The Ultimate Legacy Challenge for Boomers
Posted Wednesday, April 16th, 2014| Comments (3)
Why This Millennial Is Hanging With a Bunch of Boomers
Millennials are entering the workplace with a variety of negative stereotypes attached to their generation. “They are entitled.” They don’t want to work hard.” “They are disloyal.” “They require constant praise.” And on it goes.
That narrative—as inaccurate as it may be—makes it easy for Boomers to disengage. Such a choice, however, would be a lost opportunity for all generations in the workplace.
There are many reasons why Boomers should actively participate in the career development of Millennial employees. The following offers five of the more compelling:
Simple demographics should encourage Boomers to focus on the leadership development of Millennials. The intervening generation—the poorly named Gen X—is simply too small to fill the gap that will be left by the giant population of Boomers. Millennials, therefore, will be stepping into leadership roles sooner than predecessor generations were called upon to do so.
Millennials are willing to work hard, but they want to work smart. Their notions of when and where work can be done are vastly different from the face-time culture that Boomers’ nurtured. Boomers often misread the Millennials’ desire to use their prodigious technology skills to make work more efficient as a challenge to Boomer authority and work practices. This reaction inhibits helpful communications about ways to develop a more efficient workplace with more engaged employees.
The “entitlement” narrative has been part of the Millennials’ reputation since they started school—and it may be the biggest misperception of all. Millennials were raised by parents who studied child development experts so their offspring could be confident and secure. But when these children grew up and entered the workplace, that carefully nurtured self-confidence is viewed as entitlement. The questions Millennials were encouraged to ask as kids are now seen as a lack of respect for senior generations at work, and the desire for success that was imbued in them in their youth is interpreted as an unwillingness to “pay dues” as young adults. It is no wonder Millennials are confused when the adults in their lives at work respond so negatively to the self-respect that their Boomer parents helped foster at home. By pushing past this stereotype, Boomers can leverage the Millennials’ natural confidence in ways that promote their development at work.
Millennials want meaningful feedback, not empty praise. They earnestly seek to learn from new assignments, and recognize that an annual review is not an effective career development tool. Boomers who take time to offer feedback as work is performed are cultivating loyal employees—and fostering retention.
At some point, legacy matters. After decades of working hard, Boomers should be thinking about their own legacy. While there may be many accomplishments in which they can take pride, the gaping hole in most workplaces is the failure to adjust the model to the life circumstances of today’s families. Work-life integration and flexibility are not luxuries, they are workplace imperatives. Millennials will complete this undone work if they must, but do they really need to wait until the Boomers relinquish power to do so?
There are more similarities than differences in the characteristics of Boomers and Millennials. As driven, hard-working generations, opportunities abound to combine their collective energies to reform the workplace. It is the work that Boomers should have done years ago. By letting go of their defensive reactions, and seeing Millennials for who they really are, Boomers can add workplace reform to the list of social changes that have been the markers of their lives.
That should be the lasting legacy of the Boomers’ impact on the workplace. After all, they raised the Millennials – now it is time for Boomers to understand them at work and create an environment that nurtures the link between Millennials’ success and organizational sustainability.
Lauren Stiller Rikleen is the author of the recently released You Raised Us—Now Work With Us: Millennials, Career Success, and Building Strong Workplace Teams. She is the president of the Rikleen Institute for Strategic Leadership and the Executive-in-Residence at the Boston College Center for Work & Family in the Carroll School of Management.
Posted Wednesday, April 2nd, 2014| Comments (3)
Aging and Retirement: The Elephants in the Room
Sometimes, it’s tough to imagine a bright future for members of the Millennial generation. A new Pew Research study reveals that high levels of student loan debt and low levels of wealth and personal income are paving a rutted road for Millennials, roughly defined as those now in their teens through the low 30s. Yet they are still optimistic about the future and, according to The Millennial Impact Project report, want to make a meaningful difference. Happy hour conversations with friends at a steadily increasing crop of Millennial-attracting whiskey establishments echo this trend. (In full disclosure, I too am a Millennial.)
With this unsettling news, it may seem pollyannaish to describe a future in which we’re incredibly passionate about our jobs while simultaneously managing to leave a positive impact on our world. Maybe we should just worry about having a job, period. But can’t I work to save the world and eat my cake, too? That may very well be the case, and we can look to baby boomers and older adults for part of the answer.
A recent report by Boston College and Encore.org shows that honorees and nominees of the Purpose Prize, a program that celebrates the achievements of social entrepreneurs over the age of 60, describe their work as very close to an “ideal job.” These real-life trailblazers are defying the notion that innovation is the sole province of the young. They are working as changemakers in education, health care, social services, and the environment, among others, and report that their work is personally meaningful and an important part of who they are as individuals. Nearly 95 percent noted that if they had all the money they needed without working, they would still continue down the same path.
