Benefits December 3, 2013

Economic Pickup Shows Little Retirement Impact

December 3, 2013 (PLANSPONSOR.com) – Analysis from the Center for Retirement Research (CRR) shows strong equity returns and modest housing price increases since 2010 have done little to improve most Americans’ retirement outlook.
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In an issue brief titled “Will the Rebound in Equities and Housing Save Retirement?,” researchers examine whether the inflation-adjusted 45% return on stock market investments observed since 2010 has improved the National Retirement Risk Index (NRRI). The NRRI, published triennially by the CRR, measures the percentage of working-age American households at risk of being unable to maintain their pre-retirement standard of living when exiting the work force. 

The brief also examines what impact the 6% increase in housing prices, measured since 2010, has had for Americans’ retirement readiness.

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Put simply, researchers found that neither housing price improvements nor strong equity market returns have significantly improved retirement readiness as assessed by the NRRI. In 2010, the index stood at 53%, meaning more than half of all American households were considered at risk of losing their standard of living in retirement. If the index were recalculated today, using 2013 economic data, it would only fall three percentage points to hit 50%.

Researchers point to a number of factors for the low correlation between market returns, housing prices and retirement readiness. Most prominent is the fact that the more robust growth observed in stock market investments in recent years has mainly benefited the top third of households by income—those starting with higher levels of retirement readiness.

In fact, the issue brief shows only a small fraction (2%) of the wealth of low-income households and only 6% of the wealth of those in the middle-income group are tied into the stock market. That’s compared to about 17% of total wealth for households with the highest incomes.

Also important is the fact that housing price increases were too modest to have a significant impact on the NRRI. In the NRRI, housing prices have a significant impact because households are assumed to access home equity at retirement by taking out a reverse mortgage. The higher the home value, the more a household can extract in cash and turn into an income stream through annuitizaiton.

More information on the issue brief and the underlying research is available here.

Benefits December 3, 2013

College Major May Not Define Career Path

December 3, 2013 (PLANSPONSOR.com) – A CareerBuilder survey finds that a person’s major in college may not correspond to the job they get after graduation.
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Nearly half (47%) of college-educated employees surveyed say their first job after college was not related to their college major. Thirty-two percent of college-educated employees report that they never found a job related to their college major. For those that are age 35 and older, the figure is 31%.

“A college education will give you a significant advantage in the job market. In a tough economic climate, college graduates must be flexible and open to taking positions outside their area of study. Taking the knowledge gained in college and branching out with it in unexpected directions is common after graduating,” says Rosemary Haefner, vice president of human resources at CareerBuilder, based in Chicago.

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Haefner adds, “In most cases, workers who went into a new field ended up liking the new industry. Odds are you won’t get that dream job right out of school, but it’s important to remember that there are many different paths.”

When asked about finding employment unrelated to a college major, 64% of employees say they are happy with the degree they chose to achieve. Sixty-one percent believe they can still have their dream job.

However, this positive attitude is not true of all respondents. While 13% of college graduates say the demand for their degree increased between the time they entered college and the time they graduated, 28% say the market for their degree got worse. Fifty-nine percent say the market for their degree was unchanged. Thirty-six percent of all college-educated employees wish they chose a different major.

Graduating into a depressed job market also affects job seekers in a number of ways, according the results of the survey. Of those who say the demand for their degree decreased while they were in school, 33% said they were forced to take a lower-paying job outside their field. Thirty-two percent say the lack of demand meant they could not find work after graduation.

However, 46% of respondents who say the demand for their major decreased while they were in college also reported that they were able to find a job in their desired career path within a year, and 58% found a job within two years after graduation.

This survey was conducted online within the U.S. by Harris Interactive and reached 2,134 workers (employed full time, not self-employed and nongovernment) who graduated from college between August 13 and September 6.

CareerBuilder is a provider of labor market intelligence, talent management software and other recruitment solutions.

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