The Housing 'Crash'
The Impact of the Housing Crash on Family Wealth is a new report from the Center for Economic and Policy Research.
What follows is the press release that accompanied the report:
The study, “The Impact of the Housing Crash on Family Wealth,” analyzed the wealth holdings of families in all age cohorts in 2004 and projected the wealth of these families in 2009. The findings are presented by income quintile under three scenarios- real house prices remain at current levels, real house prices fall by an additional 10 percent, or real house prices fall by an additional 20 percent. In all three scenarios, the vast majority of these families will have little or no housing wealth in 2009.
“This extraordinary destruction of wealth will have tremendous implications for millions of families,” said report co-author Dean Baker. “Coupled with a very low personal savings rate, this means that many people, especially those near retirement will only have Social Security and Medicare to rely on once they leave the workforce.”
The report projects that if house prices stay the same through 2009, the median household headed by a person between the ages of 45 and 54, those in their prime earning years, will have 24.7 percent less wealth than did the median household in this age group in 2004. These households will have accumulated just $113,268 in net worth in 2009, barely $15,000 more than their counterparts in 1989, whose net worth totaled $97,600.
If real house prices fall 10 percent, the median household in the 45 to 54 cohort will see a 34.6 percent loss in wealth compared with the median in 2004 while families in the 18 to 34 cohort will lose of 67.6 percent. If prices fall by 20 percent, the most pessimistic scenario, families in the 55-64 cohort will experience a loss of 49.6 percent of their wealth compared to the same cohort in 2004.
This analysis should also prompt serious re-examination of policy proposals to cut Social Security and Medicare for near retirees. Baker commented, “policies that perhaps could have been justified at the peak of the housing bubble make much less sense now that tens of millions of near-retirees have just seen most of their wealth disappear.”
The full report may be read online.
Feeling Gloomy
Pew has released the results of a survey, Baby Boomers: The Gloomiest Generation by D'Vera Cohn, Senior Writer, Pew Social & Demographic Trends Project
June 25, 2008
The Pew survey was conducted by telephone from January 24 through February 19, 2008 among a randomly selected nationally representative sample of 2,413 adults. Baby boomers are defined as adults ages 43-62 at the time the survey was taken.
What follows are some paragraphs from that survey:
Worried About Money
The latest Pew survey finds that the boomers' glum assessments about their lives overall are matched by relatively high levels of anxiety about their personal finances. Some 55% say it is likely that their incomes will not keep up with the cost of living over the next year. That majority makes them the exception among all adults. Only four-in-ten younger Americans (44%) or older ones (43%) have that concern.
The anomaly here is that boomers are in their peak earning years. As a group, they enjoy higher median household incomes than do younger or older adults, according to the Census Bureau's 2006 American Community Survey. Americans ages 45 to 64 — roughly the same age range as the boomers — have a median household income of nearly $60,000. That compares with about $53,000 for adults ages 25 to 44, and about $30,000 for those ages 65 and older.
In the Pew survey, boomers also are more likely than younger or older adults to own stocks or bonds, and to have retirement accounts.
Even so, boomers are more anxious than other Americans that they will have to cut household spending in the coming year because money is tight. Nearly three-in-ten boomers (28%) say it is very likely they will have to do so, compared with 22% of younger adults and 18% of older ones.
Read the entire release about the survey.
Perhaps an explanation for that gloom is well justified by the current report released from the Center for Economic and Policy Research: Baby Boomers Face Massive Loss of Retirement Wealth Due to Housing Market Meltdown:
"A new report from the Center for Economic and Policy Research (CEPR) shows that, due to the collapse of the housing bubble, the vast majority of near retirees have accumulated little or no wealth. This means that they will be almost completely reliant on Social Security and Medicare to support them in their retirement years.
"The study, The Housing Crash and the Retirement Prospects of Late Baby Boomers, analyzed the wealth holdings of families headed by people between the ages of 45 and 54 in 2004 and projected the wealth of these families in 2009. The findings are presented by income quintile under three scenarios — real house prices remain at current levels, real house prices fall by 10 percent, or real house prices fall by 20 percent. In all three scenarios, the vast majority of these families will have little or no housing wealth in 2009.
" 'This extraordinary destruction of wealth will have tremendous implications for millions of families as they enter retirement,' said report co-author Dean Baker. 'Coupled with a very low personal savings rate, this means that many people will only have Social Security and Medicare to rely on in their retirement."
"The report projects that if house prices were to stay the same through 2009, the median household would have 24.7 percent less wealth than the median household in this age group in 2004. If real house prices fall 10 percent, the median household would see a 34.6 percent loss in wealth compared with the median in 2004 and a 45.6 percent falloff if prices fall by 20 percent."
Daughter Track
The following paragraph is from WordSpy:
[Felice N.] Schwartz (1989)[hyperlink seniorwomen.com] introduced the term "mommy track" to refer to an alternative career path that allows a mother flexible or reduced work hours, but at the same time tends to slow or block advancement. A newly coined phrase, the "daughter track", refers to a late-in-life version of the mommy track where women are leaving their jobs to care for their aging parents.
— Elizabeth F. Cabrera, "Opting out and opting in," Career Development International, January 1, 2007
The following paragraph is from Arlie Russell Hochschild's paper, Love and Gold,
included in the book, For Women, Power and Justice: A Global Perspective:
Vicky is part of a global care chain: a series of personal links between people across the
globe based on the paid or unpaid work of caring. A typical global care chain might work
something like this: An older daughter from a poor family in a Third World country cares for her
siblings (the first link in the chain) while her mother works as a nanny caring for the children of
a nanny migrating to a First World country (the second link) who, in turn, cares for the child of
a family in a rich country (the final link). Each kind of chain expresses an invisible ecology of
care, one care worker depending on another and so on. A global care chain might start in a
poor country and end in a rich one, or it might link rural and urban areas within the same poor
country. More complex versions start in one poor country and extend to another slightly less
poor country and then link to a rich country.
Such global care chains are now on the rise. For some time now, promising and highly
trained professionals have been moving from ill-equipped hospitals, impoverished schools,
antiquated banks, and other beleaguered workplaces of the Third World to better opportunities and higher pay in the First World. As rich nations become richer and poor nations become
poorer, this one-way flow of talent and training continuously widens the gap between the two.
This is the brain drain. But now in addition a parallel, more hidden and wrenching trend is
growing, as women who normally care for the young, the old, and the sick in their own poor
countries move to care for the young, the old, and the sick in rich countries, whether as maids
and nannies or as day-care and nursing-home aides. It is a care drain.
The movement of female care workers from south to north is not altogether new. What is
new is the scope and speed of it. The causes are many. One is the growing split between the
global rich and poor. Since the 1940s, the gap between north and south has widened. In
1960, for example, the nations of the north were twenty times richer than those of the south.
. . .
