Latest news with #financialsecurity
Forbes
a day ago
- Business
- Forbes
Why Annuities Are Healthy For Retirees?
Senior woman helping senior man during class or seminar Annuities are good for retirees, but America's workers lost access to annuities over the past forty years. Congress, states, and employers attacked the unions that supported defined benefit plans which paid benefits for life. Today, only about half of the 63 million Americans nearing retirement (or retired), age 50 - 64, have retirement accounts. Of those with retirement accounts, the average balance is about $150,000 – far less than they'll need for time they can expect to be retired. So annuities are starting to look better and better. With market volatility and increasing life expectancy, there's a resurgence of interest in guaranteed lifelong income. Annuities, especially when embedded in retirement systems, offer a solution to a complex and increasingly urgent problem for many. Most Americans near retirement—or recently retired—have endured a lifetime of financial insecurity. The scale of the challenge is staggering: 63 million Americans between ages 50 and 64 are entering retirement after decades of stagnant wages, weakened union coverage, and the disappearance of secure defined benefit pensions. Automation and globalization eroded demand for their skills, and many took on mortgages, consumer debt, and even student loans to support their families. Our team at the New School document the rising insecurity of retirement here. The 401(k) causes problems when it is time to spend it. The stress of managing a lump sum is immense. The math is impossible. Annuities help solve what Nobel laureate William Sharpe called the "nastiest problem in finance": how to make a lump sum last for an uncertain lifespan. Being targeted by criminals is also stressful. Scammers often pretend to be legitimate financial advisors and target older people with retirement nest eggs. A 72-year-old with $500,000 is a more juicy target than one with a $3,333 monthly benefit. It's predictable that the FBI reported an almost doubling of reported fraud on Americans age-60+ between and over form 2021 to 2023. There's a spate of research that backs up what, for most people, is common sense: economic security – through annuities – is good for retirees' emotional and physical health. Managing a steady monthly income is healthier than managing a one half million dollars in your 70s and 80s. There are 2 main reasons annuities are good for your health: 1) Since people with annuities have financial incentives to live a long time they take better care of their health, and 2) Lump- sum management causes more stress and depression compared to receiving guaranteed payments. Emerging research suggests that people who perceive they will receive an annuity may engage in more health-focused behaviors. A 2025 study presented at a Consumer Research conference showed that individuals expecting annuity payments expressed a willingness to invest in relatively expensive health checks and pay for more intensive exercise programs than their current routine. Even more notably, people who anticipated receiving an annuity actually increased the intensity of their exercise, compared to those who expected to receive a lump sum. Researchers hypothesize that knowing they can beat the bank by living longer than the expected prompts they to stay healthy. There are open research questions too: Do annuity recipients choose more life-extending treatments? Are they less likely to opt for suicide or assisted suicide? Research shows that financial hardship is a common factor in such decisions, even when controlling for pain, illness, and age, so having a guaranteed income may save lives. We know it lowers depression. In 2024, Canadian researchers found that more stable income—like that provided by annuities—reduced biological stress markers. People with predictable income had lower allostatic loads, a clinical measure of stress that includes high blood pressure, glucose levels, and cortisol. High allostatic load is a signal of increased risk of early death. Economist Constantine Panis found in 2006 and 2015 that annuities improve retiree satisfaction. Holding income constant, retirees with annuities reported higher well-being than those with defined contribution plans. Why would steady income boost health? Happiness is linked to better immune function, better glucose regulation, and lower levels of stress chemicals in the brain. In an article titled "What Makes Retirees Happy?" economists Keith Bender and Natalia Jivan found forced retirement, compared to voluntary retirements, makes people miserable. (And, sadly, most people retire earlier than they want to). A secondary finding is that retirees receiving regular payments were happier and had fewer symptoms of depression than those managing an equivalent lump sum. This research suggests that annuities not only reduce financial stress but can improve mental and physical health outcomes. If annuities are so good for people, why don't more buy them? There's plenty of blame to go around. Some researchers blame the victim. They argue people underestimate how long they'll live and overestimate the likelihood of dying early. Two economists blame this mistaken math calculation for causing chronic fear they will lose money if they turned their nest egg into annuities. And we can stop blaming retirees' bequest motives—wanting to leave money to children. In most cases, these desires could be met by annuitizing most of their savings and setting aside a small portion for heirs. We can blame governments and employers for destroying annuities. The seemingly unrelated trend – the decline in union membership – caused by 40 years of employer, federal, and state policies that undermined union organizing diminished the defined benefit system, while the same policies favored do-it-yourself retirement plans, like 401(k)s and IRAs. You can blame the structure of the commercial insurance industry which faces a rock and a hard place. The rocks in selling voluntary annuities are adverse selection and moral hazard. Adverse selection is caused by the buyers being biased towards healthier people who are more likely to buy annuities. And, as I showed above, once someone has an annuity, they may start living healthier, which creates moral hazard that insurers must also price in. The hard place is that insurance companies also have to price in profit. Together – profit motive, adverse selection, and moral hazard – tend to make annuities more expensive than annuities from defined benefit plans. Compounding the problem, many products are hard to understand. Some consumers are right to be cautious. Annuities can improve well-being by encouraging healthier behavior, reducing stress, and providing a stable income for life. Retirees with annuities report higher satisfaction, lower depression, and even biological markers of better health. Policymakers, employers, and financial planners should revisit how annuities are presented and offered. And the mother of all annuities – Social Security – needs preserving by increasing revenues into the system. Congress needs to pass the Retirement Savings for Americans Act, which provides easy to understand monthly benefits to low and moderate income workers. The evidence is clear: retirement income security isn't just good economics—it's good medicine.
