Moving & Retirement: More

The FBI Issues A Reverse Mortgage Fraud Report

 

NBER Working Paper: Changes in Social Security Have Affected Retirement

In How Changes in Social Security Affect Recent Retirement Trends (NBER Working Paper No. 14105), co-authors Alan Gustman and Thomas Steinmeier find that changes in Social Security rules have changed the shape of retirement. Rule changes increased full-time work by married men aged 65 to 67 by about 9 percent between 1992 and 2004, encouraged later retirement, promoted the return to full-time work after retiring, and facilitated working part-time after retirement. All in all, they account for about one sixth of the increase in labor force participation by 65 to 67 year old married men between 1998 and 2004.

One of the main reasons for enacting the 1983 Social Security reforms in the United States was to increase the labor force participation rate of older workers. In 2000, Congress further expanded work incentives by abolishing the Social Security earnings test for people over the normal retirement age. As a consequence, in 2004 more men over age 65 were working than in earlier years. Overall, between 1998 and 2004 there was a 3.1 percentage point decline in the fraction of 65-to-67-year-old

But the experience of younger men was different. Labor force participation rates declined for men aged 50 to 56. And, more men were retired at younger ages in 2004 than in previous years. In 1998, 80.4 percent of men 50 to 56 years old worked full-time. By 2004, only 75.5 percent did so.

To isolate the effect of Social Security rule changes from other factors — such as the abolition of mandatory retirement ages, changes in employment and compensation policies, rising incomes encouraging early retirement, the stock market boom, and the rising labor force participation rates of women -- the authors estimate a retirement model using Health and Retirement Survey data on 2,231 married men. They then simulate the effects of evolving Social Security rules, assuming that each individual has the work history actually experienced. Individual time preference rates are varied, so that some people respond strongly to delayed incentives and others respond only to incentives that affect current consumption.

The baseline model's estimates suggest that the value of retirement leisure is increasing by 5.4 percent per year, a relatively low value, suggesting that economic incentives can change work effort in retirement. Poor health increases the value of retirement leisure by approximately the same amount as being seven years older, and individuals may change their perception of retirement after they experience it, with some deciding to go back to work. The simulation results further suggest that differences in Social Security rules have no effect prior to age 62. This means that the decline in labor force participation observed for those in their fifties has another cause.

-- Linda Gorman

 

Unclaimed Pension Benefits

The Pension Benefit Guaranty Corporation (PBGC) provides a Pension Search directory (www.pbgc.gov/search) to locate pension earnings that have been misplaced. Search using last name, company name, or state where the company was headquartered.

Since 1996, PBGC has offered the Pension Search directory (www.pbgc.gov/search) as an interactive tool for people who may have lost track of a pension earned during their career. People can search by their last name, company name, or state where the company was headquartered.

"For the 32,000 people still missing, individual benefits range from $1 up to $611,028 and average about $4,950.  The states with the most missing pension participants and money to be claimed are: New York (6,885/$37.49 million), California (3,081/$7.38 million), New Jersey (2,209/$12.05 million) Texas (1,987/$6.86 million), Pennsylvania (1,944/$9.56 million), Illinois (1,629/$8.75 million) and Florida (1,629/$7.14 million)." 

"Over the past twelve years more than 22,000 people have found $137 million in missing pension benefits through PBGC’s Pension Search program. The states with the most found participants and pension money claimed are: New York (4,405/$26.31 million), California (2,621/$8.33 million), Florida (2,058/$15.27 million), Texas (2,047/$11.23 million), New Jersey (1,601/$9.99 million), Pennsylvania (1,594/$6.54 million) and Michigan (1,266/$6.54 million)."  

"The PBGC encourages those who may be owed money from a defined benefit pension plan that ended to conduct Internet pension searches and not write off the money as lost forever.  The online service is free and available 24 hours a day.  For those without access to the Internet at home, many local public libraries, community colleges and senior centers make computers available to the public that can be used for searching the Pension Search directory.  Searchers can also e-mail found@pbgc.gov or missing@pbgc.gov if they believe they are entitled to a benefit."

"The Impact of the Financial Crisis on Workers' Retirement Security"

The House Committee on Education and Labor held a hearing examining "how the current financial crisis is impacting pension funds and workers’ directed retirement accounts, such as 401(k) plans. According to a recent poll by the Associated Press, more than half of all Americans are worried that the ongoing financial crisis will force them to postpone retirement."

Those testifying before the committee were:

Jerry Bramlett
CEO
BenefitStreet, Inc.