But if First World middle-class women are building careers that are molded according to the
old male model, by putting in long hours at demanding jobs, their nannies and other domestic
workers suffer a greatly exaggerated version of the same thing. Two women working for pay is
not a bad idea. But two working mothers giving their all to work is a good idea gone haywire. In the end, both First and Third World women are small players in a larger economic game
whose rules they have not written.
Read the rest of Emeritus Prof. Hochschild's paper at Berkeley's Sociology's site
A Daring Experiment
From the Harvard and Business Education for Women, 1937 - 1970.
"In 1937, five young women arrived at Radcliffe College to begin what Harvard Business School Professor Fritz Roethlisberger called “the first daring experiment in ‘practical education’ for women” — a one-year, certificate-earning personnel program."
A Giant Step, The Training Course in Personnel Administration, 1937 - 1945
"From the outset, the Radcliffe Training Course program focused on “the understanding and treatment of human problems in any employment situation,”with the goal of training graduates for work in human resources departments. Faculty and curricula in economics, sociology, guidance, and educational psychology were drawn from the Harvard Business School, other Harvard graduate schools, and Simmons College. In addition to case method coursework in the classroom, the program also included fieldwork: six-week apprenticeships at sponsor companies across the Northeast, with experiences ranging from working the production line to performing administrative tasks."
Continue on to the section Broadened Horizons, The Management Training Program, 1946-1955 and subsequent sections including oral histories.
Caller Complaints
We've all gotten those phone calls, usually after you've returned home from work and impatient to sit down to dinner. Unwelcome? An understatement, but our sympathy for those who work in this industry sometimes exceeds our annoyance.
From the Librarians' Internet Index:
This website allows users to submit and view phone numbers of telemarketers. It notes that "[u]nlike government reporting websites, these reports are publicly published for the world to see." Search, or browse by area codes, most searched numbers, and recently filed complaints. The submission form has a place to submit the caller name (if known), caller type (such as debt collector), and complaint details.
URL: http://www.callercomplaints.com/
LII Item: http://lii.org/cs/lii/view/item/26088
College 529 Plans Rated
Morningstar has released their rankings of The Best and Worst of 529 College Savings Plans. Click on their 529 home page and click on the name of the plan of your choice.
The College Savings Plan Network website has a common questions page, answering What’s the difference between a 529 prepaid tuition program and a 529 savings program? as well as:
Q. How do I open a 529 plan?
A. 529 plans are available by contacting the state which administers the program. This CSPN Web site offers links to plan web sites and toll-free numbers to contact the state plans. Most states offer residents the opportunity to invest in the plan directly though the state. These plans are often called “Direct Sold” and are typically offered at lower fees and without sales commissions. For those looking for professional advice on how to invest in a 529, “Advisor Sold” programs are offered by many of the state plans. Advisor Sold programs offer professional investment advice and service with standard sales commissions applying.
Perhaps most importantly, if when you look at Morningstar's rankings,
Q. Can a savings / investment account be rolled over to another 529 program?
A. Yes. The account owner can choose to move funds from one state’s 529 plan to another states’ plan one time within a 12-month period for the same beneficiary.
Financial Market Turmoil and the Federal Reserve: The Plot Thickens
What's past is prologue; what to come, in yours and my discharge.
Shakespeare, The Tempest, Act 2, Scene 1
Prologue
A little more than a year ago, I began to recount a story — already long-in-the-making — of the transformation of financial institutions driven by abundant liquidity in global financial markets. In those early chapters, one could not help but worry about the inherent risks to financial markets and the economy when the gloss of confidence wears thin, causing me to wonder aloud: "What happens when liquidity falters?" Let me briefly try to recount this tale over the last few quarters before offering some rough plot lines from which the balance of the story can be divined.
The sleepy complacency of a bygone era seemed rudely interrupted by a liquidity shock last August. A global margin call on virtually all leveraged positions began. As you know, the Federal Reserve found it necessary to begin to exercise its monetary muscles in unprecedented ways. The seasons darkened, and the plot thickened. New structured products and old financial institutions evidenced increasing signs of weakness. Some central banks, including the Federal Reserve, helped supply liquidity to where it was most in need. Financial market turmoil, partly as a result, was periodically placed in abeyance. Casualties of the liquidity contraction nonetheless appeared; some remained in the narrative for awhile, others were removed with great dispatch.
The narrative continued to morph through the first quarter of 2008. Central banks, while generally more comfortable remaining behind the scenes, took center stage with new tools and policy prescriptions. The script was rewritten so that product innovation flowed, but this time from the public authorities. Many private market participants receded to the shadows of the stage, some anxiously anticipating intermission.
We skip ahead to the Epilogue:
Epilogue
Some believe the story of the current market turmoil began in August, and will end when the housing market stabilizes. But, in my view, the narrative actually began in a seemingly more benign time with underpinnings more fundamental than the value of the housing stock. Financial institutions and other market participants grew increasingly dependent on the extraordinary liquidity around them. When liquidity faltered, the weaknesses of the existing architecture abruptly revealed itself. A metaphor, perhaps, is instructive: Fish don't know they are wet. And they don't learn unless their memories are long or the water is gone. A new financial architecture, born of the forces of creative destruction, is early in the process of construction with the aid of the Federal Reserve and other public authorities. But for the new paradigmatic architecture to be enduring, market-supplied liquidity must come to predominate. To that end, I remain confident that financial institutions and financial markets will evolve to meet these challenges.
Read the entire speech by Fed Reserve Governor Kevin Warsh at the New York University School of Law Global Economic Policy Forum, April 14, 2008
Household Wealth & Retirees
The Federal Reserve released a paper that, although chock full of graphs, formulas and jargon unfamiliar to the average retiree, does come to some encouraging conclusions:
"As the baby boomers begin to retire, a great deal remains unknown about the evolution of wealth toward the end of life. In this paper, we develop a new measure of household resources that converts total financial, nonfinancial, and annuitized assets into an expected annual amount of wealth per person. We use this measure, which we call "annualized comprehensive wealth," to investigate spend-down behavior among older households in the Health and Retirement Study. Our analysis indicates that, in (real) dollar terms, the median household's wealth declines more slowly than its remaining life expectancy, so that real annualized wealth actually tends to rise with age over retirement. Comparing the estimated age profiles for annualized wealth with profiles simulated from several different life cycle models, we find that a model that takes into account uncertain longevity, uncertain medical expenses, and (for higher-income retirees) intended bequests lines up best with the HRS data."
"It is reasonably well known that retirees in the bottom quintile of the income distribution (conditional on their age and marital status) rely almost exclusively on DB pension benefits, Social Security benefits, and other government transfers to finance spending. Although these sources do not constitute a high level of comprehensive wealth, their annuity-like payout scheme means that they can finance a more or less constant path of outlays through retirement. While annuity-like benefits are also an important source of wealth for retirees in the middle- and upper-income groups, these retirees also tend to have significant financial and nonfinancial wealth. A new finding from our analysis is that, for the median retiree in the middle- and upper-income groups, annualized comprehensive wealth tends to rise over retirement. One might have expected wealth balances to fall roughly in line with declining longevity in retirement — after all, this is the trajectory that would be predicted by the simplest life cycle model of consumption."
