Tuesday, November 12, 2019

What Explains the Retirement Savings Shortfall?

In a perfect world, the typical worker would have saved $364,000 in a 401(k)/IRA retirement account by the time he or she was aged 55 to 64. Instead, the typical worker at age 55 to 64 has accumulated only $92,000.

What accounts for the gap in what should be and what is? In a study to determine the reasons for the gap, researchers at the Center for Retirement Research (CRR) analyzed IRS tax records and data from the Census Bureau's 2014 Survey of Income and Program Participation. First they estimated potential 401(k) balances in a perfect world—a world in which there is universal coverage, consistent contributions of 9 percent of earnings (6 percent contributed by workers and 3 percent by employers), no early withdrawals, and no fees. In that world, retirement savings for the typical worker aged 55 to 64 would amount to $364,000.

But the world is not perfect. The results of the CRR analysis show that one of the biggest reasons retirement savings are falling short of their potential is the immaturity of the 401(k) system, which went into effect in the early 1980s. Consequently, the "relatively recent shift from traditional pensions to the newer 401(k) plans means that many of today's 60-year-olds did not participate in a 401(k) plan when they were young workers," explain the researchers. Another major reason retirement savings are not as high as they could be is the lack of universal coverage. Many employers do not provide their workers with the opportunity to participate in a 401(k) plan. Lesser reasons for the shortfall are fees and leakages.

Here is how each of these reasons reduces the $364,000 potential in retirement savings to a paltry $92,000...

IRA balance for typical worker aged 55 to 64
$364,000 potential in a perfect system
Reduced to $247,800 after accounting for the immature 401(k) system
Reduced to $136,200 after accounting for the lack of universal coverage
Reduced to $122,800 after accounting for fees
Reduced to $92,000 after accounting for leakages

Source: Center for Retirement Research at Boston College, Why Are 401(k)/IRA Balances Substantially Below Potential?

Monday, November 11, 2019

Most Kids Get to School by Private Vehicle

Despite the ubiquitous yellow school buses driving the roads most months of the year, the 54 percent majority of the nation's children are driven to school in a private vehicle, according to the Federal Highway Administration's National Household Transportation Survey. A smaller 33 percent ride a school bus. Just 10 percent walk or bike to school.

The way children aged 5 to 17 get to school has not changed much in the past two decades, reports the Federal Highway Administration. Only 10 percent of children walk or bike to school because the schools most children attend are too far from their home. Among children who live within a half mile of school, most walk or bike to get there.

Percent of 5-to-17-year-olds who walk/bike to school by distance from home to school
81% of those who live less than 0.25 miles from school
56.1% of those who live from 0.25 and 0.50 miles from school
24.8% of those who live from 0.50 to 1 mile from school
  7.0% of those who live from 1 to 2 miles from school
  0.9% of those who live 2 or more miles from school

Source: Federal Highway Administration, 2017 National Household Travel Survey, Children's Travel to School

Thursday, November 07, 2019

Housing Problems Loom for Older Americans

Entrepreneurs take note. Over the next two decades, prepare for explosive growth in the number of households headed by people aged 65 or older. According to projections by the Joint Center for Housing Studies (JCHS), the number of householders aged 65 or older will expand by 53 percent between 2018 and 2038. The number aged 80 or older will more than double. By 2038, more than one-third (34 percent) of the nation's households will be headed by people aged 65 or older and one in eight (12 percent) will be headed by people aged 80 or older.

The rapid growth in the number of older householders creates problems and opportunities. The problem is that too many older Americans live in housing unsuited to the needs of the aged, according to the JCHS report, Housing America's Older Adults 2019. Fully 80 percent of homeowners aged 65 or older, live in detached, single-family homes. "The majority of these homes are now at least 40 years old and therefore may present maintenance challenges for their owners," says the report.

And that's not all. Many older householders live in low-density communities, making it difficult for them to care for themselves as they age. "The growing concentration of older households in outlying communities presents major challenges for residents and service providers alike," the report warns. "Single family homes make up most of the housing stock in low-density areas, and residents typically need to be able to drive to do errands, see doctors, and socialize."

But problems like these create opportunities. "The need for affordable, accessible housing and in-home supportive services is set to soar," concludes the report.

