supplement Social Security, which also isn't as dependable as it once was.

Copyright 2012 ABC News Radio

Monday
Sep102012

Gen Z Imagines An Inheritance It Will Not Get

Fuse/Thinkstock(NEW YORK) -- Thirty-nine percent of Generation Z (kids aged 13 to 22) think that they will be getting an inheritance -- thus, that they won't need to worry as much about saving for retirement. Only 16 percent of their parents, however, intend to leave them any money.

The two generations' different expectations are borne out by a new survey, "Generation Z and Money Survey," produced by market research company Head Solutions Group on behalf of investment advisers TD Ameritrade.

Ameritrade's managing director of investor services, Carrie Braxdale, says that up to a point Gen Z kids and their parents share the same view of the future. She was surprised to see, for example, that when both groups were given an open-ended, non-multiple choice question asking them to list their biggest concerns about the economy, they gave virtually identical answers.

Without any prompting, both groups said jobs and unemployment were their biggest worry (kids 26 percent, parents 25 percent). Their fourth-biggest concern was not having enough money (kids eight percent, parents 10 percent). Braxdale cites this as proof of just how powerful an influence the parents' financial view can be on their kids'.

For this reason, she says, it's crucial for parents to spend time with their children discussing such subjects as the proper use of credit cards or learning how to make -- and stick to -- a budget.

The survey also documents quite vividly, however, that what they think they have been discussing with their kids may not be the same as what the kids think: 38 percent of Gen Z respondents say their parents have spoken with them about saving for retirement; 49 percent of the parents say that they have.

The degree to which the youngest generation and their parents are not on the same page financially is proof that young Americans who grew up during the recession did not learn much from their parents' woes, says USA Today.

Kids in the survey were not asked why they believed they would be living comfortably on their parents' money in the future, but Braxdale hazards a guess: It's because they're living comfortably on it now.

"We can't say for sure what their rationale is," she says, "but when you're young, and your parents are providing for all your needs," it's not unreasonable to suppose that this might go on forever.

Gen Z has much less confidence that Social Security will be around to help them in retirement: 35 percent believe it won't be, versus six percent of parents. And Z's expectations about retirement are different: 51 percent of parents imagine that retirement will be a time when they no longer work for money; only 37 percent of kids expect that.

The survey of some 2,000 U.S. residents was conducted this spring -- roughly 1,000 kids and 1,000 parents. It took every participant 12 minutes on average to complete. Why would any 13-year old kid sit still that long? The fact the survey was online, says Braxdale, helped.

Copyright 2012 ABC News Radio

Wednesday
Jul182012

Study: Unemployed Baby Boomers Dipping into Retirement Savings

Jupiterimages/Thinkstock(NEW YORK) -- Millions of aging baby boomers have cracked into their nest eggs, raided their 401(k)s and other retirement funds because they need the money now.

A new study from the non-profit Transamerica Center for Retirement Studies finds that only one in 10 displaced workers is very confident about the ability to retire comfortably.  The findings are based on a Harris Interactive poll of more than 620 unemployed or underemployed people.

Catherine Collinson, president of the Transamerica Center says, “Many have raided retirement accounts to make ends meet -- and it will be difficult for them to overcome these savings setbacks once they regain employment.”

Copyright 2012 ABC News Radio

Tuesday
Jul172012

Top 10 US Cities to Retire on $100 a Day

iStockphoto/Thinkstock(NEW YORK) -- Like millions of Americans, Judy and Leroy Snyder worried about whether they could afford to retire.  She is a former secretary; he worked cranes on construction jobs.

When they decided to quit working in their early 60's, the couple put down roots right where they'd already been living -- in Pittsburgh.  And it turns out they made a good choice.

Pittsburgh is one of 10 U.S. cities that offer what a new analysis calls a "rich retirement at a fraction of the cost."  The analysis, commissioned by AARP The Magazine, began with one key question: Where could you live well on $100 a day, or an annual income of $36,500?

At a 25 percent tax rate, that's $27,375 in spendable income, or about $2,281 a month.  If one spent about a third of that -- $720 -- on mortgage payments, one could buy a home that costs $192,000.

Housing costs though were just the starting point.

"Other criteria we used were crime, cost of living, climate," said Gabrielle Redford, editorial projects manager for AARP The Magazine.  "We of course wanted health resources, doctors and hospitals.  We looked at recreation, we looked at the arts."

A nearby college or university was a plus, so was easy access to an airport.  AARP also factored in the number of sunny days a year.

Combining the hard economic numbers, with the softer quality of life issues brought a broad array of choices from all parts of the country.

"These are not necessarily retirement meccas," Redford said, "they are just great places to live and great places to retire."

Besides Pittsburgh, the other cities that grabbed the brass ring are San Antonio; Omaha, Neb.; Grand Junction, Colo.; Gainesville, Fla.; Spokane, Wash.; Las Cruces, N.M.; Eau Claire, Wis.; Morgantown, W.Va.; and Roanoke, Va.

Copyright 2012 ABC News Radio

Wednesday
Jun062012

Low Interest Rates Delay Retirement, Survey Finds

Comstock Images/Thinkstock(NEW YORK) -- Record low rates on savings accounts and CDs are hampering the plans of would-be retirees, according to a survey by Wells Fargo/Gallup.