Dr. Teresa Ghilarducci
Professor of Economic Policy Analysis
The New School for Social Research

Dr. Peter Orszag
Director
Congressional Budget Office

Jack VanDerhei
Research Director
Employee Benefit Research Institute

Dr. Christian Weller
Associate Professor of Public Policy, University of Massachusetts-Boston
Senior Fellow, Center for American Progress

The Retirement Game

The Center for Retirement Research at Boston College is hosting an online retirement game called Get Rich Slow:

"Participants make decisions for a fictional couple in a fun, non-threatening group setting. They experience the implications of their decisions and also chance events. They come away with an overview of the retirement planning process and the hands-on experience essential in moving ahead. Get Rich Slow is currently available to individual users free of charge."

Each age begins with a Free Money Round where the group is asked two to four factual questions. For each correct answer, $1,000 is added to Norm and Sally’s nest egg. In the “Decision Round,” the participants hear about Norm and Sally’s current situation and make the decisions that will affect their financial future. A spin of the wheel of fortune then determines whether the stock market boomed or crashed, and whether Norm lost his job or suffered a health shock. The Game is divided into five ages — 45, 55, 65, 75, and 85. At each age, the group makes key decisions for a fictional couple — Norm and Sally.

Article

John Malone, Part Two of Traveling: After retirement, as our five children grew up, moved away from home and started families of their own, our travels took on a different form: the pursuit of our grandchildren, fiercely competing with their other grandparents for face time

 

PGBC Continued

The GAO has produced another report about the Pension Guarantee Benefit Corp, those people who receive premiums from corporations to insure that there will be a backup (up to a fixed dollar amount) for your pension, should that corporation fail.

What GAO Found: Improvements Needed to Address Financial and Management Challenges

PBGC administers the current or future pension benefits for a growing number of participants of plans that have been taken over by the agency — from 500,000 in fiscal year 2000 to 1.3 million participants in fiscal year 2007. PBGC is financed by insurance premiums set by Congress and paid by sponsors of defined benefit (DB) plans, investment income, assets from pension plans trusteed by PBGC, and recoveries from the companies formerly responsible for those trusteed plans; PBGC receives no funds from general revenues. The treatment of PBGC in the federal budget is complicated by the use of two accounts — an on–budget revolving fund and a non-budgetary trust fund. Ultimately this budget treatment can be confusing--especially in the short-term — as on-budget gains may be offset by long-term liabilities that are not reported to on-budget accounts.

PBGC’s single-employer program faces financial challenges from a history of weak plan funding rules that left it susceptible to claims from sponsors of large, severely underfunded pension plans. PBGC had seen recent improvements to its net financial position due to generally better economic conditions and from statutory changes that raised premiums and took measures designed to strengthen plan funding and PBGC guarantees. However, certain improvements have only just begun phasing-in and the changes did not completely address a number of the risks that PBGC faces going forward. Further, PBGC just began implementing a new investment policy that, while offering the potential for higher returns, also adds significant variability and risk to the assets it manages. Also, changing economic conditions could further expose PBGC to future claims.

The Pension Benefit Guaranty Corporation (PBGC) insures the retirement future of nearly 44 million people in more than 30,000 private-sector defined benefit pension plans.

In July 2003, GAO designated PBGC’s single-employer pension insurance program — its largest insurance program — as “high risk,” including it on GAO’s list of major programs that need urgent attention and transformation. The program remains on the list today with a projected financial deficit of just over $13 billion, as of September 2007.

Because Congress exercises oversight of PBGC, GAO was asked to testify today on 1) the critical role PBGC plays in protecting the pension benefits of workers and how PBGC is funded, 2) the financial challenges facing PBGC, and 3) the PBGC’s governance, oversight and management challenges.

To address these objectives, we are relying on our reports from the last several years that, as part of our designation of PBGC’s single-employer program as high-risk, explored the financial and management challenges facing the agency. GAO has made a number of recommendations and matters for Congressional consideration in these past reports. PBGC generally agreed with these past recommendations and is implementing many of them. No new recommendations are being made as part of this testimony.

What Can You Walk To?

One of the reasons we chose the property to buy that we did, was to walk to a village nearby (.32 mi) with market and deli, pharmacy, hardware store, gas station, restaurant, wine shop, bank, ice cream and even the dentist we chose. We lost our newly opened bakery, but we can hope for a replacement. At .51 mi is a movie theater and many more restaurants. And, the bus stops in front of our house that can take us to the city (San Francisco) or to rapid transit.

