Anticipated Changes in Workplace Demographics

Online shopping has become the norm in the Western part of the world. Experts say mature economies adopted e-commerce quickly because of its strong infrastructure and a trusting financial landscape.1

In other words, consumers could count on receiving goods ordered, vendors knew they would get paid and any conflicts were protected by a reputable credit and court system. These things weren’t true in many developing countries, thus e-commerce was slower to gain traction there.

However, now that emerging markets have put a secure infrastructure in place, many expect online sales to soar — which could help bolster those waning economies. The global online market offers new prospects for struggling brick-and-mortar retailers in the U.S. Just about any retailer, large or small, that can adapt its sales model to a global e-commerce market could be poised for massive opportunity.2

That’s one of the interesting parallels between life and commerce — where some doors close, others open; we just need to see where opportunity awaits. The same can be true when planning for retirement. Please feel free to contact us to discuss creating retirement strategies through the use of insurance products that can help you work toward your long-term retirement income goals.

Interestingly, one of the biggest economic issues of the day comes from a social phenomenon: As older people are living longer, younger people are having less children. To be exact, the first of the baby boomer generation turned 70 last year while, at the same time, the fertility rate in the United States reached its lowest point since records began in 1909.3

The ramifications of this population shift will likely be widespread and long lasting. For example, retirees tend to contribute less to the consumer economy, with an average reduction of 37.5 percent in household spending. This, in turn, affects company revenues and, subsequently, returns in the investment market.At the same time, retirees may be drawing down invested assets for income, further reducing available capital.

The elderly population boom also is expected to cause economic drains in targeted areas of the country. For example, states that have long been popular retirement havens, such as Florida, Arizona, Oregon and South Carolina, are among at least 14 states where the cost of elderly care is rising.5

In Florida alone, 20 percent of the population is over the age of 65; more than 40 percent is over 50. While it’s easy to write this off as the result of Florida being a retirement haven, that is no longer the case. Within about 10 years, the entire country will have a similar demographic composition — we will become “a nation of Floridas.”6

Another problem with the sizable gap between retirees and babies is an anticipated drop in the number of workers. The workforce may not be large enough to support the government programs older people are entitled to after years of contributing into the system. This issue is hardly isolated to America. Between 2025 and 2050, the number of people age 65 and older is projected to nearly double worldwide.7

To help mitigate the drain on resources, many are raising the eligible age for government-sponsored pensions and encouraging people to work well past traditional retirement age. Whether due to lack of retirement savings or the desire to work longer, the share of people working longer has grown during the past decade: a 6 percent increase in Germany, 10 percent in the U.K. and 18 percent in the U.S.8

Content prepared by Kara Stefan Communications.

1 Knowledge@Wharton. Nov. 1, 2017. “Why Emerging Markets Are the Next E-commerce Frontier.” http://knowledge.wharton.upenn.edu/article/why-emerging-markets-are-the-next-e-commerce-frontier/. Accessed Nov. 22, 2017.

2 Ibid.

3 Stephen McBride. World Economic Forum. Sept. 14, 2017. “Retiring baby boomers are going to have a huge impact on the economy.” https://www.weforum.org/agenda/2017/09/retiring-baby-boomers-are-going-to-have-a-huge-impact-on-the-economy. Accessed Nov. 22, 2017.

4 Ibid.

5 Sue Chang. Marketwatch. Nov. 8, 2017. “These maps show just how crazy fast the world is aging.” https://www.marketwatch.com/story/these-maps-show-just-how-crazy-fast-the-world-is-aging-2017-11-08?link=sfmw_tw. Accessed Nov. 22, 2017.

6 Joseph F. Coughlin. Time. Nov. 8, 2017. “There’s No Such Thing As ‘Old Age’ Anymore.” https://www.msn.com/en-us/news/other/theres-no-such-thing-as-old-age-anymore/ar-BBEJG0u. Accessed Nov. 22, 2017.

7 Suzanne Woolley. Bloomberg. Sept. 17, 2017. “Retirement, Delayed.” https://www.bloomberg.com/quicktake/retirement-redesigned?cmpid%253D. Accessed Nov. 22, 2017.

Ibid.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

The Impact of Income Inequality

As it turns out, income inequality can be an issue for all society, not just the poor.