These notable social entrepreneurs are the most celebrated of a growing movement toward purpose in later life, but according to Encore.org’s research, they are just a few of the 9 million Americans ages 44 to 70 who are already in encore careers that combine personal meaning, social impact, and for many, continued income.
However, it’s not always easy to get to an encore. In fact, more than two in three (67 percent) of those already in encore careers experienced gaps in their personal income during the transition from their previous careers to their encores, and nearly four in five (79 percent) of those experienced a gap of six months or more. A majority relied on personal savings alone to make ends meet.
It’s no surprise, then, that the encore stage of life is often seen as an elite institution, available only to those who can afford to labor without pay and take the time to reflect on personal goals and passions.
We should think carefully about how to make encore careers available to all those who want to use their later years to improve their communities and the bigger world. How about planning for our encores early in our careers, just as we do (or should) for retirement? Policies should encourage this. We need to re-imagine key stages in our lives, too. Why, for example, do we feel the urge to cram all of our education into the first 25 years of our lives? Wouldn’t it be better—for our creativity, for our mental and emotional capacities, and for our economy—if we engaged our minds in learning throughout our lives, refreshing skills as we and the world evolve, to help others in need?
Already, programs are cropping up that make this vision a reality and help people move into socially-impactful work past midlife. But we need more than those pathways. We also need to change our thinking so that social contribution is the preferred complement (or replacement) to the tired vision of traditional retirement. That way, the encore stage of life will become a true cultural norm, available to anyone who wants in, for years to come. Including, by the way, me and many of my twenty- and thirty-something friends. Which is why this Millennial is spending his time working with a bunch of baby boomers, looking for ways to make it easier for current and future generations to live, and not just leave, their legacies.
Posted Wednesday, March 19th, 2014| Comments (6)
Self-employment: The Answer for an Aging Workforce and a Sluggish Economy?
There is a retirement crisis in the United States. Or is there?
Millions and millions and, for emphasis, even more millions of middle-aged Americans are moving closer to retirement these days. We don’t know exactly when all of them will retire or exactly what retirement will look like. Surveys find many people expect to keep working well past age 65. Yet Social Security shows a preponderance of claimants continue to file for retirement at age 62 or 63.
If we don’t know exactly what retirement looks like, we do know the financial condition of our aging nation filled with Baby Boomers—shaky at best. Even with the resounding comeback of the stock market since the Great Recession, and a slow but steady recovery in most housing markets around the country, retirements for many if not most will not be pretty.
Yet, even if this statement is true (and there are good reasons to challenge just about any absolute statement about retirement security), it’s hardly clear that it amounts to a crisis, or what we should do about it that we’re not already trying to do.
Private employers with 401(k)s and 403(b)s have taken a lot of heat in recent years for not doing more to help employees achieve better retirement outcomes. While employers have been struggling themselves to recover from the recession, they nevertheless have stepped up support for their plans (yes, often after pointed prodding), helped by better federal laws and innovative solutions provided by behavioral economists.
Retirement plans generally now offer better investment choices, lower fees, improved consumer disclosures and a range of participation rules that have raised employee contributions and participation. Retirement-plan balances are rising and projected outcomes portray satisfactory retirement solutions for the overwhelming percentage of plan participants.
The lack of tax-advantaged retirement accounts at smaller employers is widely cited as a major problem here. Roughly half of the nation’s private-sector employees do not even participate in a retirement plan and most of them work for smaller employers. President Obama and members of Congress have repeatedly proposed new retirement plans targeted to this population. There is also support for relaxing ostensibly pro-consumer safeguards for investment plans that have had the unintended consequence of making it harder for smaller employers to create and manage such plans.
We can argue about the pace and degree of change here. But it’s not as if anyone is turning a blind eye to the problem. And we should hardly be surprised that reallocating federal budget dollars to help improve retirement outcomes is not likely to happen these days. It is true that government budget deficits are declining. But they are still large, and government costs for helping our aging population—primarily through Social Security, Medicare and Medicaid—are set to soar in future decades.
Academic researchers have long identified Americans’ financial illiteracy as a primary cause of poor retirement planning and outcomes. And they have further urged schools and community colleges to greatly expand financial education courses. This is happening, albeit too slowly. But such efforts are more likely to help turn things around for future generations than for boomers whose financial realities for retirement already are largely determined.
Today’s reality, then, is that we have limited dollars and not much time to improve retirement outcomes, especially for people within 10 years of retirement. To move ahead, we must target our efforts where they will do the most good. To do this, we first have to recognize some unpleasant realities that have long been elephants in the room when it comes to retirement policy discussions.
Longevity gains are putting unforeseen pressures on retirement prospects. We are living longer, meaning we need to save more money for longer retirements, and we will have less to spend during retirement. Expecting employers or governments to “fix” this problem is naïve.