Here are additional paragraphs of some interest:
Panel (a) in Figure A-1 shows the simulation results for the baseline life cycle model specification, in which all retirees know they will live exactly to their life expectancy, do not face random medical expense shocks, and do not value leaving bequests. One thing that stands out in that panel is the abrupt decline in income at age 82. The decline, smoother versions of which we will see in all of our simulations, is due to the fact that households receive less Social Security income when one of the members dies. Apart from income, the figure reproduces the familiar results of the standard life-cycle model. Wealth declines steadily through retirement, and consumption lies almost entirely on top of annualized wealth at all ages. This is a reflection of the central hypothesis of the standard life-cycle model: in the absence of bequests or income uncertainty, households will optimally consume their permanent income, which in this case is exactly equal to annualized wealth. In order to explain the upward-sloping annualized wealth profiles observed in the data, we will have to consider departures from the baseline model. We begin by considering the role of uncertain longevity.
Panel (b) displays average life-cycle profiles for households facing uncertain longevity. Annualized wealth and consumption now rise gradually until almost age 80 and then fall rapidly until they equal retirement income around age 95. From the value function in equation (7), we can see that survival probabilities act like the discount factor to depress the growth rate of consumption. Individuals recognize that they may not live to enjoy future consumption, so they spend more today. This discounting effect accounts for the rapid spend-down past age 80, but what, then, explains the upward sloping profiles earlier in retirement?
The increase in average consumption and annualized wealth is due to the fact that some spouses die earlier than anticipated. Early in retirement, households prepare to finance consumption for both members over their expected lifespans. Some households will live longer than expected and risk exhausting their resources. Others will experience an early death, and the surviving spouses will find themselves with a sudden increase in total resources per person, which translates into an increase in both annualized wealth and consumption.
The entire paper, The Trajectory of Wealth in Retirement, can be found at the Fed site.
Articles
Doris O'Brien, The Check is in the Mall: Some economic gurus suggest we boost the economy by spending our rebates only on American-made goods! Have these "experts" looked at the labels in their closets lately? Or at the appliances in their kitchens? Or the electronic goodies they find indispensable?
HTG Investment Advisors, Organizing Your Financial Records: What are my reasons for keeping records? Tax preparation and protection in the event of an audit probably come to mind immediately. But being able to access or recreate your information in the case of disaster should also be a consideration
Prepare Your Applications
You still have time to Enter Google's Lunar X Prize competition if you can gin up your application by December 31, 2010:
The Google Lunar X PRIZE is a $30 million international competition to safely land a robot on the surface of the Moon, travel 500 meters over the lunar surface, and send images and data back to the Earth. Teams must be at least 90% privately funded and must be registered to compete by December 31, 2010. The first team to land on the Moon and complete the mission objectives will be awarded $20 million; the full first prize is available until December 31, 2012. After that date, the first prize will drop to $15 million. The second team to do so will be awarded $5 million. Another $5 million will awarded in bonus prizes. The final deadline for winning the prize is December 31, 2014.
Sharpen those keyboards and enter.
In the meantime, learn who your competition is: The Google Lunar X PRIZE teams come from all walks of life with varied
sets of experiences and ideas. Each has a unique plan for getting to
the lunar surface. Get to know all of our competitors by following
their blogs, watching the latest videos, or participating on their
forums, and cheer them on to the Moon!
Economic Discontent Deepens As Inflation Concerns Rise
The Pew Research Center for the People & the Press released the following study which we excerpt:
Public views of the US economy, already quite negative, have plummeted since January. Just 17% currently rate the nation's economy as excellent or good, down from 26% last month. The percentage of Americans rating the economy as "poor" has increased even more dramatically, from 28% to 45% in one month.
Moreover, there has been a modest rise in the proportion of Americans who view their own finances negatively, though personal financial ratings continue to be more positive than opinions of the overall economy. A majority of Americans (53%) now say their financial situation is only fair or poor, up from 49% in January.
Fully 58% of the public says that their incomes are falling behind the rising cost of living. This compares with just 44% who expressed this view in September 2007. And the impact of the real estate slump is becoming apparent to American homeowners. The percentage of homeowners reporting that their home has increased in value during the past few years has fallen from 84% in October 2006 to 67% currently.
The latest national survey by the Pew Research Center for the People & the Press, conducted Jan. 30-Feb. 2 among 1,502 adults, finds that several factors are driving the public's economic pessimism, including concerns about the availability of jobs as well as problems in the housing market. However, rising prices — for gasoline or energy, healthcare, or overall inflation — are mentioned most frequently as the nation's biggest economic problem.
Overall, 24% cite concern over prices — with the cost of energy and healthcare mentioned most frequently — as the most important problem facing the country. By comparison, 18% volunteer jobs as the nation's biggest economic problem, while 13% cite housing — including 6% who specifically cite the sub-prime mortgage crisis.
The general sense that prices have risen rapidly in recent years is much more prevalent now than at the beginning of the Bush administration. Overall, 79% of the public says that over the past five years prices have risen "a lot;" in June 2001, 63% said that prices had increased a great deal over the previous five years.
People's personal financial concerns are more varied, and differ considerably along socioeconomic lines. The leading personal financial concerns of the poorest Americans are healthcare costs, jobs, and simply not having enough money to get by. By contrast, the leading concern among wealthy people is retirement and Social Security.
Predictive Trader
Intrade, one of the prediction trading sites, gathers information on a particular subject (such as Academy Awards, the outcome of O.J. Simpson's Las Vegas robbery case and search engine rankings) and provides that data to customers:
"Our trading service allows members to transact in the most innovative, transparent and exciting way on political, financial, current and similar event futures. Intrade members trade directly with each other."
When you trade on Intrade you are pitting your wits against other members of Intrade. Intrade provides the platform whereby members can trade between themselves.
Here are some FAQ answers on Intrade:
What is the role of Intrade? Intrade is an exchange that facilitates the matching of orders from its customers. Intrade ensures that trading profits and losses are transferred between customers in a timely manner and allows customers to close out positions by trading with any other customer. Intrade does not enter into trades on the exchange.
What is exchange trading? Exchange trading allows members to trade on contracts against other members.
How does Intrade make money? By taking a small commission on matched trades. There is no charge for entering an order; there is only a charge when you get a matched trade.