Source: Joint Center for Housing Studies of Harvard University, Housing America's Older Adults 2019

Wednesday, November 06, 2019

Standing, Stooping Are the Most Common Physical Difficulties

What are the physical functions Americans have the most trouble performing? Surprisingly, it's not walking a quarter mile or climbing stairs. Instead, the most difficult physical tasks for the largest share of the public are standing for two hours and stooping, bending, and kneeling. Overall, 9 percent of people aged 18 or older—nearly one in 10—say it would be very difficult or impossible for them to stand for two hours. The same percentage say they are not be able to stoop, bend, or kneel.

Overall, 14.9 percent of the public reports having at least one of these difficulties in physical functioning...

Among people aged 18 or older, percent saying it would be very difficult or impossible to...
Stand for two hours: 9.0%
Stoop, bend, kneel: 9.0%
Walk a quarter mile: 7.1%
Push/pull large objects: 5.9%
Climb 10 steps without resting: 4.9%
Lift or carry 10 pounds: 4.1%
Sit for two hours: 3.0%
Reach overhead: 2.3%
Grasp small objects: 1.7%

With age, physical difficulties increase. Only 5 percent of 18-to-44-year-olds report any difficulty in physical functioning. The share rises to 49 percent among people aged 75 or older. Among the oldest Americans, 33 percent say they would find it very difficult or impossible to stand for two hours, 29 percent could not stoop, bend, or kneel, 28 percent could not walk a quarter of a mile, and 20 percent could not climb 10 steps without resting.

Source: National Center for Health Statistics, National Health Interview Survey, Tables of Summary Health Statistics

Tuesday, November 05, 2019

Most Americans Live in Their State of Birth

More than half of Americans—58 percent—live in their state of birth, according to the Census Bureau's 2018 American Community Survey. The percentage varies greatly by state, however, ranging from a high of 78 percent in Louisiana to a low of 27 percent in Nevada. Here are the five states with the highest and lowest shares of residents born in-state...

Highest percentage born in-state
78.1% in Louisiana
76.2% in Michigan
74.9% in Ohio
71.7% in Pennsylvania
71.7% in Mississippi

Lowest percentage born in-state
27.0% in Nevada
35.9% in Florida
37.1% in District of Columbia
39.7% in Arizona
40.7% in New Hampshire

Source: Census Bureau, State of Residence by Place of Birth—ACS Tables

Monday, November 04, 2019

Median Household Income Rises in September 2019

The upward trend continues. Median household income climbed 0.4 percent between August and September 2019, after adjusting for inflation. The $66,214 September median was $234 greater than the August 2019 median, according to Sentier Research. Sentier's estimates are derived from the Census Bureau's Current Population Survey and track the economic wellbeing of households on a monthly basis.

"Real median household income continued to display an upward trend over the past 12 months (up 3.3 percent)," says Sentier's Gordon Green, "and especially since the low point reached in June 2011 (up 18.6 percent)." At the June 2011 low point—two years after the official end of the Great Recession— median household income was just $55,841.  

Sentier's Household Income Index for September 2019 was 107.2 (January 2000 = 100.0). "We are at a point now where real median household income is 7.2 percent higher than January 2000, the beginning of this statistical series," says Green. "We have seen a strong positive trend in real median annual household income over the past several years, which is encouraging." To stay on top of these trends, look for the next monthly update from Sentier.

Source: Sentier ResearchHousehold Income Trends: September, 2019

Thursday, October 31, 2019

Gaping Holes in the Safety Net

Gig workers have become a controversial symbol of the gaping holes in the American safety net. Behind the outrage over gig work is our employer-based benefit system, which excludes independent contractors from medical benefits, retirement savings, and other protections. Independent contractors aren't the only ones who are on their own. Most low-wage workers are too...

Percentage of workers whose employer provides medical care benefits, by average wage quartile
Highest: 94%
Third: 88%
Second: 74%
Lowest: 40%

Percentage of workers whose employer provides retirement benefits, by average wage quartile
Highest: 90%
Third : 84%
Second: 70%
Lowest: 46%

Source: Bureau of Labor Statistics, Employee Benefits in the United States—March 2019

Wednesday, October 30, 2019

First-Time Homebuyer Watch: 3rd Quarter 2019

Homeownership rate of householders aged 35 to 39, third quarter 2019: 56.5%

The homeownership rate of the 35-to-39 age group was stable in the third quarter of 2019, just 0.4 percentage points higher than the second quarter rate and not a significant increase. The homeownership rate of the age group peaked at 65.7 percent in 2007. It bottomed out at 55.0 in the fourth quarter of 2016. The current rate is much closer to the bottom than the top.