In its Investor and Retirement Optimism Index survey, one in three investors said low rates will cause them to delay retirement.

“Forty-five percent of non-retired Americans and 34 percent of retirees fear that current low interest rates may cause them to ‘outlive’ their money in retirement,” Wells Fargo said in a statement Wednesday.

Some 26 percent of non-retired people and 19 percent of retirees said low interest rates will cause them to put money in investments they “might have avoided.”  And, one in three investors in the survey said low interest rates are likely to lead to a sharp increase in inflation in the years ahead.

“A year ago, retired investors were three times as optimistic as working Americans and now retirees are less optimistic, which may be attributed to how challenging it is to have any kind of growth in savings.  Our questions on interest rates show the impact low rates are having -- they are challenging for retirement nest eggs, particularly when core inflation rate growth is about 3 percent a year and CD rates are yielding less than 1 percent.  Some people may feel like they’re pushing mud up hill,” said Karen Wimbish, director of Retail Retirement at Wells Fargo.

Rates have fallen to record lows because the Federal Reserve is keeping the discount rate near zero, trying to buoy the economy, which is only slowly recovering from the financial meltdown and mortgage collapse that began in 2007.  Rates on six-month CDs fell to below 1 percent in 2009 and are now at a record low of 0.42 percent.

Copyright 2012 ABC News Radio

Wednesday
May302012

401(k) Fees May Cut 30 Percent from Retirement Balance

iStockphoto/Thinkstock(NEW YORK) -- American workers who don’t think twice about their employer-sponsored 401(k) plans may be surprised to learn that fees can cut their retirement savings by 30 percent over a lifetime.

A household with two people earning the median income of their age group from 25 to 65 will pay an average of $154,794 in 401(k) fees and lost returns, according to a report from progressive, non-partisan public policy research group Demos, based in New York.

The $154,794 is 30.3 percent of that household’s retirement balance of $509,644 that is lost to fees.

The median 401(k) balance was a scant $23,000 at the end of the first quarter this year among Fidelity Investments’ 11.8 million accounts.

The higher your income, the greater the absolute value you pay in fees.

A dual-earning household in which each partner earns an income greater than three-quarters of Americans each year over their lifetime can expect to pay as much as $277,969.

Robert Hiltonsmith, policy analyst at Demos, said the most surprising finding was how much of a retirement balance can be lost to fees.

“I knew it was going to be a lot. I didn’t realize it was going to be more than 30 percent of what your retirement nest egg would have been,” he said.

The mutual fund industry provides a different picture.

The Investment Company Institute, a fund industry trade group, said the average person pays $248 a year in 401(k) fees, according to a study last year. The Los Angeles Times reports that would cost the average dual-income household under $20,000 while working over four decades.

But Hiltonsmith said the institute does not take into account trading fees, which represent nearly half of fees paid in Demos’ calculations.

Second, the household in our model is able to make consistent -- and increasing -- contributions each year, and never withdraws or cashes out their balance due to a life trauma or shock, Hiltonsmith said.

“Most households, however, don’t have the economic or job security for this to be the case, and aren’t able to do one or both of these things,” he said.

Hiltonsmith said the institute uses the median retirement balance, which is low because of the economic realities faced by most households trying to save for retirement.

The 30.3 percent figure that Demos discovered doesn’t vary based on household contributions or balances.

“And that percentage bite is, I think, the number to focus on,” Hiltonsmith said.

Workers with 401(k) funds can act to minimize the fees for their accounts in at least three steps:

1. Workers should learn what their fund’s expense-ratio is.

An expense ratio is a mutual fund’s fixed costs, such as administrative and marketing fees divided by the total assets of the mutual fund.

In the 401(k) funds available to Demos employees, the expense-ratios range from 0.70 to 1.3.

You can find most fund’s expense-ratios and compare funds on sites like Morningstar.com and Brightscope.com.  Starting July 1, 401(k) providers will be required to disclose fees and expenses according to a rule first approved by the Employee Benefits Security Administration’s rule in October 2010.

Higher fees do not guarantee a higher return.

2. You can ask a financial advisor about shifting their money into lower-cost funds.

Actively-traded funds, which aim to maximize returns by rapidly buying and selling assets, incur much higher trading costs than passive funds, such as index funds. The latter invests in a set diversified portfolio or in a fixed mix of assets.

3. Workers can ask their employer about having lower-cost 401(k) options available or switching providers.

Elisabeth Leamy, ABC News’ consumer correspondent, said that if banding together with your co-workers and pushing for better choices still fails, workers should make the minimum contribution to get the company match and put the rest of your savings into a low-fee IRA.

“I think the major point that we want a lot of people to take away from this is that these high fees in the system are part of the greater shifting of retirement risks and costs that have happened in the past 30 years,” Hiltonsmith said. “They shifted from the shared responsibility of employers and employees to solely on the backs of employees.”

Hiltonsmith said 401(k) funds should not be the primary place to supplement a worker’s Social Security benefits.

“The system isn’t suitable to be the main place for workers to save for retirement,” he said of 401(k) funds. “It’s not safe and it’s not low cost.”

Copyright 2012 ABC News Radio







ABC News Radio