- Social Security is the only source of retirement income for half of all American seniors and even the dominant source for another 25 percent. If you really want to improve retirement prospects for most Americans, you can do so by boosting Social Security payouts. If you don’t want to increase government spending in the process, you will need to boost taxes on the top tier of wage-earners.
- Expecting any voluntary savings program to make a difference in the retirement prospects of lower-earning Americans is not realistic. They either don’t have or are unlikely to set aside extra funds, even with attractive tax incentives (which, of course, could add to federal deficits).
- Citing the decline of traditional pensions as the cause of our retirement crisis is a popular theme among 401(k) critics. But it’s not accurate. Even during the prime of traditional pensions, fewer than 30 percent of employees actually qualified for and received payouts. Pensions improved retirement prospects mostly for the same types of employees who are now being helped by 401(k) plans. The difference, of course, is that pensions were funded and invested by employers; they took all the risks. Today, employees take on all the risk.
- The notion that Social Security simply pays people back for what they put into the system in taxes is false. So is the prevalent attitude toward Social Security that “I paid for it; it’s mine.” The program’s progressive payout rules provide retirement benefits that replace much larger percentages of people’s incomes for people who don’t earn much money. For people who earn only 25 percent of the nation’s average wages, for example, Social Security benefits replace 77 percent of their income. People who earn the top amount of wages subject to payroll taxes qualify for benefits that replace only 28 percent of their incomes.
In reality, Social Security is a massive income redistribution program. You may think this is a good thing or a bad thing, but at least we should recognize the program for what it is. In terms of retirement, Social Security has evolved into the only game in town for most of us.
Among the top 50 percent, there is no retirement crisis for people aged 65 and older in the top quartile of income. They make enough money and also are big beneficiaries of tax breaks provided to holders of 401(k)s and IRAs. The next quartile is the sweet spot for retirement plans, and the evidence is clear that these savers are increasingly on track toward decent retirements.
Posted Wednesday, March 5th, 2014| Comments (4)
Ahead of the Curve
For some older Americans, the answer is maybe;
for most, the answer is no.
With diminished prospects for wage-and-salary work in recent years and projections of sluggish growth for at least the near term, as documented in the Congressional Budget Office’s February report on the economy, it’s natural to look for alternative forms of employment as a way for older Americans to cope with the current macroeconomic climate. Self-employment–either incorporated or unincorporated–seems like one potentially fruitful option.
Many older workers already transition into self-employment later in life. Research based on the Health and Retirement Study (HRS)—a large, nationally representative dataset of older Americans—reveals that more than one in ten career wage-and-salary workers transition into self-employment prior to exiting the labor force completely. Further, the number of career wage-and-salary workers transitioning into self-employment later in life is much higher than the number of self-employed workers transitioning into wage-and-salary jobs. It gets better. Career self-employed workers are much more likely than their wage-and-salary counterparts to remain working at later ages—a key objective for many policymakers considering ways to mitigate the financial strains of an aging population.
As a result of these two trends (net positive transitions into self-employment and the longer working lives of the self-employed), the fraction of older workers who are self-employed increases dramatically with age. Among a group of career workers aged 51 to 61 in 1992, for example, the percentage who were self-employed as a fraction of those still working rose monotonically between 1992 to 2010 from roughly 20 percent to 40 percent for men and from roughly 10 percent to 20 percent for women. Moreover, evidence suggests that the Great Recession has not discouraged these transitions into self-employment.
Self-employment and risk
These data suggest that self-employment is already an attractive option for a large segment of the older population. The big question is whether older Americans who are not self-employed should be encouraged to try it.
One reason for self-employment’s appeal in recent years is the outlook for older Americans who are among the long-term unemployed. The length of the average spell of unemployment for Americans who are 55 and older has gone down recently, but remains high, at 46 weeks. In comparison, the average unemployment spell for younger workers is approximately 34 weeks. For these long-term unemployed older Americans, could self-employment be the solution to the lack of opportunities in wage-and-salary employment?
Consider the positives first. Self-employment offers the scheduling flexibility that older Americans rank high on national surveys. A recent AARP study revealed that older Americans value such flexibility even more highly than pension benefits. Indeed, all else equal, self-employed older Americans work fewer hours than wage-and-salary older workers do, presumably by choice.
Older Americans may also be in a better position than younger ones to become self-employed, in part because they are more likely to have the financial resources necessary to overcome a formidable barrier: access to capital. They can overcome this barrier because they’ve had more time to accumulate personal savings and more time to establish good credit. Older workers also have the advantage of decades of work experience: intangible skills and knowledge upon which they can draw when facing the inevitable challenges of self-employment. In fact, research by the Kauffman Foundation finds that the survival rate of new businesses increases with the owner’s age.