News.com.au
2 days ago
- Lifestyle
- News.com.au
‘What's the point?': Young Aussie's rant exposes housing crisis
A young Australian has gone viral after asking a question that exposes a major problem when it comes to financial security and home ownership in this country. Larissa Kay has amassed more than 700,000 views on TikTok in a clip where she asks 'What's the point?', revealing she fears she'll never be able to own a home and doesn't know what to do when it comes to planning her future. In the video, the fed-up 28-year-old woman, living in NSW, explained that she felt disillusioned with society because she's moved to a regional area and is living in a studio, but still can't get ahead. And she argued that many other Aussies in their 20s or 30s would likely be in a similar situation unless they were 'being given things by your parents'. Ms Kay said she had become disillusioned, previously thinking that if she went to university, got a degree, and then snagged a good job, she'd be able to afford a nice house by now, a holiday once a year, and be seriously considering having children. Instead, she's renting, not thinking about having children, and certainly not nearing the purchase of a home. 'That is not happening and you're just kind of like, what is the actual point of anything?' she said. 'I thought by now I might have a three-bedroom house, maybe like be thinking about kids, maybe be successful in my career. 'I moved regional to save money but there's no jobs out here. It has made me reassess my whole life? What am I doing? Should I just go travelling? 'I'm a pretty A-type person, I like to plan everything, but I'm just kind of feeling like f**k it, should I just do what makes me happy?' Speaking to Ms Kay explained that she studied for five years and is a qualified allied health professional, but it hasn't worked out. 'It didn't really pay off for me in terms of pay and working conditions,' she said. 'I originally went into it because I was told it was in high demand, which it was/is - but professionals like healthcare, teaching, etc seem to be the ones getting left behind.' She's now started Luupa, a pet-sitting service that matches owners with pet sitters, but she's still nowhere close to homeownership. Even though her career hasn't so far worked out as planned, the 28-year-old argued that she thought it didn't used to be this hard to get ahead in Australia. 'My parents worked fairly normal jobs and owned two homes in decent areas with a pool,' she said. 'Whereas myself and a lot of my peers need a full time job with a university degree, plus a side hustle or two to make ends meet, and that still decent guarantee a home, or a decent rental. 'I fear every day I'll never have a house of my own - when you don't have the option of living with parents or having them help you - it's really scary.' Ms Kay explained that housing is 'definitely the biggest expense' even though she and her partner live somewhere small. 'We live in a small studio, which we are grateful for and is comfortable, but we do this because we want to have a life outside of just working to pay rent or save for a home,' she explained. 'If we were to move to a bigger house, our rent would likely triple which is just completely unaffordable for us. So that is really hard.' Housing isn't the only weekly expense that Ms Kay frets about. In fact, she feels like everything is too expensive. 'Basic things like fuel and groceries - we used to be able to budget $100 a week as a couple and that's more than doubled,' she said. The Australian Bureau of Statistics has found that younger people are struggling to get into the housing market at the rate as previous generations. About half of Millennials are homeowners - 55 per cent - whereas 66 per cent of Baby Boomers were homeowners at the same age. That shouldn't be a surprise because in 1984 the average Australian could buy a home that cost 3.3 times their annual income. But in 2025, the average person faces house prices 10 times their annual salary. Even if young people manage to get onto the property ladder that doesn't mean they're set either. Financial comparison website Finder has found that mortgage holders are drowning in debt, with 42 per cent of homeowners in 2024 admitting they were struggling with their repayments. Over 13 per cent admitted they'd missed repayments in the last six months. Ms Kay's rant hit a raw nerve with other young Australians who were quick to commiserate with her. 'I'm worried about my housing prospects and I'm a professional who's in a relationship with another professional, and we have no kids,' one shared. 'I'm 29. In a 3-person share house. Good paying full time job. But haven't managed to save anything in the last 5 years,' one admitted. 'It feels like we've been sold out and lied to,' another said. 'I've just accepted I'll never own a house, live in share houses and make minimum wage my whole life even though I have a university degree,' one shared. 'If you don't have family support it's becoming impossible to just set yourself up,' someone argued. 'Two incomes of $120-150k a year is the minimum required to live in Australia. You need to find a career that can get you to that in the future, or you're cooked,' another said.
