Monday, October 1, 2007
A Retirement Crisis; Really?,
Future of Business: Telecommuting,
Federal Reserves Cut Federal Funds Rate,
August 2007 Manufacturing ISM Report on Business
A Retirement Crisis: Really?
Gen X and Baby Boomers alike are feeling the same swell of anxiety as they ponder the state of their retirement savings. Perhaps Gen X and Y worry a little less, but should they? According to The National Retirement Risk Index (NRRI), which measures the percentage of working-age households who are at risk of being unable to maintain their pre-retirement standard of living in retirement, nearly 45 percent of households are "at risk" of not having enough to maintain their living standards in retirement.
Somewhat encouraging, however, according to Andrew Eschtruth, Spokesperson for the Center for Retirement Research at Boston College (CRR), is that among early Baby Boomer pre-retirees, CRR finds only 35% are at risk of reducing their lifestyles during retirement. Those most at risk are Gen Xers who at 49% risk are dangerously close to starving during retirement. The good news is they have time to catch up.
The challenge for Gen Xers is lack of pension plans and possible social security loss. They will need to save more than Baby Boomers outside of company benefit plans.
According to an article on Forbes.com, “less than 20% of U.S. workers now have or participate in employer pension plan." The article also states “Social Security replaces less than 40% of pre-retirement income." This obviously makes the need for personal savings plans high priority.
Jean Chatzky, MSNBC/Today Show Financial Editor suggests aiming to save at least one third more than the amount you think you’ll need. She also states that there are two key ways to making retirement assets work: “asset allocation and managing your stream of withdrawals.” The following four points are critical to making your retirement savings last, suggests Chatzky:
Keep a lid on withdrawals – keep your annual withdrawals below 4%.
Work longer – Not forever, but just a few years longer can make a huge difference.
Have a cushion – Keep two or three years' worth of living expenses in a money-market fund or short-term bond fund. This way you will not have to sell investments when they are down.
Allocate wisely – Don’t have 100% of your assets in equities or in treasures or cash. The balance should be somewhere in between.
The bottom line is this: U.S. households need to save more for retirement…much more. Saving more now will equal a more comfortable situation later in life. Most importantly, seek guidance from someone qualified to give financial planning advice.
Future of Business: Telecommuting
Could striving for the corner office be a thing of the past? It looks as though telecommuting is destined to become a mainstay in corporate America. Despite a recent decline in telecommuting “buzz” talk, the trend is on the rise. According to a study produced by WorldatWork, a non-profit organization dedicated to knowledge leadership in total rewards, compensation, benefits, and work-life, the number of employers working remotely at least one day a month was 28.7 million in 2006, up 10% from the year before.
The advent of the information age has allowed for 24/7 work capabilities, and, it is estimated that by 2009, over 14 million workers will be telecommuting. However, most telecommuters will keep a space at the office for necessary meetings and “face time”.
According to Gartner Dataquest, “upwards of 12 million employees telework more than 8 hours per week, up from about 6 million in 2000.” An analyst for Gartner, Caroline Smith, calls it “the quiet revolution” and expects numbers of telecommuters to continue to grow. She also expects that Corporate America will begin offering telecommuting as “a standard flexible work option; like job sharing and maternity leave”. It will be seen as a way to attract and retain top talent.
For employees interested in telecommuting, write a proposal, do not approach your supervisor in a casual conversation. Approach the issue from a cost-accounting perspective. How much money will I save the company? What return can the company expect to see by allowing a telecommuting option? Offer to take hours that other employees cannot work such as early or late hours. Start just part-time and allow the company and your boss to see your productivity. If all else fails, there are organizations such as the Telework Consortium that can provide you with advice on how to effectively implement a telecommuting program.
Federal Reserve Cuts Federal Funds Rate
In a move designed to boost economic growth, the Federal Reserve cut the Federal Funds Rate on September 18th. This key interest rate was reduced from 5.25 percent to 4.75 percent in an effort to keep factors such as a housing slump and unstable financial market from setting off a recession. The effect of this decrease was felt just minutes after the announcement. The Dow Jones industrial average leapt up 200 points shortly after the announcement was made, increasing by 335.97 total for the day.
Analysts believe the cut was badly needed due to conditions including weakness in housing, financial market turbulence, and an upsetting employment report for August. The Fed’s action is intended to fend off adverse affects on the broader economy and a looming recession.
Chairman of the Federal Reserve, Ben Bernanke, has avoided a major cut because of his stance on the danger of inflation. The easing inflation pressures, however, have given the Fed room to cut rates. For more information, click here.
August 2007 Manufacturing ISM Report on Business
The Manufacturing ISM Report On Business is published monthly by the Institute for Supply Management (ISM). ISM is largely considered the most respected supply management organization in the world. The Manufacturing ISM Report On Business is a national index based on surveying purchasing and supply executives at over 300 industrial organizations. The Report’s market importance is extremely high. It is the most valuable of all manufacturing indices.
Economic activity in the manufacturing sector expanded in August, albeit moderately, for the seventh consecutive month, while the overall economy grew for the 70th consecutive month, the nation’s supply executives reported in the latest Manufacturing ISM Report On Business.
Manufacturing growth slowed slightly as the PMI was 52.9%. This was a decrease from July’s growth by roughly 1.0 percentage point.
The New Orders Index registered at 55.3%, down from 57.5% in July. The Production Index registered 56.1%, up slightly from July’s 55.6%. And, the Employment Index registered 51.3%, higher than July’s 50.2%.
Manufacturer’s Inventories registered at 45.4% in August, 3.1% lower than July’s 48.5%. August was the 13th consecutive month of inventory liquidation. The Customer’s Inventories Index registered at 49% in August, down 2% from July, indicating that inventories are less sufficiently available.
The performance of Supplier Deliveries remained the same in August. The Supplier Deliveries Index registered at 50%, indicating no change from the previous month.
The ISM Prices Index in August was 63%, suggesting manufacturers are paying higher prices on average as compared to July.
The Backlog of Orders Index was 50.5% in August, 1.5% lower than July. ISM’s New Export Orders Index registered at 57% in August. This was the 57th consecutive month of growth in export orders.
The 10 industries reporting growth in August are: Nonmetallic Mineral Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Wood Products; Chemical Products; Apparel, Leather & Allied Products; Fabricated Metal Products; Textile Mills; Electrical Equipment, Appliances & Components; and Furniture & Related Products.