While all of these incentives are valid, any evaluation of policies to encourage self-employment must consider the role of self-selection. Transitions into self-employment are not exogenously bestowed upon people; rather, they are the calculated decisions of risk-takers who have concluded that the expected benefits of self-employment outweigh the expected costs. Perhaps more important, people who reach the opposite conclusion—that the expected costs outweigh the expected benefits—choose not to become self-employed. Policymakers should be cognizant of the often unobservable qualities that drive older Americans to make the leap from wage-and-salary employment to self-employment, and of the unobservable qualities that prevent others from taking a chance.
The financial security of older Americans is another concern. According to the Employee Benefit Research Institute’s latest annual Retirement Confidence Survey, the typical older worker has less than $25,000 in nonhousing, nondefined-benefit pension wealth. Does it make sense for these workers to bet what little they’ve saved? Making that bet even more daunting is the uncertain payoff of employer-provided pensions. A 30-year transformation in the world of employer—provided pensions is now more or less complete, with defined-contribution plans such as 401(k)s dominating defined-benefit plans in the private sector. This shift leaves older Americans today much more exposed to market forces than prior cohorts were. The long-term outlook for Social Security currently shows a sizable deficit as well, leaving little room for some kind of program expansion that might cover retirement income shortfalls.
Back to our initial question: Is self-employment the answer for an aging workforce and a sluggish economy? Self-employment may be an attractive and viable option for some older workers, and the jobs, goods, and services these people create will help the economy. For most people, however, the benefits of risking their security don’t outweigh the potential losses, especially given that time is short for many older workers to acquire the assets they’ll need for their retirement, let alone to recover from a failed business venture.
Kevin Cahill will present a more in-depth view of self-employment transitions among older Americans at the Eastern Economics Association meetings in Boston on March 8th. The views expressed in this article are those of the authors and do not necessarily reflect the views of the U.S. Bureau of Labor Statistics, Analysis Group, or ECONorthwest.
Posted Wednesday, February 19th, 2014| Comments (2)
Not Just the Money
Four companies set the pace for age-friendly workplace practices
The New York Academy of Medicine announced the winners of the inaugural Age Smart Employer Awards on February 6. This award program—described in this space last April—honor New York City employers who value workers of all ages. The Age Smart Employer Awards is an initiative of the New York Academy of Medicine and is funded by the Alfred P. Sloan Foundation. The four exemplary winners represent different strengths in Age Smart policies and practices, as well as different sectors, workplace sizes, and boroughs. These organizations are industry leaders ahead of the curve. Let me tell you why the Age Smart Selection Committee chose them.
Montefiore Medical Center, a nationally recognized 1,490-bed health care delivery system in the Bronx, treats more than 90,000 inpatients and employs more than 20,000 people. Montefiore was selected because of the sheer number of its Age Smart practices, combined with particularly exemplary management training regarding the multigenerational work force. Specifically, the hospital’s administrators partner with union leaders to train staff in cultural diversity, including education on how to manage four generations in the workplace. Montefiore also prepares its associates for a “good” retirement and offers reduced work schedules, assignment to special projects, and other strategies to help older workers’ transition into retirement. The hospital also invests in training and development of all workers across all phases of their careers. One example is a six-month program—“School at Work”—that helps associates from ancillary departments learn core health care skills, enabling them to return to school and enter new health care professions.
Pfizer, a global biopharmaceutical company, has 79,000 employees worldwide—more than 3,000 of them in New York City. Pfizer’s “Get Old” campaign challenges and redefines what growing old means and promotes healthy aging in the context of brand and product advertising messages. The company has brought the campaign’s principles into the workplace, engaging employees with comprehensive wellness programs and offering health condition management practices that take into account the unique challenges of aging. Pfizer also has strong mentorship programs and leads in caregiver support programs. For example, Pfizer encourages caregiver-friendly business polices through its cosponsorship of ReACT (Respect a Caregiver’s Time), a multicompany leadership initiative that helps employers understand the difficulties of being a working caregiver. Pfizer’s Mentor Match, another Age Smart practice, connects employees by enabling mentor-mentee partnerships among thousands of employees of all ages and experience levels.
Ristorante Settepani & Settepani Bakery employs 50 people at its two locations in Harlem and Williamsburg, Brooklyn. Settepani, like many small businesses, operates more from its owners’ hearts than from a corporate procedures manual. The company’s salient Age Smart employment practice is commitment to treating employees as family, embracing their talents, interests, and aspirations. At Settepani, all employees receive continual training to keep their skills current, with a special focus on new technologies that can have a big impact on the bottom line. The company cross-trains all incoming staff and provides multiple training formats to accommodate workers’ needs.
Renewal Care Partners provides long-term care for people living with chronic and acute health conditions. Based in New York City, the organization has a staff of more than 100. Renewal Care Partners excels in recruiting, training, and using insights from older workers in their roles as caregivers. For example, through robust partnerships with community-based organizations, the organization identifies older adults uniquely qualified to work with older clients. Additionally, it offers external training opportunities and encourages staff to take on greater leadership roles.
