Retirement
In Real Clear Markets this week, Robert Pozen described proposed rule changes from the U.S. Treasury that would increase flexibility for workers seeking to use part of their retirement savings for a secure, lifelong annuity. Pozen pointed out that this change could have a big impact because under current arrangements many workers are reluctant to give up all financial flexibility and purchase annuities with their entire retirement balance.
These changes could be particularly good news for women. As Melanie Hicken pointed out in CNN Money, while women are more likely to enroll in their workplace retirement plan and put away large amounts of their paychecks, they tend to amass fewer savings than men over the life course.
Wealth Inequality
A recent paper by economists Emmanuel Saez and Gabriel Zucman adds more depth to the portrait of growing wealth inequality in America. Matt Yglesias summed up their findings for Vox: “The basic punchline is that wealth — accumulated asset ownership — is very, very concentrated and has been growing more concentrated for a generation. Back in 1980, 0.01 percent of the population owned three percent of national wealth. Today that top 0.01 percent, about 32,000 people, owns about 11 percent of national wealth.”
Emily Rauscher of the Assets and Education Initiative at Kansas University also examined wealth inequality through a multi-generational lens in the new report, “By My Parent’s Bootstraps.” This report looked at parental transfers of funds to adult children, finding that “allowing young adults to fall back safely in times of economic difficulty or to vault themselves up the economic ladder by affording greater options … may help to determine future economic trajectory.” Rauscher recommended Children’s Savings Accounts as a policy solution.
Economic Mobility
As economic mobility becomes out of reach for more Americans, people are starting to think out of the box when it comes to building credit and gaining and maintaining employment. This was certainly the case for Shweta Kohli whose credit success story was profiled by Patricia Cohen and published in the New York Times. Kohli, who was denied a credit card for a lack of credit history, joined a lending circle to improve her chances. After joining one managed by the Mission Asset Fund, a non-profit group in San Francisco, her credit score increased from 0 to 789 in just over two years.
Taking a similarly creative approach, one company called The Source provides employees of client companies with social services. “The goal is to stabilize workers’ home lives and thereby create more reliable employees,” explained Randy Osmun, the company’s Executive Director, in an interview with Catherine Rampell. Part of The Source’s business model is to connect caseworkers with employees to provide whatever social service or philanthropic support they need such as donated baby goods or affordable loans.
Quick Hits
Mary Williams Walsh described the Dutch pension system in her article for The New York Times, “No Smoke, No Mirrors: The Dutch Pension Plan.” The take away for U.S. policy is that additional funding, brutal honesty about liabilities, and financial services could increase the solvency of America’s public pension fund.
AARP reports that unemployment among those aged 55-plus fell from 4.6% to 3.9% between August and September, the lowest rate in over six years.
According to Michelle Conlin of Reuters, borrowers are facing wage garnishments and asset seizing by banks for foreclosures long-past. How? A rarely used legal tool known as a "deficiency judgment," which allows banks to sue for the difference between an original home loan and proceeds of the foreclosed property’s sale.