A new study of high-earning clients of a bank’s wealth management unit tracked the fortunes of male and female young adults to learn how income inequity would impact their lives. The assumptions had both genders starting out in the job market earning a salary of at least $100,000 and in possession of an inheritance of $1 million.1 The following are some of the study’s findings:2

  • A 25-year-old woman living in a wealthy country earns 10 percent less, on average, than a man the same age.
  • By age 85, the income gap will result in the woman having 38 percent less wealth than the man.
  • The gap will widen if the woman takes a year off from work or decides to work part time for a while.
  • The problem is exacerbated by the fact that women are expected to live longer and must stretch their wealth over a longer

Retirement planning is challenging enough without the issue of lower wages throughout one’s career. Lower earnings mean fewer opportunities to save and invest, in addition to a reduced standard of living. Whether married, divorced or single, we help clients create retirement strategies through the use of insurance products that help them work toward their long-term retirement income goals. Give us a call to learn more.

Interestingly, the U.S. women’s labor force participation peaked in 2000. At the time, this had a big impact on household income and broader economic growth. Since then, as prime-age women have dropped out of the workforce, the national growth rate has suffered.3

Over the past two years, real median household income in the U.S. has increased by 3.2 percent, but this follows 17 years of stops and starts. Even today’s positive numbers can be deceptive, because they do not reflect areas of the country that are still struggling. For example, an analysis of data from the 2000 Census and the 2016 American Community Survey found that 86 urban areas — including Miami, Orlando, Phoenix, Tucson, Chicago, Indianapolis and Milwaukee — suffered declines in median income between 10 and 15 percent from 1999 to 2016. Many of these areas lost a large number of middle-income manufacturing jobs during the 2000s that have not been replaced.4

A new large-scale study found poverty-level household income can have a significant impact on children’s development, ranging from cognitive and educational outcomes to social development and physical health. The study included data from past research that found that when low-income families do receive an influx of cash, this money is usually spent on fruit, vegetables, books, clothes and toys.5

Aligned with this type of insight, some countries are looking at ways to solve some of their largest societal issues through a basic income. This year, as part of a two-year, limited trial involving 2,000 unemployed citizens, Finland became the first European country to provide a “no-strings-attached” monthly payment to cover essential costs of living. The basic income (about $587 a month) replaces any other current unemployment benefits and will continue even if recipients get a job. Cities in the Netherlands and Canada have scheduled similar pilot programs.6

In the U.S., test programs have found that giving homes to the homeless is the cheapest way to reduce homelessness, and paying high-risk people not to be involved in gun violence has been remarkably effective at reducing a city’s murder rate.7

Content prepared by Kara Stefan Communications.

1 Reuters. Oct. 23, 2017. “Pay gap to affect high-earning women’s retirement lifestyle: study.” https://www.reuters.com/article/us-global-women-pay-gap/pay-gap-to-affect-high-earning-womens-retirement-lifestyle-study-idUSKBN1CS0Z7. Accessed Nov. 28, 2017.

2 Ibid.

3 Jay Shambaugh, Ryan Nunn and Becca Portman. Brookings. Nov. 1, 2017. “Lessons from the rise of women’s labor force participation in Japan.” https://www.brookings.edu/research/lessons-from-the-rise-of-womens-labor-force-participation-in-japan/. Accessed Nov. 28, 2017.

4 Alan Berube. Brookings. Oct. 12, 2017. “Five maps show progress made, but mostly lost, on middle-class incomes in America.” https://www.brookings.edu/research/five-maps-show-progress-made-but-mostly-lost-on-middle-class-incomes-in-america/. Accessed Nov. 28, 2017.

5 The London School of Economics and Political Science. Centre for Analysis of Social Exclusion (CASE). “Does Money Affect Children’s Outcomes? An update. http://sticerd.lse.ac.uk/case/_new/research/money_matters/report.asp. Accessed Dec. 7, 2017.

6 Drake Baer. New York magazine. Jan. 4, 2017. “What Happens When You Give Free Money to Poor People.” https://www.thecut.com/2017/01/the-psychology-of-basic-income.html. Accessed Nov. 28, 2017.

7 Ibid.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.