This first group of Age Smart Employer winners exemplifies the central tenet of the award: Age Smart policies and practices are good for business, good for employees, and good for the community. I invite you to learn more about the winners by viewing their videos and profiles. Each winner is an industry leader and we are eager for their peers to follow.
Posted Wednesday, February 5th, 2014| Comments (9)
Continued Work and Social Security Claiming Decisions
Why record numbers of older workers don’t retire
Seniors who are able to keep working and want to do so—who enjoy and get satisfaction from the challenge—deserve to be recognized, understood, and celebrated, especially on the job.
Just last year, the New York Times published profiles of two prominent scientists in their 90s who are still working and contributing to their fields. There’s nutrition scientist Fred Kummerow, age 99, who directs laboratory research at the University of Illinois and publishes papers in peer-reviewed scientific journals. And there’s neuropsychologist Brenda Milner, age 95, who studies differences between the left and right brain at the Montreal Neurological Institute and Hospital.
Outliers? Perhaps. But these people are also the leading edge of a new phenomenon: bypassing the conventional age of retirement to continue working.
The average retirement age in the United States has been ticking upwards, from 57 in 1993 to 59 in 2003 and now to 61, according to Gallup’s annual Economy and Personal Finance survey. Moreover, Gallup found, more than half of those between the ages of 58 and 64 who are still working expect to continue beyond the age of 65. Indeed, the fastest-growing segment of the labor force (by rate of increase) is women who are 65 and older, according to a report by the U.S. Bureau of Labor Statistics. Men in this age group are close behind.
Among the reasons for these shifts are the economic downturn, which diminished retirement savings; laws eliminating most mandatory retirement; the gradual increase in the age of eligibility for Social Security; and the fact that many baby boomers entering their 60s are ill-prepared for retirement.
But improvements in health and longevity also play a role, allowing seniors who simply love what they do to keep at it.
Last July, Kimberly Blanton described the surprising results of a recent study in the blog she writes for the Center for Retirement Research, at Boston College. She commented, “By the time people reach their mid-60s, two out of three have retired, either voluntarily or because they’re unable to keep or find a job. By age 75, nine out of ten are out of the labor force. But the minority who do continue working aren’t just survivors—they’re thrivers.” What’s more, she observed, this group is dominated by highly educated, high-achieving professionals who, contrary to stereotypes, are as productive (measured by hourly wages) as younger workers in their prime earning years.
The research I conducted for my two most recent books reveals that mature professional men tend to define themselves, as their fathers did, by what they do for a living and the career goals they have reached. Female professionals who came of age in the same period (from the 1950s to the 1970s) tend to define themselves first in the roles associated with their homes, families, and collegial relationships and then as career women. Other differences, including choice of career field, number of years on the job, and pay inequities, frequently result in greater financial security for older men than for older women.
Now, my research shows, having met disparate traditional educational, social, and economic expectations over the years, mature professional women and men find themselves on the same path in their work lives, blazing it and opening up new territory as they age.
Posted Wednesday, January 22nd, 2014| Comments (0)
The Fountain of Wisdom
It is increasingly commonplace for people to work into their late 60s and even 70s. The percentage of people in these age groups who continue to view themselves as part of the work force has continued climbing for more than 20 years. The deep recession has been widely cited as forcing many older Americans to stay on the job and defer retirement, but the trend was well established before the downturn and is expected to continue even as the economy recovers.
This shift has been well documented and the details are nothing short of extraordinary. Here are the labor force participation rates for different groups of older Americans, as reported last month by the U.S. Bureau of Labor Statistics:
We are witnessing a statistically and socially significant shift toward continued work and extended careers for older Americans. For their part, employers are responding to graying work forces. Over time, and especially as the economy recovers, we can expect expanded employer accommodation efforts—more training, intergeneration communication and sensitization programs, and redesigned jobs reflecting age-appropriate roles for employees.
At the same time, however, employers should consider how continued employment in later age is altering retirement plans for millions of Americans. There is a solid opportunity and need here for human resource departments to better understand these issues and provide appropriate employee communications and training resources to older employees.
Work-based retirement programs such as 401(k) are an obvious focus for such efforts. The retirement assets of most people aged 55 and older fall far short of funding even modestly comfortable retirements. Encouraging and helping older employees to take full advantage of tax incentives and employer matches thus becomes a must.
As more 65-and-older employees stay on payrolls, Medicare options increasingly will enter the mix of health care considerations. There will be a growing appeal for hybrid solutions that permit employees, employers, insurers and Medicare officials to craft mutually helpful and innovative packages that represent better deals for all parties.
Less obvious, perhaps, is the changing role that Social Security can play in the retirement plans of older employees, and in the thinking of employers and human resource managers. For most Americans, the decisions about when and how to claim their Social Security benefits are far and away the most important retirement decisions of their lives and, in many cases, of the lives of their spouses and other family members.