When in the market for a retirement home or just a vacation, enter the address of the location you're considering and it will pinpoint services nearby. It's called WalkScore.com.

Here's the explanation of the walk score assigned to the address you might give:

What does my score mean?

Your Walk Score is a number between 0 and 100. Here are general guidelines for interpreting your score:

• 90–100 = Walkers' Paradise: Most errands can be accomplished on foot and many people get by without owning a car.
• 70–89 = Very Walkable: It's possible to get by without owning a car.
• 50–69 = Somewhat Walkable: Some stores and amenities are within walking distance, but many everyday trips still require a bike, public transportation, or car.
• 25–49 = Car-Dependent: Only a few destinations are within easy walking range. For most errands, driving or public transportation is a must.
• 0–24 = Car-Dependent (Driving Only): Virtually no neighborhood destinations within walking range. You can walk from your house to your car!

America's 2,508 neighborhoods in the largest 40 US cities are ranked to help you find a walkable place to live. The top cities?

1. San Francisco, CA
2. New York, NY
3. Boston, MA
4. Chicago, IL
5. Philadelphia, PA

6. Seattle, WA
7. Washington D.C.
8. Long Beach, CA
9. Los Angeles, CA
10. Portland, OR

 

 

Articles

John Malone, A Retirement Odyssey: "The area is rife with magnetic leylines and vortices and contains the oldest mountains on the planet, including Mt. Mitchell, the highest east of the Mississippi, and Shining Rock, a peak of solid quartz crystal. We sensed the wonderful energy of the mountains as we searched for our spot to retire"

Rose Mula, A Moving Experience: My movers were as inept as I, stacking boxes haphazardly everywhere. Though my new condo has two bathrooms, the paths to both were blocked with cartons. Crying was not an option. I had no idea where my tissues were packed

The Wall Street Journal runs a feature, Ask Encore/ Focus on Retirement, a weekly column answering questions from their readers. This was a recent entry by Kelly Greene:

In Your 70s, Weighing Whether to Buy a Home or Rent

We recently sold our home and have relocated to a different part of the state. We are renting until we decide which neighborhood we wish to live in and have eight more months on our lease. Should we decide to buy at our ages, 75 and 73, or continue to rent? We are both healthy and able to pay all cash, or shouldn't have trouble getting a mortgage as we both have excellent credit and no debt. We have heard arguments both ways involving life expectancy, the continuing drop in housing prices within our time frame, and rentals becoming more scarce as homeowners are having to foreclose, etc.

Two certified financial planners, one on the East Coast and the other on the West Coast, suggested that you seriously consider continuing to rent — or, if you'd rather buy, at least scale down to a condominium with less maintenance involved than a house.

Read the rest of the WSJ Ask Encore article

Article

Pat Beurteaux, The Big LXV: It doesn’t help that, here in Ontario, one receives a congratulatory message from the Minister of Health. What is it really saying? `Congratulations. You made it despite our best efforts to kill you.’ Or `Best of luck. You’re going to need it’

A New Sighting

Sightings: Naturally Occurring Retirement Communities and Other Things. We noticed that the slogan of the Naturally Occurring Standards Group was: Because Life is Naturally Occurring. We like that.

Article

HTG Investment Advisors: Retirement Planning and Magical Thinking — Without a doubt, there is a “disconnect” between the reality of pre-retirees’ financial situations and their perception of what it takes to retire.

You're Now 70½ and Other Distributions

I never quite realized that taking money from my IRA or 401K would require a fairly complicated set of calculations. Minimum distributions are to be determined, otherwise known as your RMD (Retirement Portfolio Distribution).

So we turned to Morningstar, a thoroughly straightforward site to use for this kind of problem. Fortunately, there was an article, How to Manage Retirement Portfolio Distributions that contains a formula. We'll leave you to figure out how you fit that formula. The free article may require registration.

Happy Distribution!

New Links

WorkPlaceFairness

What constitutes age discrimination in a company is something that most of us will wonder about sometime in our career. This section of the WorkPlaceFairness site lays out most of the questions that we have and, you may be surprised to learn, it starts at age 40:

If you are 40 years of age or older, and you have been harmed by a decision affecting your employment, you may have suffered unlawful age discrimination. The Age Discrimination in Employment Act (ADEA) is a federal law that protects individuals 40 years of age or older from employment discrimination based on age. Here are some examples of potentially unlawful age discrimination:

You didn't get hired because the employer wanted a younger-looking person to do the job.
You received a negative job evaluation because you weren't "flexible" in taking on new projects.
You were fired because your boss wanted to keep younger workers who are paid less.
You were turned down for a promotion, which went to someone younger hired from outside the company, because the boss says the company "needs new blood."
When company layoffs are announced, most of the persons laid off were older, while younger workers with less seniority and less on-the-job experience were kept on.
Before you were fired, your supervisor made age-related remarks about you, such as that you were "over-the-hill," or "ancient."