How are the fees calculated? Intrade trading exchange has been modeled around an exchange and clearing house together. To calculate your fees for any trade, multiply the number of lots you traded by $0.05
Issues to trade on:
Democratic Primaries
Republican Primaries
2008 General Election
or
The US Economy will go into Recession during 2008
Happiness And Health: Lessons — And Questions — For Public Policy
"Throughout the centuries, human happiness and its causes have been a central concern to clerics, philosophers, psychologists, and therapists of various kinds. Given the subject matter, some might be surprised to see economists dipping their toes into these waters, viewing them as Johnny-come-latelys or even as gatecrashers — economics, after all, is sometimes known as the "dismal science." But economists have their own rich tradition in this area, and their discipline is, in fact, rooted in "moral science," in which happiness plays a central role. Moreover, as "queen of the social sciences," economics brings with it insights from myriad aspects of social life and a vast array of mathematical tools for exploring relationships between self-reported happiness and just about anything else one can think of."
"By bringing economic and psychological principles to bear, 'happiness economists' have produced a substantial body of evidence that health is a consistent determinant of self-reported happiness — one that transcends national boundaries, belief systems, and the highly subjective nature of happiness. The fruits of their labors include 'happiness equations,' in which health is among the handful of measurable variables that account for observed variability in human happiness. Even more compelling, Carol Graham informs us, is the observation that health correlates more strongly with happiness than any other variable included — even income — in countries throughout the world. Happiness surveys, Graham shows us, are powerful tools that members of the health policy community can use to gain fresh perspectives on the public’s health behavior and to develop policy worldwide."
Carol Graham (cgraham@brookings.edu
) is a senior fellow in the Economic Studies Program at the Brookings Institution. The entire report is available at the Health Affairs journal
The Fed Chairman's January Update
Having read through the Fed Chairman Ben Bernanke's most recent speech to the Women in Housing and Finance, the following are some paragraphs that cap his remarks and relate to future actions:
Monetary policy has responded proactively to evolving conditions. As you know, the Committee cut its target for the federal funds rate by 50 basis points at its September meeting and by 25 basis points each at the October and December meetings. In total, therefore, we have brought the funds rate down by a percentage point from its level just before financial strains emerged. The Federal Reserve took these actions to help offset the restraint imposed by the tightening of credit conditions and the weakening of the housing market. However, in light of recent changes in the outlook for and the risks to growth, additional policy easing may well be necessary. The Committee will, of course, be carefully evaluating incoming information bearing on the economic outlook. Based on that evaluation, and consistent with our dual mandate, we stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks.
Financial and economic conditions can change quickly. Consequently, the Committee must remain exceptionally alert and flexible, prepared to act in a decisive and timely manner and, in particular, to counter any adverse dynamics that might threaten economic or financial stability.
Read the entire speech, Financial Markets, the Economic Outlook, and Monetary Policy
A New Profile of the Boomer
The MetLife Mature Market Institute has issued a new report, Study of
Boomers: Ready to Launch; The “Average” 62-Year Old Boomer
(Born January 1, 1946 - December 31, 1946)
To profile the average 62-year-old boomer is to study the contrasts between popular imagery and private lifestyle. In the past decade, especially, the baby boomer demographic
has fired up the imaginations of marketers and the media with its huge numbers (almost 77 million total), and the social fabric both rendered and created during its turbulent youth. The truth and the imagery may be at odds, however.
Some highlights of this cohort from the report:
Finances
The average member of the 1946 birth group…
…has an annual income of $71,400.
…has a household net worth, excluding home value,
of $257,800.
…has an average of six financial products/plans including 401(k)/403(b), IRA, health insurance, life insurance and CD/savings accounts.
If they do not already have investments such as stocks, bonds, annuities, or long-term care insurance they have few plans to purchase these in the next 12 months.
They have received or expect to receive some inheritance from their parents – typically in the range of $113,000
to $210,000.
Their home is currently worth $297,900.
They are aware that at age 62 they are eligible for a reverse mortgage, but typically are not planning to use a reverse mortgage for funding in their retirement. Should they use a reverse mortgage they would use the money to support their own aging and long-term care needs and pay down debt.
They do not have a professional financial advisor.
Housing
They own their home.
They do not plan to move from their current residence, although a sizable portion of their friends say they might at some point in the future.
Identity
They did not attend the Woodstock music festival in 1969.
They like the term “baby boomer” to describe themselves.
They feel they have done a good job of providing for their own basic needs, their spouse’s and children’s needs, as well as their parents’ needs.
They feel they have done a good job of contributing to their community and to society.
They feel they have done a good job of ensuring a steady stream of income for their future, and in planning to live their early retirement years to the fullest.
At the same time, they feel that they have done only a poor to fair job of saving and investing for their own future, saving
and investing for their children’s future, and ensuring coverage for their own long-term care costs.
They do not view themselves as being “old” until they are age 77 years and 10 months.
They were politically conservative in their 20s and remain so today. In fact, a good number of their formerly liberal friends admit to becoming more politically conservative as they’ve aged. Some of their conservative friends admit the opposite, becoming more liberal as they’ve gotten older.
The words that describe the worst thing about turning 62 are “getting older” and having “more health problems.”
The words that describe the best thing about turning 62 are “freedom,” “retirement,” and “not having to work.”
Retirement
They’ve decided to take their Social Security benefits earlier than full benefit eligibility and certainly by age 65. They are doing so primarily for financial reasons like providing
immediate income for retirement, along with some skepticism about the viability of the Social Security system thrown in for good measure. A sizable portion of their friends will be applying for benefits as early as age 62.
They plan to be fully retired by age 66 years and 4 months.
They feel that having a personal financial arrangement that guarantees a steady source of income for life is more important
than spending more during their early retirement years and potentially not meeting their future financial needs.
They like the word “retirement” to define their next life transition.
Read the rest of the MetLife Mature Market Institute report highlights at the
Federal Reserve Consumer Help
"If you have a problem with a bank or other financial institution, contact the Federal Reserve for help." The situation and instruction as framed couldn't be simpler. After the Fed lays out the following procedures (Can I file a complaint? How do I file a complaint? What will the Federal Reserve do? What won't the Federal reserve do?, it then posits a series of questions a consumer might ask:
"Can a bank really..." Post withdrawals from my account from the largest dollar amount to the smallest just to get more overdraft fees?
Keep adding new fees to my account?
Refuse to cash my check?
Call me at work about not making a loan payment? Not give me back my checks? "How do I... " Get answers to other questions?
Get a loan or deposit account from the Federal Reserve Bank?
Spot a fraud or scam?
Prevent my bank from foreclosing on my home loan?
File a complaint?
Know if my bank is safe?
Contact a Federal Reserve customer service representative today.
Federal Reserve Consumer Help
PO Box 1200
Minneapolis, MN 55480
ConsumerHelp@FederalReserve.gov
888-851-1920 (Phone)
877-766-8533 (TTY)
Protecting Social Security's beneficiaries
From The Economic Policy Institute; Agenda for Shared Prosperity:
"Inducing retirement savings through tax incentives is much less efficient and effective than simply providing benefits directly. Inducing behavior through the use of the federal income tax code is a poorly targeted approach, providing tax breaks for behavior that would have occurred without the incentive and failing to get benefits where they are most needed. Moreover, trying to induce the proper behavior requires substantial regulation and enforcement.