Very few older Americans have even $100,000 set aside for their retirements. A typical Social Security benefit, by comparison, is akin to a guaranteed monthly annuity that would require a nest egg well in excess of $1 million to fund. That’s how important Social Security is to successful retirements, and it’s important even to people who earn a lot of money.
Every person participating in Social Security (some government employees and railroad workers have separate retirement programs) pays the same amount of taxes each year—in 2014, the rate is 6.2 percent of the first $117,000 in wage income. Employers also pay 6.2 percent and self-employed persons are on the hook for 12.4 percent of their earnings up to the $117,000 ceiling.
(There is a similar Medicare payroll tax—1.45 for employees and employers; 2.9 percent for self-employed persons—and this tax is applied to all wage earnings. Under Obamacare, there are additional Medicare taxes due from wealthier individuals.)
However, while contribution rates may be the same, the benefits available from Social Security are in no way the same for everyone. Social Security benefits have long been promoted as a common benefit—a “we’re all in this together” program. But its benefit provisions can vary greatly, and reflect complex choices that can make a huge difference to people. Social Security claiming decisions thus can play a major role in the retirement prospects of older employees and in the support and advice they need from employers.
People can begin claiming Social Security benefits as soon as their 62nd birthday. Or, they can defer their benefits and watch them increase in value each year by about 8 percent a year PLUS the rate of inflation. After the age of 70, benefits do not increase except for an annual cost of living adjustment (except they will increase for many people who keep working, and I’ll get to that shortly).
People are eligible for Medicare at the age of 65 and usually must sign up for the program unless they have private health insurance from an employer. But they do not have to sign up for Social Security at this time. And by waiting until they are 70, their monthly benefits—for the rest of their life—are 76 percent higher than if they began claiming at 62.
One of the additional core components of Social Security involves what happens to benefits when a person reaches what the Social Security Administration has called “full retirement age.” This is a confusing concept, made more so because the agency also calls it “normal retirement age.”
Now, because benefits can increase every year until age 70, you might think 70 is the full or normal retirement age. No, it isn’t.
Or, because Medicare benefits begin at age 65, you might think this is the full retirement age. No, again, although 65 used to be the program’s full retirement age before changes to the law raised this age. It is now 66 for people born between 1943 and 1954, and will rise by two months a year for those born between 1955 and 1960, reaching 67 for people born in 1960 and later years.
Reaching full retirement age has some enormous potential impacts on Social Security benefits. Prior to reaching full retirement age, anyone receiving basic Social Security retirement benefits can have those benefits temporarily reduced should their outside wage earnings exceed an annual minimum; in 2014, that minimum is $15,480. The ceiling on exempt outside earnings is higher for those reaching full retirement age in the current year; for anyone turning 66 in 2014, the exempt amount of outside earnings is $41,400.
For people receiving Social Security benefits who are aged 62 to 65 and earn more than $15,480, the agency will withhold $1 in benefits for every $2 of outside earnings; for those turning 66 who earn more than $41,400, $1 in benefits will be withheld for every $3 in outside earnings. This can make a big difference to older employees who have already started claiming Social Security (and while waiting until 70 can produce big monthly payment gains, nearly no one waits this long; 62 is the most popular claiming age).
Beyond withholding benefits, the way the agency does this can play havoc with an employee’s financial planning. If benefits are withheld, the withholding is not proportional or pro-rated during the year but happens all at once. A person receives $0 benefits every month until the amount of withheld benefits has been satisfied. Monthly benefits are then restored.
When a person reaches full retirement age, there is no penalty for outside earnings. In addition, the agency will restore any benefits that were withheld earlier because of outside earnings prior to reaching full retirement age. There are other significant implications of reaching full retirement age, particularly how it can affect decisions to take spousal, divorce and survivor benefits.
Lastly, older employees who continue working into their 60s and beyond can actually raise their Social Security benefits by continuing to work. A minimum of 40 quarters of work on which payroll taxes have been paid is needed to qualify to receive Social Security. But the agency bases an individual’s benefit entitlements on his or her 35 years of highest earnings.
An older employee who already has 35 years of covered earnings can boost his or her Social Security benefit if the amount earned in 2014 is large enough to become one of the top 35 earning years. The agency will automatically recalculate a higher lifetime benefit. Even people already claiming Social Security will see their benefit increase, and it will increase again for each and every year their future wage income is large enough to be one of their 35 top earnings years.
The agency adjusts annual wage earnings each year to reflect the impact of inflation. So, a year of wages earned in 1990 might be worth more than you’d think when compared to earnings in a more recent year. But when a person reaches the age of 60, the agency’s rules say that their wage earnings are no longer adjusted for inflation. So it’s very likely these later-year earnings by older employees will be included in their top 35 earnings years, and thus boost their Social Security benefits.
Few employees know about or understand these Social Security provisions. The same probably can be said about human resource managers. Yet the retirement prospects of older employees can be greatly affected—for better or worse—by their Social Security claiming decisions. As more and more retirement-age employees remain on the job, these decisions will grow in importance for employers as well.