What about their younger counterparts? Householders aged 30 to 34 were once the nation's first-time home buyers—defined as the age group in which the homeownership rate first surpasses 50 percent. The homeownership rate of 30-to-34-year-olds crept up to 47.9 percent in the third quarter of 2019, not statistically different from the 47.5 percent of the previous quarter. The homeownership rate of the age group peaked at 55.3 percent in 2007, fell below 50 percent in 2011, and has been stuck below that level ever since. 


Nationally, the homeownership rate was 64.8 percent in the third quarter of 2019, not statistically different from the rate one year earlier. The homeownership rate reached an all-time high of 69.0 percent in 2004.

Source: Census Bureau, Housing Vacancy Survey

Tuesday, October 29, 2019

Most Working Women Want to Work

Overall, 56 percent of women aged 18 or older would prefer to have a job outside the home rather than stay at home and take care of house and family, according to a Gallup survey. This is the largest percentage of women expressing a preference for work in all the years Gallup has asked the question, first posed in 1992. Among men, 75 percent say they would rather work than be a homemaker.

Among women with children under age 18, most of those who are employed (57 percent) prefer to work rather than be a homemaker. Most of those who are not employed (67 percent) prefer to be a homemaker rather than have a job outside the home.

Here's the percentage of adults who would prefer to work outside the home rather than stay at home and care for house and family...

Percent of women who prefer working to homemaking
75% of employed women, no children under 18
57% of employed women with children under 18
51% of women who are not employed, no children under 18
30% of women who are not employed, with children under 18

Percent of men who prefer working to homemaking
85% of employed men, no children under 18
73% of employed men with children under 18
69% of men who are not employed, no children under 18
58% of men who are not employed, with children under 18

Fully 42 percent of men who are not employed and have children under age 18 would prefer being a homemaker to working outside the home.

Source: Gallup, Record-High 56% of U.S. Women Prefer Working to Homemaking

Monday, October 28, 2019

Hey! Not All the Gray Hairs Are Boomers

How many of the Democratic presidential candidates are baby boomers? Not as many as you think, unless you're a reporter who assumes anyone with graying hair is a member of the baby-boom generation. That's what Politico writer Ben White assumed recently in his article How the Baby Boomers Broke America—classifying both Bernie Sanders and Joe Biden as boomers along with Elizabeth Warren. Of the three, Warren is the only baby boomer, born in 1949. Bernie Sanders (1941) and Joe Biden (1942) were born well before the boomer birth years of 1946 to 1964. Both Sanders and Biden are members of the "Silent Generation."

Only 4 of the 12 Democrats who qualified to participate in the October debate are baby boomers: Warren (1949), Tom Steyer (1957), Amy Klobuchar (1960), and Kamala Harris (1964). Just as well represented at the debate were Generation Xers. Four of the candidates were born during the Gen X birth years of 1965 through 1976: Cory Booker (1969), Beto O'Rourke (1972), Julian Castro (1974), and Andrew Yang (1975). Another two participants in the debate were Millennials, the generation born from 1977 through 1994: Tulsi Gabbard (1981) and Pete Buttigieg (1982).

Number of Democratic presidential candidates by generation 
2 from the Silent generation
4 from the Baby-boom generation
4 from Generation X
2 from the Millennial generation

The winner of the Democratic presidential primary will face Republican Donald Trump on election day 2020. Trump is a baby boomer, born in 1946. He is younger than Sanders and Biden, but older than the other Democrats.

Note: Ben White of Politico is not the only journalist who has been careless with generational definitions. David Brooks, in his New York Times column, Your Baby Boomer Report Card, also got it wrong. First, he said anyone born after 1960 doesn't count as a boomer, including Barack Obama (born in 1961). Sorry, but you can't cherry pick generational identity. Second, Brooks classified Bob Dylan as a boomer, but Dylan is a member of the Silent Generation (born in 1941 and a few months older than Bernie Sanders). Generational definitions seem to get sloppy when writers are trying a little too hard to make a point.

