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