There is also a section devoted to women.

The Retirement Security Project "is dedicated to promoting common sense solutions to improve the retirement income prospects of millions of American workers and is supported by The Pew Charitable Trusts, in partnership with Georgetown University's Public Policy Institute and The Brookings Institution. The goal of The Retirement Security Project is to work on a nonpartisan basis to make it easier and increase incentives for middle- and lower-income Americans to save for a financially secure retirement." The Project publishes evidence-based policy briefs as well as policy and legislative analysis, discussion papers, original research, working papers and Congressional Testimony.

Spending and Adjusting Retirement Money Amounts

One approach to deciding how much to withdraw from your retirement 'nest egg' is formulated by Jonathan Guyton, a planner at Cornerstone Wealth Advisors in Minneapolis, and another devised by Ty Bernicke, a planner in Eau Clair, WI.

We found these references in a New York Times article, New Advice to Retirees: Spend More at First, Cut Back Later. This, of course, made sense to us as our philosophy has been to try to reduce our possessions, rather than add to them.

Here's Mr. Guyton's Executive Summary of a paper he wrote

Executive Summary This paper establishes new guidelines for determining the maximum "safe" initial withdrawal rate, defined as (1) never requiring a reduction in withdrawals from any previous year, (2) allowing for systematic increases to offset inflation, and (3) maintaining the portfolio for at least 40 years. It evaluates the maximum safe initial withdrawal rate during the extreme period from 1973 to 2003 that included two severe bear markets and a prolonged early period of abnormally high inflation. It tests the performance of balanced multi-asset class portfolios that utilize six distinct equity categories: U.S. Large Value, U.S. Large Growth, U.S. Small Value, U.S. Small Growth, International Stocks, and Real Estate. Two portfolios (65 percent equity and 80 percent equity) are evaluated in conjunction with systematic Decision Rules that govern portfolio management, sources of annual income withdrawals, impact of years with investment losses and withdrawal increases to offset ongoing inflation. This paper finds that applying these Decision Rules produces a maximum "safe" initial withdrawal rate as high as 5.8 percent to 6.2 percent depending on the percentage of the portfolio that is allocated to equities.

For the entire paper, go to the FPA Journal site.

From the same Journal comes Mr. Bernicke's set of recommendations set out in an executive summary:

Executive Summary Traditional retirement planning assumes that a household's expenditures will increase a certain amount each year throughout retirement. Yet data from the U.S. Bureau of Labor's Consumer Expenditure Survey show that household expenditures actually decline as retirees age. Consequently, under traditional retirement planning, consumers tend to oversave for retirement, underspend in their early years of retirement, or postpone retirement. "Reality" retirement planning assumes that a household's real spending will decrease incrementally throughout retirement. The result is that clients can make more realistic retirement saving assumptions and will be able to retire sooner. The paper analyzes the Consumer Expenditure Survey data to determine whether people are spending less voluntarily as they age or out of financial necessity or generational differences. The conclusion is that reduced spending is voluntary. Using Monte Carlo simulation, the paper runs hypothetical retirement income projections comparing traditional retirement planning and reality retirement planning. Under the traditional approach, the couple's nest egg would appear to be depleted by age 80. Under the reality approach, the nest egg at age 80 would be over $2 million. Such dramatic differences not only have implications for retirement planning, but for related issues such as estate, tax, and investment planning.

For that complete article, go again to the specific Journal page.

Men's and Women's Adjustment to Retirement

The paper, Renegotiating identity and relationships: Men and women's adjustments to retirement by Helen Barnes and Jane Parry, draws upon research literature and interviews conducted with 48 men and women aged 50-65 in four contrasting parts of the UK. Fieldwork was conducted using semi-structured in-depth interviews, covering personal information, family and social relationships, paid and unpaid work, community and leisure activities, and future hopes and plans.