Research Fellow and journalist Philip Moeller is the co-author of “How to Live to 100” and is now working on a book about Social Security, to be published by Simon & Schuster.
Posted Wednesday, January 8th, 2014| Comments (6)
Companies need look no further than their own employees to solve the problems of an aging workforce
Pushed by the aging of the workforce, businesses are scrambling to find consultants to help them restructure and find innovative ways to make the most of the assets of their older employees. However, a project conducted last year in six cities (Bilbao, Bologna, Bonn, London, Prague, and Strasbourg) demonstrated the surprising truth that businesses already have the answers. To discover them, they just need to tap into the collective wisdom of their own staff.
The European Voices for Active Ageing (EVAA) project was an initiative funded by the European Union’s Europe for Citizens program. The project was led by World Café Europe—a nonprofit organization that specializes in dialogues engaging as few as 50 and as many as 1,000 people. During these dialogues, everyone participates. The EVAA project was designed to give adults in later life a voice about issues that matter to them today. In each city a different topic was discussed. In Bologna, the topic was “Work after 50.”
Wisdom of the ages
Ninety adults participated in the Bologna dialogue. Of this group, 71 percent were white- and blue-collar workers between the ages of 50 and 70; 16 percent were white- and blue-collar workers younger than 50; and the remaining 13 percent were retired workers over the age of 70. The purpose of the Bologna dialogue was to explore what change is necessary in today’s workplace in order to unleash the talent and potential of an aging workforce.
The dialogue’s results were remarkable. In four hours, the participants pinpointed nine key issues: knowledge transfer, lifelong learning, new challenges for workers over 50, intergenerational issues, new work structures, an age-friendly organizational culture, the attitudes both of older and younger workers, ageism in the workplace, and opportunities for government legislation to promote workplaces free of age-bias.
The participants made specific suggestions of ways businesses should respond to each of these issues. For example, the participants concluded that businesses needed to encourage older workers to reconsider some of their own negative attitudes, such as “too old to learn,” “resistance to change,” and “unwillingness to share.” They also strongly advocated a gradual retirement process enriched by a cross-generational program of courses, coaching, and mentoring on retirement planning. Mandatory retirement would be abolished. In another inspired moment, they came up with seven ways in which employees over 50 could heighten their engagement in their work: for example, within companies as communicators of organizational knowledge and, in paid early retirement, as consultants or contributors of socially useful work. (For an overview of the Bologna dialogue, click here.)
Willingness to act
EVAA was conceived as a dialogue by older adults for older adults. In preparation, facilitators over the age of 50 were coached and mentored to lead the conversation. Bologna had two facilitators: a union worker and a university professor.
At the end of the session, the participants were asked to fill out an evaluation sheet. One question asked them to rate their level of personal motivation as a result of the dialogue. An overwhelming majority—89 percent—said they were motivated to continue their engagement with the issues involved in “Work after 50.” Of this group, 25 percent said they were “extremely motivated” to continue their engagement. (For detailed recommendations and evaluation results, click here.)
All of these results point to an interesting question: What if businesses were willing to engage their employees in a highly participatory way about issues that matter to them and to their company? What happened in Bologna suggests that they would find a fountain of wisdom waiting to be discovered. As a bonus, companies would also identify “extremely motivated” employees who are eager to become part of the solution.
Posted Wednesday, December 11th, 2013| Comments Off
One Size Does Not Fit All for Employer’s Health & Wellness Strategies
A cost/benefit view of occasional flexibility
In 2012, the Copenhagen Consensus Center asked a panel of leading economists to list in order of priority the most cost-effective ways to advance global welfare. What might one expect to see at the top of such a list? Tackle climate change? Extend protected wildlife areas? Work to reduce heart attacks? No to all three. The top contender: reducing undernutrition in preschoolers. Economists estimate that every dollar invested to improve young children’s nutrition has a payoff of $30.
The same counterintuitive cost/benefit logic also applies to improvements in the workplace. When employers think about raising productivity and morale, they tend to consider large-scale innovations in the way an organization does its business or wholesale revision of human resources policies. Yet research conducted recently by the Sloan Center on Aging & Work at ModernMedical—a large, regional medical provider in the United States—suggests that the biggest return on investment might come from a much humbler domain: occasional flexibility.
A hesitation to ask
We define occasional flexibility as the opportunity to take a few hours off work for personal reasons. What may seem like a small request from an organization’s perspective can have a profound effect on the life of an employee. Our research uncovered the tension that surrounds such requests.
Although we found clear evidence that occasional flexibility is important to ModernMedical employees and managers (see Figure 1), relatively few had actually requested time off during the two months preceding our survey (Figure 2). It is possible that the respondents had simply not needed time off during that period, but it is also possible that they hesitated to ask for it. Indeed, less than 40 percent of ModernMedical employees were “completely comfortable” requesting a few hours off during regularly scheduled hours (Figure 3). It may also be possible that employees make adjustments on the family side of the equation to avoid asking their bosses for adjustments on the work side. Such sidestepping does not show up in the data, so researchers cannot easily document it.