"The current system of private pensions includes substantial government intervention. This governmental presence includes (1) an annual tax subsidy for private plans of over $110 billion a year, the largest in the income tax code, (2) the Employee Benefits Security Administration at the Department of Labor with its reporting and disclosure requirements, enforcement responsibilities, and reams of regulations, (3) the Employee Benefits Plans Office at the Internal Revenue Service with its cumbersome nondiscrimination rules and other complicated reams of regulations, and (4) the Pension Benefit Guaranty Corporation with its 2006 deficit of $18.8 billion and its projected exposure of $73 billion as a result of “new probable terminations.” Despite all of this government involvement, employer-sponsored plans have never covered more than about half the workforce and the benefits of private-sector plans go disproportionately to top executives and other highly compensated employees. Moreover, the courts are constantly clogged with lengthy, expensive litigation involving these plans. Further, the administrative costs, in many cases, are extremely high. Within the last year, for example, 10 class action lawsuits have been filed against major corporations, challenging, as excessive, the fee structure that is used by most 401(k) plans in the country.
"Notwithstanding our mental image of a stool with three equal legs, the Social Security leg is vastly sturdier and better built than the other two. Social Security is fully portable. It covers virtually the entire work force, including those most difficult to reach, such as part-time, seasonal, and household employees. The program is fairer to those with less discretionary income: as described earlier in this paper, it has a progressive benefit formula, which provides larger proportionate benefits (though smaller in dollar amount) to low-income workers, part-time workers, and those with gaps in their working record due to unemployment, time caring for family members, or other reasons. Its benefits are fully backed by the federal government, which, unlike private employers, can raise taxes and will never go out of business. Social Security spreads risk much more widely. And Social Security has much lower administrative costs than the other two legs.
"The three-legged stool metaphor, with the mind’s eye picturing three equal legs, channels thinking towards the necessity of strengthening and reinforcing each leg — after all, how else is the stool to remain upright? But of course, the goal is not to stabilize a stool. To help us untangle the retirement security challenge, it is helpful to clear one’s mind completely of the image of a three-legged stool. When one returns to first principles, and thinks about the problem with fresh eyes, free from the metaphor’s stifling grip, the solution becomes clear.
"The nation’s goal, since the enactment of Social Security, has been to permit every American worker to retire with a secure source of income that adequately replaces pre-retirement wages. Social Security meets the goal perfectly, except that its benefits are inadequate. Once Social Security is projected to be in long-range balance, policy makers should increase its benefits in a prudent, careful manner. Raising Social Security’s benefits is the fairest, simplest, most secure, most effective, and most efficient way to ensure that all Americans can enjoy a secure and adequate retirement following a lifetime of labor."
Read the entire paper by Nancy J. Altman, Protecting Social Security's beneficiaries
Protecting Senior Investors
Report of Examinations of Securities Firms Providing 'Free Lunch' Sales Seminars
Highlights from the Report:
The Securities and Exchange Commission securities regulators released a joint report summarizing the results of their examinations of 'free lunch' investment seminars.
The year-long examination was conducted by the SEC, the Financial Industry Regulatory Authority (FINRA) and state securities regulators (members of NASAA, the North American Securities Administrators Association). The regulators scrutinized 110 securities firms and branch offices that sponsor sales seminars and offer a free lunch to entice attendees.
The report's key findings include:
* 100% of the "seminars" were instead sales presentations.
While many sales seminars were advertised as "educational," "workshops," and "nothing will be sold," they were intended to result in the attendees' opening new accounts and, ultimately, in the sales of investment products, if not at the seminar itself, then in follow-up contacts with the attendees.
* 59% reflected weak supervisory practices by firms.
While some exams found effective supervisory practices, many examinations found indications that firms had poorly supervised these sales seminars, including failure to review seminar presentations or materials as required.
* 50% featured exaggerated or misleading advertising claims.
Examples included "Immediately add $100,000 to your net worth," "How to receive a 13.3% return," and "How $100K can pay 1 Million Dollars to Your Heirs."
* 23% involved possibly unsuitable recommendations.
In 25 of the 110 examinations, examiners found indications that unsuitable recommendations were made, for example, a risky investment recommended to an investor with a "conservative" investment objective, or an illiquid investment recommended to an investor with a short-term need for cash.
* 13% appeared to be fraudulent and have been referred to the most appropriate regulator for possible enforcement or disciplinary action.
Examiners found indications of possible fraudulent practices in 14 examinations that involved apparent serious misrepresentations of risk and return, possible liquidation of accounts without the customer's knowledge or consent, and possible sales of fictitious investments.
Read the rest of the highlights release at the SEC site
Where are the Shareholder's Mansions?
CEOs' home purchases, stock sales and subsequent company performance
CROCKER H. LIU
Arizona State University
DAVID YERMACK
New York University — Stern School of Business
March 2007
Purchasing a home represents a significant economic decision, involving aspects of both investment and consumption. The buyer generally adjusts his portfolio, often taking on secured debt and liquidating assets to pay the acquisition cost. Thereafter, the homeowner enjoys benefits related to the size, comfort, and location of the property. Affluent persons sometimes acquire impressive homes as signals of their personal wealth, power and importance, an age- old
behavior labeled “conspicuous consumption” by sociologist Thorstein Veblen.
We study real estate purchases of major company CEOs, compiling a database of the
principal residences of nearly every top executive in the Standard & Poor’s 500 index of major
US companies.
We test whether CEOs’ decisions about the size, cost, and financing of their
homes contains information useful for forecasting future performance their companies, and we
find patterns with strong statistical and economic significance. When a CEO buys a home,
future company performance is inversely related to the CEO’s liquidation of company shares and
options as a source of financing for the transaction, even though these stock sales are often small
relative to the CEO’s total holdings in his firm. We also find that, regardless of the source of
finance, future company performance deteriorates when CEOs acquire extremely large or costly mansions and estates.
According to an ancient saying, “A man’s home is his castle.” This adage might apply especially well to American CEOs, many of whom are known for having enormous wealth and imperial personalities. The Hearst Castle, built in California by newspaper magnate William Randolph Hearst between 1919 and 1947, is probably the most celebrated home of a US business leader, but it is hardly the only one. Mansions built by J.P. Morgan, Andrew Carnegie, and Henry Clay Frick remain landmarks today in New York City, all having been converted to service as museums. In modern times, Microsoft Chairman Bill Gates received notoriety for constructing a 66,000 square foot home in Washington State, part of an estate valued at $140 million, while Mittal Steel (India) founder Lakshmi Mittal paid $128 million in 2004 for a
London townhouse with a 20 car garage near Kensington Palace, the largest amount ever paid worldwide for an existing single family home. Conversely, Berkshire Hathaway CEO Warren Buffett is famous for having lived since 1958 in a house he bought for $31,500 in an ordinary neighborhood of Omaha, Nebraska. When he was the richest man in the world in the early 1970s, industrialist Howard Hughes lived a secret residence that became the subject of constant
press speculation.