Source: Demo Memo analysis of the birth years of presidential candidates

Thursday, October 24, 2019

How Much Is Too Much?

Are parents doing too much for their young adult children? Most Americans think so. According to a Pew Research Center survey, the 55 percent majority of adults say parents are doing too much for their children aged 18 to 29.

But ask the parents of these young adults whether they're doing too much and you get a different answer. Fully 63 percent say they are doing about the right amount. Only 28 percent think they do too much. The remaining 8 percent say they do too little.

One of the big things parents do for their young adult children is help them financially. Among parents with children aged 18 to 29, a substantial 59 percent have provided at least some financial help to their child in the past 12 months. The average American might call this financial help excessive. But parents with children aged 18 to 29 know better than anyone else how hard it is for young adults to achieve financial independence these days. While 64 percent of the public thinks adult children should be financially independent by age 22, only 24 percent of young adults achieve financial independence by age 22.

Source: Pew Research Center, Majority of Americans Say Parents Are Doing Too Much for Their Young Adult Children

Wednesday, October 23, 2019

We Really Are a Fractured Nation

Fractured Nation is the title of the latest report on American values released by PRRI (the Public Religion Research Institute). The title aptly describes the findings of PRRI's August-September 2019 survey of the public's attitudes about a variety of important issues. Here's a look at some of the fractures by political party identification...

Percent who mostly/completely agree with statement...

Democrats  Republicans
Society as a whole has become
too soft and feminine
    26%      65%
These days society seems to punish men
just for acting like men
    23      53
Today discrimination against whites has become
as big a problem as discrimination against
blacks and other minorities
    21      69
Immigrants are invading our country and replacing
our cultural and ethnic background
    20      63
It is necessary to believe in God in order to be moral
and have good values
    35      55

Source: PRRI, Fractured Nation: Widening Partisan Polarization and Key Issues in 2020 Presidential Elections

Tuesday, October 22, 2019

Older People Carry the Most Cash

For the first time, cash has fallen to second place as a payment instrument. According to the Diary of Consumer Payment Choice, cash was used to pay for 26 percent of transactions in an average month of 2018, down from 31 percent in 2016. Debit cards were in first place in 2018, used to pay for 28 percent of transactions.

The declining use of cash is not much of a surprise, since younger adults are spurning cash in favor of other types of payments. The Diary results confirm this notion. The 25-to-34 age group used cash to pay for only 18 percent of purchases in an average month of 2018. The figure was an almost identical 19 percent among 35-to-44-year-olds. Cash is much more commonly used as a payment instrument by the youngest and oldest adults. Among 18-to-24-year-olds, 34 percent of payments are made with cash. Among people aged 65 or older, the figure is 33 percent.

Americans carried $58 in cash on their person on an average day of 2018. The amount varies by age, however, with people aged 65 or older carrying the most cash.

Amount of cash carried on an average day, 2018
Under age 25: $20
Aged 25 to 34: $37
Aged 35 to 44: $36
Aged 45 to 54: $59
Aged 55 to 64: $68
Aged 65-plus: $104

Source: Federal Reserve Bank of San Francisco, 2019 Findings from the Diary of Consumer Payment Choice

Monday, October 21, 2019

Citizenship Controversy Raises Awareness of Census

Maybe there is a silver lining to all the controversy surrounding the Trump administration's failed attempt to add a citizenship question to the 2020 census. There is nearly universal awareness of the upcoming census, according to a Pew Research Center survey fielded in September. Fully 98 percent of adults say they have heard of the 2020 census. This level of awareness six months prior to census day (April 1, 2020) is good news.

The great majority of the public also plans to participate in the census, according to Pew's results. Overall, 84 percent of people aged 18 or older say they probably or definitely will participate in the 2020 census. Enthusiasm for the census rises with age...

Percent who probably/definitely will participate in the 2020 census
Total, all ages: 84%
Aged 18 to 29: 66%
Aged 30 to 49: 82%
Aged 50 to 64: 90%
Aged 65-plus: 97%

Source: Pew Research Center, Most U.S. Adults Intend to Participate in 2020 Census, but Some Demographic Groups Aren't Sure