Figure 4 illustrates a cost/benefit approach to a hypothetical request for occasional flexibility.
As the first panel in this figure shows, from the employee’s perspective, the benefit of being granted time off—to see a child perform in a one-night-only school play, for example—could be enormous. The cost to the manager—in terms of time spent coordinating schedules, for example—is certainly real, but in our example it is assumed to be relatively low. In this case, the decision to approve such requests would be unambiguous to a social planner, weighing the benefits to the employee against the costs to the employer.
In contrast, from the manager’s perspective, the benefits to the employee might either not be taken into account at all, or might be heavily discounted. The second panel of Figure 4 illustrates the same cost/benefit decision from the manager’s perspective. The outcome is then the opposite of the social planner’s outcome: the request for time off is denied.
The rewards of mutual understanding
Open communication is one straightforward way to help ensure that managers take into account the employee’s benefit when they consider requests for occasional flexibility. After all, the height of the gray bar in Figure 4 is unknown to the manager, unless the employee relays this information accurately.
Just as it is critical for a manager to appreciate the benefit of occasional time off to an employee, an employee needs to understand the costs that a manager associates with such requests. The employee’s understanding of the height of the red bar in Figure 4 will be some comfort when requests are denied, as they inevitable will be from time to time.
The biggest bang for the buck in the realm of workplace flexibility may come from improving the process that employees use to request time off. The findings from our discovery process and comprehensive baseline survey tell us that employees at ModernMedical place a high value on their freedom to make occasional requests for time off. Accommodating these requests may seem minor to a manager or to an organization, but can have an enormous impact on employees and their families. The outcome of a request can determine whether or not an employee can attend a child’s holiday play, and have an experience that will last forever in memory. The loyalty the employer receives in return just might last forever, too.
Posted Tuesday, November 26th, 2013| Comments Off
Global health statistics are startling. According to the CDC, more than 50% of U.S. have more than one chronic condition. According to USAID, 20% of the Russian population has hypertension and the World Heart Federation reports that over the last two decades, the overweight population in Mexico has risen from 10% to 68%.
Given these and other disconcerting global trends, there is growing interest among employers to help manage the health of their employees and ultimately increase the productivity and engagement of their workers. More and more, they are looking to health and wellness programs to help them achieve key business outcomes.
Recently, a study, based on the 2011 Generations of Talent study, commissioned by MAXIS Global Benefits Network (GBN), in conjunction with the Sloan Center on Aging & Work at Boston College, found that while employees place a high value on health and wellness benefits, only 35% of respondents who span 11 countries are satisfied with the programs currently offered. Further, when employees are strongly dissatisfied with these benefits, the data suggests that they are at about 55% of their “maximum” commitment and 78% of their “maximum” work engagement.
The MAXIS GBN study found that levels of satisfaction with programs and the correlating employee engagement varied whether among Millennials, emerging markets or people in poor health. For instance, you might think that healthier, younger workers might not care about wellness benefits, but those at younger ages were more dissatisfied than older workers, and the link between satisfaction, engagement and commitment was stronger. Furthermore, the satisfaction gap between employees’ perceived value of and satisfaction with employer-sponsored health/ wellness initiatives was highest in developing countries such as Brazil, Mexico, India and China. And, across all markets, workers in poor health reported being much less satisfied overall with health and wellness resources. In addition, that low satisfaction negatively colored their perception of how able they are to work.
Clearly, a one size fits all approach is not the answer. While no program can meet all expectations, it is important to ensure a better match between employee needs and benefits offered. A tailored approach is crucial in developing effective health and wellness programs.
Recognizing the gap in satisfaction and employers’ growing need to address the health and productivity of their workforce, MAXIS GBN, a partnership between MetLife and AXA, works closely with companies to develop and implement health strategies for every stage of their employees’ health journey.
MAXIS GBN believes that the answer for employers is to keep it simple, but well-directed:
- Focus efforts on the groups reporting the lowest satisfaction scores. The challenge is to meet the expectations of those who highly value health and wellness but are unhappy with the status quo.
- Seek input from various stakeholders during design, implementation and review of programming. This will help companies to understand what’s working and what’s not. Different workers have different needs and interests which vary by country, age, gender, job, health status and lifestyle.
- Act on it… Think simple. Programming and resources don’t have to be expensive … relevancy to each audience is what counts. Companies should test different programming and communication approaches and see what works.
Companies have an opportunity to broaden their current health and wellness programs by building a global strategy that is linked to in-market initiatives. Taking a holistic view of health and wellness by creating a global strategy will help employees live healthier lives and impact the bottom-line of companies.The strategy should be driven by data and included adapted market-specific solutions.