Read the rest of the paper (depending on where you live) from the Social Science Research Network
"It's from the I.R.S."
The Library of Congress is hosting an exhibit, Cartoon America. One of the artists cited is:
Etta Hulme, one of the few female practitioners of the craft of editorial cartooning, twists the well known plot of men stranded on a desert island unearthing buried treasure, into an ironic reminder that income taxes are due. Etta Hulme earned her fine arts degree at the University of Texas at Austin and immediately headed for Disney Studios in California, where she worked in the animation division for two years before returning to Texas. She began her cartooning career in 1954 at Austin's Texas Observer and has been with the Fort Worth Star-Telegram since 1972.
The cartoon can be seen at: http://www.loc.gov/exhibits/cartoonamerica/images/ca005-04613v.jpg
A few quotations from the IRS site itself might take the sting out the process:
"Like mothers, taxes are often misunderstood, but seldom forgotten.'' — Lord Bramwell, 19th Century English jurist
"Next to being shot at and missed, nothing is really quite as satisfying as an income tax refund.” — F. J. Raymond, humorist
A tax loophole is "something that benefits the other guy. If it benefits you, it is tax reform.''
— Russell B. Long, US Senator
Another source for taxing quotes is the Tax Analysts:
The more you create, the less you earn.
The less you earn, the more you’re given,
The less you lead, the more you’re driven,
The more destroyed, the more they feed,
The more you pay, the more they need,
The more you earn, the less you keep,
And now I lay me down to sleep.
I pray the Lord my soul to take,
If the tax-collector hasn’t got it before I wake.
— Ogden Nash
If, from the more wretched parts of the old world,
we look at those which are in an advanced stage of
improvement, we still find the greedy hand of government
thrusting itself into every corner and crevice of
industry, and grasping the spoil of the multitude. Invention
is continually exercised, to furnish new pretenses
for revenues and taxation. It watches prosperity as
its prey and permits none to escape without tribute.
— Thomas Paine
Taxes are the sinews of the State.
— Marcus Tullius Cicero
’Tis pleasant to observe, how free the present Age is
in laying taxes on the next.
— Jonathan Swift
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
Who is Benjamin Graham?
Wikipedia gives a succinct biography of Mr. Graham:
"Benjamin Graham (May 8, 1894 – September 21, 1976) was an influential economist and professional investor who is today often called the "Father of Value Investing" and the "Dean of Wall Street." He is perhaps best known today from frequent references made to him by billionaire investor Warren Buffett, who studied under Graham at Columbia University, and was his only pupil to receive an A+. Other well known students of Graham include William J. Ruane, Irving Kahn, Walter J. Schloss, and Charles Brandes. Buffett, who credits Graham as grounding him with a sound intellectual investment framework, described him as the second most influential person in his life after his own father. In fact, Graham had such an overwhelming influence over his students that two of them, Buffett and Kahn, named their sons after him."
Fortunately, Wiley Publishing, has reprinted ten 'rare' lectures of Graham's, from the book The Rediscovered Benjamin Graham: Selected Writings of the Wall Street Legend, by Janet Lowe. Although these are from over half a century ago, many of the companies referenced will be familiar to senior women.
An excerpt from Lecture Number One:
"One way of expressing the principle of continuity in concrete terms would be as follows: When you look at the stock market as a whole, you will find from experience that after it has advanced a good deal it not only goes down -- that is obvious -- but it goes down to levels substantially below earlier high levels. Hence it has always been possible to buy stocks at lower prices than the highest of previous moves, not of the current move. That means, in short, that the investor who says he does not wish to buy securities at high levels, because they don't appeal to him on a historical basis or on an analytical basis, can point to past experience to warrant the assumption that he will have an opportunity to buy them at lower prices — not only lower than current high prices, but lower than previous high levels. In sum, therefore, you can take previous high levels, if you wish, as a measure of the danger point in the stock market for investors, and I think you will find that past experience would bear you out using this as a practical guide. Thus, if you look at this chart of the Dow Jones Industrial Average, you can see there has never been a time in which the price level has broken out, in a once-for-all or permanent way, from its past area of fluctuations. That is the thing I have been trying to point out in the last few minutes."
Two Provisos From Mr. Graham's Lecture No. 5
"A thing I would like to warn you against is spending a lot of time on over-detailed analyses of the company’s and the industry’s position, including counting the last bathtub that has been or will be produced; because you get yourself into the feeling that, since you have studied this thing so long and gathered together so may figures, your estimates are bound to be highly accurate. But they won’t be. They are only very rough estimates, and I think I could have given, and probably you could have given me, these estimates in American Radiator in half an hour, without spending perhaps the days, or even weeks, of studying the industry."
" I want to say finally on this question that an elaborate forecasting technique has been developed in recent years on the amount of dollar business and physical volumes that would be done in various industries at certain levels of employment, or certain levels of gross national product. The Committee for Economic Development has gotten out studies of that kind which gives you estimates of the industry totals under full employment conditions, and the same has been done by the Department of Commerce. Those of you who want to go into that aspect of analysis should start pretty much with these forecasts, and accept them or reflect them as far as your own judgment is concerned. If you accept them, then build your forecast of the individual company’s sales in relation to the industry totals which you are starting with. You may make three different estimates, — as is now done sometimes — based upon full employment, moderate unemployment, and considerable employment; and make your estimate of sales accordingly. That is the new technique, and I think you will find it interesting as applied to security analysis."
WISER
The Women's Institute for a Secure Retirement recently held a symposium on
Drafting the Blueprint for Women's Retirement Security. Some of the points raised Social Security and pension concerns: •
88 percent of retirement-age women receive Social Security•
Most women receive benefits at least in part based on their spouse’s record. About 38 percent of women receive benefits solely on their own work record•
Social Security represents an average of 53 percent of total income for unmarried women over 65, versus 38 percent of total income for unmarried men and 33 percent of total income for married couples of the same age
Some SS proposals targeted to enhance or protect benefits for women:
•
Changes to spousal benefits — including earnings sharing between spouses, reduction in spousal benefits/increase to survivor’s benefits, and reduction of the 10-year marriage requirement for divorced spouses•
Changes in benefit computation — including dependent care credits, and shortening the computation period used to calculate retirement benefits•
Establish minimum benefit — indexed to poverty level or percentage of poverty level
Other Social Security reform proposals may weaken benefits for women:
•
Changes in benefit computation--would extend the benefit computation period from 35 to 38 or more years, which would lower average benefits for most workers, especially those with fewer years of work history•
New risks include investment risk, longevity risks, and lack of spousal protections§
Possible benefits include potential higher returns, and inheritability/ownership§
Women’s tendency to invest more conservatively than men can have both positive and negative effects on income in retirement
Pension Income for Women:
•
Roughly half of all workers have access to retirement programs through their employer
•
Currently retired women are less likely than retired men to have a significant portion of their income from non-Social Security pensions §
In 2003, 29 percent of women and 45 percent of men age 65 and older had pension income •
In 2004, 54 percent of full-time working women participated in employer-sponsored pensions, versus 53 percent of men; however, women average lower benefits due to lower average earnings and years of work
Gaming and Learning
When I told a contributor to this site, that women of all ages actually played online games, she was incredulous.