The Independent
2 days ago
- Health
- The Independent
Stormont minister calls for terminally ill to be allowed state pension early
A Stormont minister has urged the UK Government to allow the terminally ill early access to their state pension. Communities Minister Gordon Lyons said it is imperative that Government does more to ensure financial security and dignity for people in their final months of life. The measure – proposed by the end-of-life charity Marie Curie – would allow terminally ill individuals to claim their state pension based on national insurance contributions, topped up to at least pension credit-level. Figures from the charity's Dying In Poverty campaign show that around 111,000 people die in poverty each year in the UK, with more than one-in-four working-age individuals facing financial hardship in their final year. Mr Lyons has written to pensions minister Torsten Bell to press for action. 'It is imperative that we do more to ensure financial security and dignity for people in their final months of life and I am urging Minister Bell to take decisive action on this issue,' he said. 'A terminal diagnosis should not be accompanied by the added burden of financial hardship but unfortunately this is the stark – and unacceptable – reality for too many. 'Marie Curie's compassionate and practical solution would allow terminally ill individuals to access the state pension early, providing much-needed financial stability and some peace of mind during the most difficult of times.' On March 31, the Northern Ireland Assembly unanimously backed a private member's motion urging the UK to implement legislative changes that would enable those with a terminal diagnosis to access their state pension early. It is understood that these issues may be tackled in the UK Government's new Pension Schemes Bill. Mr Lyons said he has committed to engaging with the Department for Work and Pensions on behalf of those diagnosed with a terminal illness and to advocating for greater support. He added: 'I am urging the UK Government to act swiftly and compassionately to deliver meaningful change on early access to state pensions. 'No-one should be facing their final months with the added burden of financial distress and I will continue to press for a fair and compassionate system that meets the needs of those who are most vulnerable.' A government spokesperson said: 'No-one should suffer financial hardship because of a health condition, especially people nearing the end of life. 'And our special rules unlock early access to certain benefits and support systems for those nearing the end of their lives. 'Our Pension Schemes Bill will increase the life expectancy threshold for support from six to 12 months, giving more people the help they need at the hardest time of life.'
Yahoo
2 days ago
- Business
- Yahoo
6 Cash Flow Mistakes Boomers Are Making With Retirement Savings
Retirement should be a time to enjoy financial security and not stress over cash flow. That said, some common money mistakes may be putting boomers at risk. Be Aware: Try This: Even those who have diligently saved for decades can run into trouble if they're not managing their withdrawals, spending habits or investment strategies wisely. From underestimating inflation to relying too heavily on Social Security, certain missteps can drain savings faster than expected. Here are some cash flow mistakes boomers are making with their retirement savings — and how to avoid them. A common mistake retirees make is not taking IRA withdrawals in low tax years, according to Matt Hylland, a financial planner at Arnold and Mote Wealth Management. 'If a majority of your savings is in a traditional IRA, your tax liability will likely increase as you age. This is because of RMDs (required minimum distributions) and the onset of other income, like Social Security.' While withdrawals from IRAs are taxed as income, retirees with no other sources of income can very likely take out withdrawals at very low tax rates, Hylland pointed out. 'For example, in 2025 a 65-year-old married couple with no other income could take out $130,000 from IRAs and still remain in the 12% federal tax bracket.' Waiting to withdraw from your IRA until you start claiming Social Security benefits can incur tens of thousands of dollars in additional tax liability each year, Hylland said. Read Next: Waiting until you reach retirement to start figuring out your tax strategy may put you in jeopardy, Hylland said. 'Many retirees have spent decades trying to defer taxes as long as they can with their 401(k)s. But once you enter retirement, your optimal strategy may very well be to prioritize IRA withdrawals, and purposely pay some taxes.' He said retirees often use cash savings, brokerage accounts or even Roths early in retirement to keep a very low tax bill. 'While that may save them some money in the short term, it can be very costly in the long term.' The reasons are that delaying RMDs can lead to higher taxes later by pushing retirees into a higher tax bracket. Additionally, if retirees keep their taxable income too low early in retirement, they could miss the chance to convert pretax retirement savings into a Roth IRA at a lower tax rate. Lastly, Social Security benefits become taxable if the total income exceeds certain thresholds. Another problem is when retirees act too conservatively and fail to consider the tremendous impact of inflation in the first five to seven years of their retirements, according to Myles McHale, an adjunct professor at Cannon Financial Institute. 