Here are some excerpts from that paper:

Work provides a plurality of functions and rewards, including purposeful activity, sociability, status, and material gain. Individuals attach different significance to these and prioritise them differently over the lifecycle. Work also provides a series of routines giving structure and meaning to people’s lives, upon which they rely more or less heavily. Consequently the loss of paid labour, in the context of structural positioning and social involvement, affects people in different ways. Gender is an important dimension in this process, since women’s employment biographies have typically been more fragmented then men’s, including time taken to raise children or care for parents. Men’s frequently more intensive employment patterns also have implications for the character of their social networks.

Some women also referred to missing work, although they were more likely to miss social aspects and to stay in touch with former colleagues. The minority of women who expressed a strong identification with their work found it painful to retire. For Mrs Barber, a former teacher, retirement was triggered by reaching sixty and by her husband’s health problems. She had not felt ‘ready to leave’, and described losing her job as ‘a bereavement’, saying that she had ‘cried for weeks,’ and could not bear to return to her former school and see someone else in ‘her’ classroom. Mrs Ramsay, unusually amongst the female informants, expressed her work identity in terms of a ‘worker’ and ‘provider’, which related both to her status as a lone parent and the ‘work ethic’ her own parents had adopted. She reported feeling ‘devastated’ when ill health forced her to leave.

By contrast, some men who had expressed considerable pleasure and satisfaction in their work and felt it to be central to their identity, had experienced no great sadness at leaving, sometimes to their surprise. Key factors influencing their feelings included choice, a reasonable level of income, and the prospect of enjoyable activities in retirement. For instance, Mr Kamir expressed his pleasure in a newfound freedom from ‘the discipline of work’, although he had thoroughly enjoyed his time as a lecturer. A long-standing local politician and writer, he had strong ideas about how he wanted to spend his time and attractive alternative roles to pursue.

Even women who had been employed in fairly senior positions tended to stress that work was of secondary importance to their family lives. Mrs Napier, who had been a senior social work manager, described herself as ‘not very ‘career-minded’ and having ‘no ambition’, saying ‘I was quite happy at home with the children’, while Mrs Norman, who worked in a senior local authority post, said that her central identity was a ‘Jewish matron’ and described her home as ‘her life’, while her job was ‘just her job’. Following retirement, Mrs Napier returned to work part-time at a more junior level, as she enjoyed the day-to-day practice of social work, while Mrs Norman relished the chance to express other aspects of her identity, writing a book about Judaism, doing voluntary work with elderly Jewish people in Eastern Europe, and concentrating on home life.

Women who described work as more central to their lives often emphasised that it had been a financial necessity (complementing their partners’ income). It is difficult to know how much this self-presentation resulted from normative pressures faced as working wives and mothers, but it appeared to be qualitatively different to the more ‘vocational’ attachment expressed by other informants. Several women commented that paid work had not been central to their identities because of societal attitudes prevailing during much of their working lives. Mrs McIntosh remarked that when she left school there were only three possible jobs for girls:

You either went into an office, became a nurse, or you went to university, which invariably just meant you became a teacher. In any case, once married, ‘you were expected to leave work and become a mum’.

Although she later retrained, she found it impossible to break into her chosen field, and reflected that she ‘never really had the kind of work [she] wanted’.

Fewer men than women expressed dissatisfaction with their jobs, or expressed an instrumental orientation (such as financial issues) to working. Those that did, however, were less traditionally gendered in their work identities, and found it easiest to adapt to being retired. Mr Fraser, who had taken early retirement after feeling increasingly unable to cope with the stress of his job as a computer programmer, commented:

Most people don’t enjoy their jobs and probably wouldn’t work if they didn't’t need the money.

Mr Adams, whose enjoyment of teaching had been soured by stress, decided that ‘you shouldn’t live to work, you should work to live,’ and described the supply teaching he had done since retiring as ‘purely for money’. Reflecting on his working life, he regretted the all-consuming nature of his commitment:

I mean, I worked, worked, worked, and I didn’t spend enough time with my kids. We didn’t do things because I was always working. It was a big problem. Even though you get these nice holidays. It doesn’t compensate for the rest of the time.

A number of those interviewed had been or were involved in caring for someone, whether this was an ill or disabled partner, adult child, elderly parent or grandchildren, and this was often their reason for leaving paid work. While both men and women were affected in similar ways by these caring roles, more women than men took them on, and only women were involved in them for an extensive period of their lives. Caring in retirement, and caring as a significant influence on adaptation were distinctively feminised trajectories.

Read the entire paper Renegotiating identity and relationships: Men and women's adjustments to retirement