The average adult woman plays games 7.4 hours per week. Forty-two percent of online game players are female.
Research from America Online (AOL) has found that females over 40 years old spend the most time per week playing online games at 9.1 hours, which accounts for 41 percent of their connection time. Comparatively, teens spend 7.4 hours per week playing games, while females under 40 log 6.2 hours.
And games do not have to be violent, sex-laden and numbing.
The American Federation of Scientists features two games on their site, one of which can be downloaded now and one in prototype about to be released.
Discover Babylon: The game is divided into three periods of Mesopotamian history: The
Uruk Period (3300-3000 BC) when writing was first developing; the Ur
III period (2100-2000 BC), a time of great cities and central
organization; and the Neo-Assyrian period (1000-600 BC), a time of
empires.
The game incorporates artifacts found in the Walters Art Gallery in Baltimore and ancient texts in the online data-sets of the Cuneiform Digital Library Initiative. Players will interact with fictional characters and real objects from the three historic periods and the present day in order to solve a series of challenges. In the process, the player will absorb historical information and became more familiar with museum and library resources. The project in its entirety exposes the player to three historical periods in addition to an accurate modern day replication of the Walters Art Museum. While exploring the museum the players gain insight behind the scenes and learn about the objects they will see once they travel back in time. The full version includes the Walters Art Museum, Uruk and Ur, while kiosk version depicts Kalhu.
Continue the description at the Discover Babylon site.
Immune Attack is a first person strategy PC video game that teaches immunological principles through entertaining game play. The protagonist, a teenaged prodigy with a unique condition in which the immune system is “present, yet non-functional”, must pilot a microscopic nanobot to save his own life. He must teach his semi-functional immune system to fight off diseases and bacterial/viral infections by programming individual cell types. This programming is accomplished through the successful completion of various educational minigames, each of which teach a central immunology principle and, once completed, confer added ability to the selected cell type.
Immune Attack is not yet available for download. When it does become available, the Federation will send out an e-mail to all those who have expressed interest in the game. To add your name to this e-mail list, please send your contact information to immuneattack@fas.org.
Other games to investigate are at Yahoo Games and Big Fish Games |
Defining Business Terms
Three terms used in media sources caught our attention: pretexting (as in the Hewlett-Packard board spying instance), the fear gague in predicting volatility in the stock market and the 'smart pig.'
The FTC refers to pretexting in a release dealing with the agency's testimony on the sale of consumers’ phone records. The subtitle of the article at the FTC sit says it all: An Entire Industry of Companies That Sell Phone Records Has Developed, Testimony Notes.
“Companies that engage in pretexting – the practice of obtaining personal information, such as telephone records, under false pretenses – not only violate the law, but they undermine consumers’ confidence in the marketplace and in the security of their sensitive data.”
“While pretexting to acquire telephone records has recently become more prevalent, the practice of pretexting is not new,” the testimony states. “The Commission has a history of combating pretexting.” The first FTC law enforcement action targeting operators who used false pretenses to gather financial information occurred in 1999. The company offered to provide consumers’ financial records for a fee. The agency alleged the company’s employees obtained the records from financial institutions by posing as the consumer whose records it was seeking. The Commission charged that the practice was unfair and deceptive and violated the FTC Act, the testimony says."
Following passage of the Gramm Leach Bliley Act (GLBA), which specifically prohibits pretexting of customer data from financial institutions, the agency launched Operation Detect Pretext in 2001. “Operation Detect Pretext combined a broad monitoring program, the widespread dissemination of industry warning notices, consumer education, and aggressive law enforcement.” It followed up the first phase of Operation Detect Pretext with a trio of law enforcement actions against information brokers. “Because the anti-pretexting provisions of the GLBA provide for criminal penalties, the Commission also may refer pretexters to the US Department of Justice for criminal prosecution, as appropriate. One such individual recently pled guilty to one count of pretexting under the GLBA,” the testimony states.
According to the testimony, an entire industry of companies offering to provide purchasers with the cellular and land line phone records of third parties has developed. The testimony notes that the agency could bring law enforcement actions against telephone record pretexters for deceptive or unfair practices under Section 5 of the FTC Act and that the FTC is currently investigating companies that appear to be engaged in telephone pretexting.
The Chicago Board Options Exchange volatility index, or VIA, is also called the investor fear gauge. Here's a FAQ series that explains that term and why the index is a bellweather:
"Why is the VIX called the "investor fear gauge"?
VIX is based on real-time option prices, which reflect investors' consensus view of future expected stock market volatility. During periods of financial stress, which are often accompanied by steep market declines, option prices — and VIX — tend to rise. The greater the fear, the higher the VIX level. As investor fear subsides, option prices tend to decline, which in turn causes VIX to decline. It is important to note, however, that past performance does not necessarily indicate future results."
Apparently (according to the Wall Street Journal), the fear gauge had risen "sparked by a Labor Department report showing that unit-labor costs rose by more than expected, raising the specter of inflation, explained Jay Suskind, director of trading at Ryan, Beck & Co."
Just what is a 'smart pig' and how is it used? If you've been following the BP Prudhoe Bay pipeline woes in Alaska, you may have read about the smart pig they're using to detect oil pipecorrosion. No, not the pink, curly-tailed creatures, but a robot:
"Smart Pigs are inspection vehicles that move inside a pipe line pushed along by the flowing material. They have been in commercial use since 1965, primarily for the detection of wall thinning caused by ordinary corrosion. Until recently other types of defects — cracks, coating disbondment, dents and gouges were not detectable with pigs. The industry is demanding smart pigs that could pass along multidiameter pipelines and bends, that could detect the precise location of any problem, and that does not interfere with or need the flowing material to still be operational."
All that you'd ever want to know about these critters can be read at the Emerging Construction Technologies site.
Pension Reform & A Scorecard
The Pension Protection Act of 2006 has been signed into law by President Bush. Here is a summary of its provisions:
Amends the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code to establish new minimum funding standards for single-employer and multiemployer defined benefit pension plans.
Extends interest rate rules for the funding standard account that require the use of a rate based on long-term investment grade corporate bonds rather than 30-year Treasury securities. Amends the interest rate calculation for lump sum distributions.
Requires single-employer plans that are fully-funded to pay variable-rate premiums to the Pension Benefit Guaranty Corporation (PBGC) . Sets forth alternative funding rules for commercial passenger airline defined benefit plans.