'High inflation early in their retirement journey will force higher withdrawals from their retirement portfolio,' he said. Another mistake is thinking that if you didn't save enough for retirement, and now are at least 55 or older and staring at retirement directly in the face, that you don't have any options, McHale said. However, retirees in this position can still make headway by working longer, increasing their saving rate and delaying claiming Social Security benefits for as long as possible. McHale said many boomers don't realize that they could spend more years in retirement than they did working. 'Longevity will be the biggest factor impacting boomer retirees,' he said. He recommended they start working with advisors who can build holistic strategic plans, no matter what stage of retirement they're at, a process his institute refers to as 'aging with grace.' He explained that a plan of that kind can cover such important elements as: Applying financial wellness principles to develop comprehensive transition plans for aging. Identifying and addressing key risk factors, including diminished capacity, elder abuse and family dynamics. Demonstrating effective communication techniques for conducting difficult conversations with family members. Developing and implementing practical solutions for housing, transportation and safety needs. While it's all well and good to save money for retirement, it's even better in the long run to invest in income-generating assets that can provide a steady stream of income, according to Jared Hubbard, the fintech product manager at investing app Plynk. 'This may include dividend-paying stocks, money market funds or bonds. When in doubt, do your research,' he said. Financial education tools can help determine what may be the best level of risk for your financial plan and ensure your investments seek to align with your retirement goals. More From GOBankingRates How Far $750K Plus Social Security Goes in Retirement in Every US Region This article originally appeared on 6 Cash Flow Mistakes Boomers Are Making With Retirement Savings Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Fast Company
4 days ago
- Business
- Fast Company
Here's how to start investing in your 60s
Standard financial advice starts with the assumption that 40-year-old investment newbies are getting a 'late start.' So what if you're a card-carrying member of AARP without a portfolio? How do you start investing when you're in your 60s? Recently, a family friend reached out for some advice on how to start investing for retirement. At 61 years old, he was afraid it was useless because he had heard the standard tut-tutting about how he should have started earlier. Once I got over my shock at his age (because that means I've reached my late 40s and I have no idea how that happened), I assured him that it's not too late. Just because a lot of retirement math starts with the wonders of compound interest over time doesn't mean your retirement is doomed. Becoming a first-time investor in your 60s may feel scary, but it's the best way to ensure you have a financially secure retirement—unless you can get your hands on some kind of time traveling phone booth. Here's what you need to know about beginning your investment journey long after hitting the big 6–0. Start setting money aside right away And when I say right away, I mean right this minute. Putting money aside for retirement is the kind of important-but-not-urgent task that is very easy to put off, which is why 20% of Americans over the age of 50 have nothing set aside for retirement, according to a 2024 AARP survey. If you already have an IRA, 401(k), or other retirement vehicle, transfer whatever amount you can afford today, and set up an automatic contribution to come out of every paycheck. If you don't already have a retirement account, take a half hour today to set one up with a reputable brokerage like Vanguard, Fidelity, or Schwab. Each of these brokerage firms offer retirement accounts, education, and tools for newbie investors. Additionally, each major brokerage has customer service available by phone and online chat that can walk you through the process of opening an account and setting up a recurring contribution. Asset allocation in your 60s Of course, it's not enough to set up your retirement account and your contributions. You will also have to decide how to invest your contributions, which feels a little more complicated in your 60s than it is for younger investors. That's because the traditional advice for retirement investors is to buy-and-hold index funds, allowing time and compound interest to perform their magic on your money. But sixtysomethings don't have the same luxury of time enjoyed by whippersnappers in their 20s, 30s, 40s, and 50s. Except, that's not necessarily true, is it? The Social Security Administration estimates that a current 60-year-old man has a life expectancy of 80 and a 60-year-old woman has one of nearly age 84—which means investors in their 60s can and should invest some portion of their money for a longer time horizon. Older first-time investors need to allocate their retirement money the same way every investor does—by when they expect to need it. This is often referred to as the bucket method, and is often broken down into three investment buckets. Short-term investments: Since you will use it for living expenses in the first one to five years after you retire, you want this money to be invested in assets that are reasonably stable and liquid. Medium-term investments: This money will provide you with retirement income for years six to 15, so you'll invest it in slightly more aggressive investments that still aim to protect your principal. Long-term investments: You won't plan to touch this money until at least 16 years in the future, so you can afford to invest in higher-risk-higher-return investments, giving you time to ride out market volatility. Put away as much as you can While your future self will be glad for whatever amount you can put aside for retirement today, more is definitely better in this scenario. Luckily, the IRS agrees with the importance of saving for retirement. Contributions to traditional IRA and 401(k) accounts are tax-deductible, meaning the money you put in those accounts lower the amount of your taxable income for the year. The IRS allows the gray-haired set to make tax-advantaged catch-up retirement contributions to IRA and 401(k) accounts. For 2025, the IRA contribution limit is $7,000 for anyone under the age of 50, and $8,000 for anyone over the age of 50. For 401(k) accounts, the contribution limit is $23,500 for those under age 50, $31,000 for anyone between the ages of 51 and 59, $34,750 for those between the ages of 60 and 63, and it drops down to $31,000 to anyone 64 or older, because the IRS is nothing if not confusing. In 2025, if you are… You can contribute this much to an IRA You can contribute this much to a 401(k) Under 50 $7,000 $23,500 50 to 59 years old $8,000 $31,000 60 to 63 years old $8,000 $34,500 64+ years old $8,000 $31,000 Find other sources of investment money If every dollar is spoken for before your paycheck even hits your account, the idea of maximizing your retirement account contributions may feel quaint. So it's helpful to start identifying some other sources of investment money. You may have more cash available to invest than you realize. Check for old 401(k) accounts Once you're blowing out 60 candles on your birthday cake, you likely have multiple careers under your belt, let alone shorter-term jobs you've forgotten about. You may have unclaimed retirement benefits gathering dust. A quick search of the National Registry of Unclaimed Retirement Benefits can let you know if you've got some retirement money languishing in an old account. See if you have unclaimed funds An estimated one out of every seven Americans is owed unclaimed property totaling $70 billion as of 2023. You can search for unclaimed funds by visiting the National Association of Unclaimed Property Administrators and searching any states where you have lived. Sell things you no longer want or need You probably have a lifetime's worth of accumulated clutter, some of which may actually be worth some money. Cleaning out your stuff to find hidden gems will not only help you pad your retirement accounts, but it will also help you with any downsizing you may want to do before retirement. But DO NOT invest your Social Security benefits If you're looking for other sources of investment money, taking your Social Security benefits as soon as you turn 62 and investing that money may seem like a no-brainer. But it is nothing short of a terrible idea. That's because your Social Security benefits are as close to a financial guarantee as you're going to get in this world. Your Social Security benefits are backed by the full faith and credit of the United States government—which, admittedly, has lost a little of its luster and reputation recently. But you can absolutely count on the monthly amount promised to you, the approximate 8% per year delayed retirement credit for waiting to take your benefits, and the annual cost of living adjustment. No investment can promise any of those things. Investing your Social Security benefits means you could lose that money. Taking your benefits as of age 62 means you will lose out on the guaranteed delayed retirement credit of 8% per year. And no investment can guarantee an annual return of 8%, let alone a cost of living adjustment to account for inflation. If you are able to delay taking your Social Security benefits, it is generally best to wait to take them until you have reached age 70 so you can maximize your monthly benefit amount. Other than yesterday, the best time is now There is no point in beating yourself up with coulda-shoulda-woulda thinking if you get started investing later in life. It's counterproductive to ruminate over things you can't change, especially since there's still a lot of good you can do as a 60-something newbie investor. The first thing to do is start right away. If you have a retirement plan, move money into it today and set up a recurring contribution. If you don't, open one with a reputable brokerage firm today, taking advantage of the customer service phone or chat options to help you lower the barrier to entry. Once you have the account and automatic transfer in place, plan your asset allocation. Even though you don't have the luxury of time like a young investor, you can still set up a three-tiered investing strategy. Your short-term, stable investments are for the money you'll need in the next one to five years. The medium-term, slightly more aggressive investments will be accessed in years six to 15. And your long-term, higher-risk, higher-return investments will be left alone until year 16 and beyond. It's important to put aside as much money as you can. If you're able to maximize your 2025 tax-deductible IRA and 401(k) contributions, that will lower your tax burden, which may help you afford the contributions. But you could also look for other sources of investment money, such as searching for forgotten retirement accounts and unclaimed funds, or by selling off some of your accumulated stuff as part of a downsizing effort. But do not use your Social Security benefit as a source of investment money. That's trading a guarantee for a risk.
