Age Discrimination Still Present Despite A Hot Job Market


The job market in the U.S. is on fire, but seniors looking for work continue to complain about age discrimination.  Workers over 50 haven’t joined the jobs recovery to the same degree as younger peers, not counting the millions who retired early during the past two years.  In January, nearly one-third of job seekers age 55 and older were part of the long-term unemployed, according to federal data which compared them to workers between the ages of 16 and 54.  In a recent AARP survey, 78% of workers between the ages of 40 and 65 said they had seen age discrimination.  One suggestion : Address the issue head on and don’t avoid it. Prove to a potential employer that you have what it takes to compete with a younger worker.

 

AT&T Unexpectedly Cuts Retiree Benefits

A jar of coins with the word retirement written on it.


AT&T has angered many former employees by reducing life insurance and death benefits as of January 1 for approximately 220K former workers.  One former employee, Dean Allison, told The Wall Street Journal that he accepted an early buyout offer to retire in 1998 and was promised a death benefit of $63K would go to his wife.  AT&T notified him that they will pay no more than $15K if he dies.  Managers who retired had their life insurance pegged at 1x their annual pay.  That number has been reduced to just $15K.  Putting more flames on the fire, the company has excluded executives from the death benefit reduction.  The heirs of Randall Stephenson, who left the company in 2020 after serving as its CEO, will receive a massive payout of $3.6 million under his current life insurance plan.  AT&T’s finance chief John Stephens has the most to gain from the benefits reduction.  The company offered to pay him an extra $500K if he meets any one of three financial targets, one of which is cutting $1 billion or more from AT&T’s obligation for retiree pension and benefits.

https://www.wsj.com/articles/at-t-slashed-promised-life-insurance-for-former-workersand-time-runs-out-at-year-end-11640544022

Some Investment Advisors Throwing Out The 4% Rule For Retirees

A jar of coins with the word retirement written on it.


A long-time rule of thumb for retirees is that they can safely take out 4% of their nest egg each year without the possibility of running out of funds before they pass away.  However, with the bull market run we have recently seen, many question whether this is still a safe bet.  Of course, much depends on your asset allocation.  If you are in all cash, you are probably looking at only a 2% withdrawal rate until interest rates start rising significantly.  Those who keep 20-50% in stock can reasonably draw between 2.5-2.8% per year and the money should last for 40 years, a little over 3% and it should last for 30 years, and just over 6% if you want the portfolio to last for 15 years, according to Morningstar Direct.

https://www.barrons.com/articles/retirement-withdrawal-strategy-4-percent-rule-51639177201

Pensions Saved In Stimulus Bill


More than a million plan participants who were in danger of having their pension payments slashed were bailed out in a recent stimulus package.  It gave $86 billion to shore up employee pension plans covering retirees at a myriad of companies.  AARP fought hard for the measure, says David Certner, AARP’s legislative policy director.

Pacific Grove, CA Tips On ROTH IRA Conversions


Tax rates are likely to go up under the Biden administration, and one hedge against this is to convert an existing IRA or 401(k) to a Roth IRA.  You will have to pay taxes on the amount converted but then the IRA grows tax free.  Talk to a tax advisor—and make sure you wait closer to year-end before doing it in case tax rates increase this year.  Or let Monterey Bank or one of our other local banks walk you through the rules.  There are few—for instance, there are no Required Minimum Distributions from this type of IRA.  Talk to Monterey Credit Union, Monterey County Bank or many of the other local financial institutions to open an account, or a financial advisor for advice.

Is the 4% Rule For Retirement Outdated? By Derek Baine

A jar of coins with the word retirement written on it.


For decades, many financial planners advising retirees have recommended using the 4% rule.  It states that if you withdraw 4% of your portfolio each year in retirement, your nest egg could last 30 years or longer.  The problem is, if you enter retirement when the stock market is tanking and start withdrawing 4% each year while we are in a bear market, your portfolio may evaporate very quickly.  Some investment advisors are now recommending taking out less than the 4% in down markets and more during good markets.  San Francisco financial advisor David Yeske uses rules based on research done by Jonathan Guyton and William Klinger in the 200’s and he says that because of its flexibility, his clients are able to take out 5-6% in good years. However, in down years there will be some belt tightening so retirees need to figure out which expenses they can cut during down years.

https://www.wsj.com/articles/retirement-nest-egg-11617929631

A Spouse’s Death Can Take Its Toll On Your Investment Portfolio

A blue and white logo of the social security administration.


The Wall Street Journal recently posted a story about the fact that your financial portfolio might quickly start unraveling if you don’t prepare for the financial consequences of your spouse’s death in advance.  Not only will you see two Social Security checks go down to one, some people have pensions that don’t have survivorship benefits and those would expire immediately.  In addition, since you will have to file single, your tax rate may go up.  “When that plan is disrupted by the tragic death of a spouse, there isn’t a lot you can do besides cut expenses or go back to work,†Jennifer Murray, a financial advisor, told The Wall Street Journal.  The bottom line: discuss this issue with your financial planner.

Monterey, CA Dementia, Alzheimer’s Disease The Greatest Risk For Your Portfolio In Your Golden Years

A doctor and patient looking at a book


There was an interesting article in the Wall Street Journal that talked about prudently investing your retirement funds.  However, it noted that the greatest risk was not stock prices or interest rates.  Rather, it was a slow cognitive decline.  One big mistake or a series of smaller ones can wipe out your entire life savings.  To guard against this happening, investment firms like Charles Schwab, Fidelity Investments and Vanguard Group are strengthening the ways they detect possible signs of cognitive decline.  This includes making web sites more difficult to navigate for someone with an impaired memory, and monitoring for frequent password changes.  Some are notifying a designated family member when they see these signs.  Good for them!  Many people who start slipping into dementia or Alzheimer’s disease try to hide this from friends and family as they are embarrassed.  Regular readers of my blog know that both my father and grandmother had this terrible disease when they passed away.  There are wonderful people at our local chapter of Alzheimer’s Association in Ryan’s Ranch.  They also have a 24-hour hotline if you need support at 800-272-3900.

https://www.wsj.com/articles/baby-boomers-biggest-financial-risk-cognitive-decline-11622942343

Pensions Saved In Stimulus Bill

A jar of coins with the word retirement written on it.


More than a million plan participants who were in danger of having their pension payments slashed were bailed out in a recent stimulus package.  It gave $86 billion to shore up employee pension plans covering retirees at a myriad of companies.  AARP fought hard for the measure, says David Certner, AARP’s legislative policy director.

Pebble Beach, CA Estate Planning In A Coronavirus World : By Derek Baine


AARP Bulletin in their November 2020 issue (page 22) had an interesting article about more and more couples looking at estate planning now that the coronavirus is making the future outlook bleak.  Keep in mind that you can write a will at any time, even if you are sick in the hospital.  Most estate planners recommend setting up a living trust, which gives you a lot of flexibility on how your assets are distributed following your death.  Experts warn that doing a joint will for a couple is a terrible idea—they aren’t even legal in some states.  Leaving more to one child than another almost guarantees that the will could be challenged.  Stepchildren aren’t automatically treated as children for legal purposes.  There are a lot of moving pieces in an estate plan so consult with your attorney.