Sets forth requirements related to funding notices that must be provided by defined benefit plans.
Allows fiduciary advisers of a plan to give investment advice to participants or beneficiaries if certain requirements are met.
Sets forth rules that govern whether plans fail to meet requirements that prohibit age discrimination in defined benefit pension plans.
Increases deduction limits for single-employer and multiemployer plans. Makes permanent provisions from the Economic Growth and Tax Relief Reconciliation Act of 2001 related to individual retirement accounts and pensions. Allows annuity contracts and life insurance contracts to include long-term care insurance contracts. Amends provisions governing the benefits of tax court judges.
Requires defined contribution plans holding publicly traded securities to provide employees with: (1) the opportunity to divest employer securities; and (2) at least three investment options other than employer securities. Allows employers to automatically enroll employees in defined benefit plans.
Sets forth provisions governing the division of pension benefits upon divorce.
Authorizes the Secretary of the Treasury to establish or change the Employee Plans Compliance Resolution System and any other employee plans correction policies.
Prohibits reduction of unemployment compensation as a result of pension rollovers.
More can be read at Thomas, the Library of Congress site named for another US President.
The Retirement Security Project released a scorecard on
the Pension Protection Act:
The new law includes several key provisions that will make it easier for middle-and low-income workers to save for retirement but falls short in some key areas.
One of the biggest strengths of the law is the removal of a number of barriers to adoption of automatic 401(k) features. In addition, the law added provisions to make it easier to save and to save more as income increases and with investments that help ensure financial security in retirement.
Research shows that automatic enrollment, one of these features, substantially boosts the rate of plan participation — sometimes to levels as high as 95 percent — with particularly dramatic increases for lower-income workers, minorities, and women.
Dr. Peter Orszag, Director of the Retirement Security Project said, “We estimate that automatic enrollment, when fully phased in, could generate $10 to $15 billion of additional contributions to 401(k) plans each year.” “Those additional contributions will bolster retirement security for millions of workers,” Orszag added.
In fact, The Retirement Security Project estimates auto enrolling an employee at age 29 instead the current average age of 41 would equal nearly $130,000 in additional retirement savings. Today among those nearing retirement the median total balance is only $73,000. With auto enrollment, most American workers will save in 12 years nearly twice the median total balance today.
Another key point in the law is encouraging automatic escalation of employee contributions to their 401(k). “Growing retirement savings in this country means getting more people to participate in their retirements plans, but also have their rate of savings grow as their income grows and as they get older,” Orszag noted.
RSP’s scorecard shows that Congress has more work to do to make the Saver’s Credit available to more lower-income households.
It's possible to view the entire scorecard in an pdf version at the Retirement Security Project site.
Baby Boomer Retirement and The Market
Dire predictions about how the crush of baby boomer retirements and their withdrawals from funds would impact markets have been afloat for a while. The Government Accountability Office produced a report,
Retirement of Baby Boomers Is Unlikely to Precipitate Dramatic Decline in Market Returns, but Broader Risks Threaten Retirement Security, to confront and examine these concerns:
Why GAO Did This Study
The first wave of baby boomers (born between 1946 and 1964) will become eligible for Social Security early retirement benefits in 2008. In addition to concerns about how the boomers’ retirement will strain the nation’s retirement and health systems, concerns also have been raised about the possibility for boomers to sell off large amounts of financial assets in retirement, with relatively fewer younger US workers available to purchase these assets. Some have suggested that such a sell-off could precipitate a market “meltdown,” a sharp and sudden decline in asset prices, or reduce long-term rates of return. In view of such concerns, we have examined (1) whether the retirement of the baby boomers is likely to precipitate a dramatic drop in financial asset prices; (2) what researchers and financial industry participants expect the effect of the boomer retirement to have on financial markets; and (3) what role rates of return will play in providing retirement income in the future. We have prepared this report under the Comptroller General’s authority to conduct evaluations on his own initiative as part of the continued effort to assist Congress in addressing these issues.
Our analysis of national survey and other data suggests that retiring boomers are not likely to sell financial assets in such a way as to cause a sharp and sudden decline in financial asset prices. A large majority of boomers have few financial assets to sell. The small minority who own most assets held by this generation will likely need to sell few assets in retirement. Also, most current retirees spend down their assets slowly, with many continuing to accumulate assets. If boomers behave the same way, a rapid and large sell off of financial assets appears unlikely. Other factors that may reduce the odds of a sharp and sudden drop in asset prices include the increase in life expectancy that will spread asset sales over a longer period and the expectation of many boomers to work past traditional retirement ages.
A wide range of academic studies have predicted that the boomers’ retirement will have a small negative effect, if any, on rates of return on assets. Similarly, financial industry representatives did not expect the boomers’ retirement to have a big impact on the financial markets, in part because of the globalization of the markets. Our statistical analysis shows that macroeconomic and financial factors, such as dividends and industrial production, explained much more of the variation in stock returns from 1948 to 2004 than did shifts in the US population’s age structure, suggesting that demographics may have a small effect on stock returns relative to the broader economy.
While the boomers’ retirement is not likely to cause a sharp and sudden decline in asset prices, the retirement security of boomers and others will likely depend more on individual savings and returns on such savings. This is due, in part, to the decline in traditional pensions that provide guaranteed retirement income and the rise in account-based defined contribution plans. Also, fiscal uncertainties surrounding Social Security and rising health care costs will ultimately place more personal responsibility for retirement saving on individuals. Given the need for individuals to save and manage their savings, financial literacy will play an important role in helping boomers and future generations achieve a secure retirement.
The entire report may be read online.
Health and Job Loss for Those Over 50
Researchers from the Department of Epidemiology and Public Health at Yale University School of Medicine studied the effect of recurrent involuntary job loss on the depressive symptoms of older US workers.
Here is an abstract of what they found:
Objectives:
The objective of this study was to assess whether recurrent involuntary job loss among US workers nearing retirement resulted in increasingly less severe changes in depressive symptoms with successive job losses.
Methods:
With data drawn from the US Health and Retirement Survey (HRS), we used repeated measures longitudinal analysis to investigate the effect of recurrent job loss on follow-up depressive symptoms, measured up to 2 years following job loss. Study participants include 617 individuals, aged 51-61 years at the 1992 study baseline, who had at least one job loss between 1990 and 2000. Our primary outcome variable was a continuous measure of depressive symptoms, constructed from the 8-item Center for Epidemiologic Studies-Depression (CES-D) battery administered at every HRS wave. A second, dichotomous outcome, derived from the continuous measure, measured clinically relevant depressive symptoms. The exposure (recurrent job loss) was defined by binary dummy variables representing two and three/four job losses. All job losses were the result of either plant closing or layoff.
Results:
Our main finding indicates that, after relevant covariates are controlled, compared to one | 
