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A New Look at Healthcare Costs in Retirement
Tweet Share on Facebook June 5, 2008 Comment (6)Health benefits for retirees are a relic of the past. Fewer than a third of current workers have any employer subsidy for retiree health insurance, according to the Employee Benefit Research Institute. In the past, I've written that retired couples will need between $205,932 (Boston College Center for Retirement Research estimate) and $225,000 (Fidelity Investments estimate) to cover healthcare costs in retirement.
A new analysis by the nonpartisan EBRI puts the number for a couple currently age 65 at a staggeringly high $635,000, and that doesn't include long-term-care costs. This ultraconservative calculation is higher than the other estimates because it is designed to give the retired couple a 90 percent chance of having enough money to cover all health bills beyond what Medicare covers.
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The 10 Most Common Jobs for Older Workers
Tweet Share on Facebook June 4, 2008 Comment (44)The stereotype of the senior citizen working at Borders and Home Depot appears to be true. Retail jobs are the most common occupation for workers 65 or older, according to an Urban Institute analysis to be released later this month.
Almost 7 percent of people still working past age 65 are employed as retail sales persons or their supervisors, the Urban Institute calculated. Among the workforce as a whole, only about 5 percent of people work in retail.
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Taking a Buyout to Leave a Job You Love
Tweet Share on Facebook June 3, 2008 Comment (3)On his last day of work at the Washington Post, Stephen Fehr, 55, lovingly described his 19 years of reporting and editing as "The Only Job I Ever Wanted." Fehr and dozens of other Post journalists accepted a voluntary early retirement offer from the newspaper. The article left me wondering what goes into deciding to retire early from a job you loved. I spoke with Fehr on his first day at his new post-Post post, senior writer for the news website Stateline.org. Excerpts:
What made you decide to accept the early retirement offer?
I wasn't really planning to, but a friend of mine who I sat next to for years at the Post works at the Pew Research Center and she called and said, "If you know anyone who's taking the buyout, there's this job opening." And I said, "Well, I'm not taking it, but the only person who really might be interested is me." I thought about it overnight and called her back. I don't think I would have taken [the buyout] if I didn't have this job lined up. -
Keeping a Job for the Retirement Plan
Tweet Share on Facebook June 2, 2008 Comment (1)Instead of golfing and sailing, you could be spending your golden years clipping coupons and hitting up early-bird specials, Washington Post business columnist Martha Hamilton reports this weekend. She writes:
"There's a good chance your retirement years could be accompanied by a drastic drop in your standard of living. The reason: Traditional pensions largely have been replaced by retirement savings plans."
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5 Reasons to Avoid 401(k) Debit Cards
Tweet Share on Facebook May 30, 2008 Comment (4)New 401(k) debit cards make it even easier to flunk do-it-yourself retirement. Investors should be wary of the potential pitfalls of 401(k) debit cards, according to an investor alert from the Financial Industry Regulatory Authority (FINRA), a nongovernmental securities industry regulator.
With a 401(k) debit card, you can generally borrow $50,000 or 50 percent of your vested account balance, whichever is less, the IRS says. Your employer must approve the loan. The amount you borrow is set aside in a separate money market fund and will generally earn income on a tax-deferred basis until you draw it down with the debit card or write a check on the account.
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Who's Got Your Number?
Tweet Share on Facebook May 29, 2008 Comment (2)How many times have you given out your Social Security number in the past year? You've probably shared it with your employer, bank, health insurer, and landlord or mortgage agent. Even employees at your local gym and utility company sometimes ask you to hand over your number. Nearly 90 percent of Americans have been asked to divulge their full or partial Social Security number in the past year, often to businesses with no clear need for that information, according to a Consumers Union telephone poll.
Americans have been asked to share their Social Security numbers with financial institutions and retailers issuing credit (60 percent), healthcare providers (49 percent), cable TV or cellphone carriers (26 percent), utilities (17 percent), and retailers (16 percent). Many of these companies have no obvious need to collect Social Security numbers.
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Employees With 401(k)'s Retire Later
Tweet Share on Facebook May 28, 2008 CommentIf you want to retire young, you'd be well advised to find a job that still comes with a traditional pension and health benefits for retirees. Employees entitled to defined-benefit retirement plans that guarantee income for life are more likely to retire at any age than employees who have only defined-contribution retirement plans like IRAs and 401(k)'s, according to an analysis of workers over age 50 by consulting firm Watson Wyatt.
Stock market booms and busts also influence the timing of retirement among workers with defined-contribution plans. Employees are more likely to retire at market peaks and delay retirement during downturns. This phenomenon often puts employees' goals at odds with those of their employers. "When the market booms, defined-contribution plan participants might retire just when companies need to add workers, and when there are market busts, defined-contribution plan participants might stay at work just when companies want to reduce the size of their workforce," says Mark Warshawsky, director of retirement research at Watson Wyatt.
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Economy Has Boomers Rethinking Retirement
Tweet Share on Facebook May 27, 2008 Comment (1)As gas and grocery prices rise, some cash-strapped older workers are rethinking plans to retire. Some 27 percent of older workers say they are putting off retirement because of the recent economic slowdown, according to a recent AARP telephone survey of 1,002 workers over age 45. Almost 25 percent of people between the ages of 45 and 64 are taking money out of their 401(k)'s and other investments. And younger baby boomers between the ages of 45 and 54 say they are even postponing paying bills (27 percent) and cutting back on medications (17 percent).
"Taking money out of your retirement savings has a compounding effect, because that money is not allowed to grow at a time when you have fewer working years to replace the losses," says Tom Nelson, AARP's chief operating officer. "Even more troubling, shortchanging your healthcare can lead to higher healthcare costs down the road."
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Revealed! Cushy Retirement Plans at Fortune 100 Companies
Tweet Share on Facebook May 23, 2008 Comment (4)Only about half of Fortune 100 companies still offer their employees defined benefit pension plans. An analysis by consulting firm Watson Wyatt found that 54 firms had a defined benefit pension plan for newly hired salaried workers last year. Of those 54 firms, 28 offered a traditional pension that guarantees income for life. The remaining 26 offered hybrid pension plans like cash balance plans, an account that the employer deposits a set amount of money into (such as 5 percent of pay) and also deposits interest (which can be a fixed rate or a variable rate linked to an index such as a one-year treasury bill). But increases or decreases in the market don't directly affect the account, because the employer bears all the investment risks and rewards.
When it comes time to retire, the employee can choose to receive annuity payments until the account balance is used up or take a lump sum equal to the account balance. Sometimes vested employees can also cash out the lump sum when they leave an employer.
Here's how retirement plans at Fortune 100 companies have stacked up over the years.
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'Safe' Target-Date Retirement Funds Have Hidden Risks
Tweet Share on Facebook May 20, 2008 Comment (15)Target-date retirement funds are designed to automatically shift investors' portfolios to less risky assets as they age. You name your retirement year, and the fund managers change the stock and bond allocation inside the fund to an appropriate risk level for your age, in theory getting a bit more conservative as you approach your ideal retirement date.
Almost 80 percent of large U.S. plan sponsors offered target funds as an investment option through their 401(k) plans in 2007, up from 60 percent in 2006, according to research by consulting firm Greenwich Associates. And even if you don't sign up, you could find yourself automatically enrolled in them unless you specifically opt out. "About 40 percent of funds that have adopted automatic enrollment use target retirement date funds as their default, compared with about a third using money market funds," says Greenwich Associates consultant Rodger Smith.
