Tag: Olivia Mitchell

Closing the Racial Wealth Gap in Retirement Readiness

Mary Pat Campbell

Link: https://knowledge.wharton.upenn.edu/article/closing-the-racial-wealth-gap-in-retirement-preparedness/?utm_campaign=KatW_Monthly2023&utm_medium=email&utm_source=kw_campaign_monitor&utm_term=7-2-23&utm_content=Closing_the_Racial_Wealth_Gap_in_Retirement_Readiness

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One factor undermining older Americans’ ability to prepare financially for retirement is the debt burden they carry. Increasingly, adults are carrying debt into retirement, according to Mingli Zhong, research associate, and Jennifer Andre, data scientist at the Urban Institute.

Their presentation on “Racial Differences in Debt Delinquencies and Implications for Retirement Preparedness” tracked some 4.8 million adults age 50+ who had credit bureau records. They found that the median debt amount for older households with debt was about three times higher in 2016 ($55,300) than in 1989 ($18,900 in real 2016 dollars).

The authors also reported racial disparities in debt levels. Compared to an older adult in a majority-white community, a typical older adult in a community of color is more likely to have any type of delinquent debt, carry a higher balance of total delinquent debt, and have a higher balance of medical debt in collections. The older adult living in a majority-white area has a higher balance of delinquent student loan debt and delinquent credit card debt, they also found.

Author(s): Olivia S. Mitchell, Sylvain Catherine

Publication Date: 6 June 2023

Publication Site: Knowledge at Wharton

You Might Live Longer Than You Think. Your Finances Might Not.

Mary Pat Campbell

Link: https://www.wsj.com/articles/death-finances-and-how-many-of-us-get-our-money-needs-wrong-51a660a2?st=latmuov31yafzz9&reflink=desktopwebshare_permalink

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Demographers and actuaries make the following distinction between life expectancy and longevity: Life expectancy refers to the average number of years someone will live from a given age, whereas longevity refers to how long he or she might live if everything goes well, typically expressed as the probability of living beyond a certain age such as 85, 90 or even 100.

A growing body of evidence shows that many people are ignorant of their so-called longevity risk—the probability of living a very long time—and the complications that presents. 

….

Drs. Hurwitz and Mitchell note that retirement calculators provide information about average life expectancy, but not longevity. They have found that about five times as many Census Bureau publications relate to life expectancy as longevity. Thus, people who have planned appropriately for their life expectancy might miss how likely they are to live longer. 

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People can look up their longevity risk with an online Longevity Illustrator maintained by the American Academy of Actuaries and Society of Actuaries, based off the latest mortality data from the Social Security Administration. 

Author(s): Josh Zumbrun

Publication Date: 10 Feb 2023

Publication Site: WSJ

Why Early 401(k) Withdrawals Are a Bad Idea

Mary Pat Campbell

Link: https://knowledge.wharton.upenn.edu/article/why-early-401k-withdrawals-are-a-bad-idea/

Excerpt:

Wharton Business Daily: What are your thoughts on the move by Congress to allow people to be able to dip into their 401(k) accounts? You are not a fan of that idea in general.

Olivia Mitchell: That’s true. This got started in March 2020, when the CARES Act was passed by Congress, allowing people who had 401(k) accounts and who were younger than age 59.5 to access up to $100,000 from their retirement accounts without paying the 10% penalty. Congress permitted this in the throes of COVID and then they allowed the income taxes on those withdrawals to be spread over three years unless the money was repaid to the account. That option ended in December 2020.

Congress passed a new bill in December that did not extend penalty-free access to everyone, but it did permit people who experienced federally declared disasters, aside from COVID, to withdraw some of their 401(k) money. So, there are still eligible people who, in 2021, can withdraw up to $100,000 from their retirement accounts without penalties. Again, they can spread it over three years for tax purposes. In general, this is not a good idea.

Author(s): Olivia S. Mitchell

Publication Date: 23 February 2021

Publication Site: Knowledge @ Wharton