Saturday, June 27, 2015

Is North Dakota's economy really oil-rigged?

The nation's 2nd largest producer of oil is taking a hit from the decline in production.

Elaine Pofeldt, special to CNBC.com

1 Hour AgoCNBC.com

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Liquid propane is transloaded from a truck to a railcar at the Red River Supply rail yard in Williston, North Dakota.

With crude oil prices down sharply from last year and the oil glut at risk of increasing, private security consultant Charles Clifton's phone has been ringing.

His company, Knightsbridge Risk Management, a private security firm in Dallas that serves the oil and gas industry, is getting calls from companies that want to plan ahead in case they shut down drilling operations in North Dakota and the Bakken shale formation.

The oil producers want to prevent theft and vandalism of the drilling sites—often a problem when operations have abruptly come to a halt in other states, said Clifton, manager for The Americas for Knightsbridge. ]

Workers and subcontractors who have suddenly been left with no income have sometimes retaliated by stealing or damaging equipment, from well caps to bulldozers, he said.

"There are a lot of rigs being parked. Someone's got to sit on them 24 hours a day."

-Charles Clifton, Security consultant, Knightsbridge Risk Management

The central problem? Formerly flush oil firms, and the workers who provided the manpower behind the boom in places like North Dakota, suddenly find themselves squeezed by the precipitous decline in oil. Although crude prices have staged a recovery, they remain firmly in correction territory. While the boom hasn't completely gone bust yet, companies are retrenching in ways that recall prior years, when oil producers were forced to downsize in the face of swooning oil prices.

"This time we're being brought in ahead of time," said Clifton. "There's a discussion about shutting down this site six months from now and what can we do now to prevent that from happening this time."

He is working on about half a dozen preliminary consulting cases in North Dakota and one in Montana. He also has a couple of security guards stationed at sites in Wyoming and Colorado. "There are a lot of rigs being parked," he said, adding, "Someone's got to sit on them 24 hours a day."

Clifton could find himself even busier helping companies in the region in coming months. After staging a significant rally since U.S. crude tested the low $40s earlier this year, WTI crude has traded in a narrow range, and there is potential for more downside—Saudi Arabia recently said it plans to raise output to new highs. On Wednesday, U.S. crude settled at $60.27.

The ongoing pressure since oil prices dropped sharply last fall is squeezing drilling operations in North Dakota and the Bakken Formation. The number of active rigs in North Dakota was 77 as of June 12, down from 145 rigs the same day last year. American Eagle Energy, a Colorado firm drilling in the Bakken Formation, filed in May forChapter 11 bankruptcy protection in Denver.

Still, many players in the region have the strength to withstand the lower prices, according to Wayne Wilson, who specializes in calculating the value of oil and gas assets as managing director with HSSK, a business valuation and litigation consulting firm that has offices in Houston, Dallas and Austin. Shale oil producers that are currently producing should generally be able to survive the next 48 months unless they have an unfavorable debt structure, he said.

One thing that is helping many producers is using new technologies to improve the efficiency of their operations and to lower labor costs, he said, adding, "That allows you to reduce some of the associated costs."

Daniel Acker | Bloomberg | Getty Images

Liquid propane is transloaded from a truck to a railcar at the Red River Supply rail yard in Williston, North Dakota.

Economic ripple effect

Lower prices are having a ripple effect on North Dakota's economy, which benefited from an employment boom in recent years because of growth in the oil and gas industry. The state's unemployment rate, while still low, increased from 2.8 percent in November to 3.1 percent in preliminary statistics for May, compared to 5.1 percent for the U.S. population, according to the U.S. Bureau of Labor Statistics.

"The bigger problem is going to be the knock-on effect," said oil and gas expert Jeffery Born, professor of finance and group coordinator at D'Amore-McKim School of Business at Northeastern University in Boston.

North Dakota was the second-largest producer of crude oil in the nation in 2013, after Texas, according to most recent published datafrom the U.S. Energy Information Administration.

"The state of North Dakota is quite dependent on energy-related activity as a source of GDP," Born said. The real GDP in North Dakota grew 6.2 percent in 2014, compared to 2.2 percent for the U.S. as a whole, driven by the oil and gas industry, according to data released June 10 by the Bureau of Economic Analysis.

The state itself and its revenue are very dependent on taxes they get from extraction and other type of fees related to energy production. Astudy at North Dakota State University released in March found that the oil and gas industry generated $2.9 billion in gross production and severance taxes in 2013. Severance taxes are imposed on wells that remove nonrenewable resources, such as crude oil.

Getty Images

A gas flare is seen at an oil well site outside Williston, North Dakota.

But some businesses that can help operators improve their efficiency are benefiting from the lower prices. Many oil producers are turning to multi-well padding, said Wilson. This is an approach that lets them drill multiple wells on a single location. Many purchased technology that enables it. "They are continuing to look at new technology," Wilson said.

Other companies that help oil producers find efficiencies are also seeing an uptick.

"When oil prices went down, we took a number of orders," said George Boyajian, vice president of business development at Primus Green Energy, based in Hillsborough, New Jersey, which has a client in the Bakken shale formation.

Primus Green Energy makes a technology that allows oil field operators to reduce flaring, a process in which gases are piped to a remote location and burned in an open flame, because these gases are not cost-effective to sell or for other reasons. Its technology can turn flared gas into a range of liquid end products, such as gasoline.

"They see our system as a way to monetize an underutilized asset," said Boyajian.

How long oil producers will remain on the hunt for new efficiencies depends, in part, on what happens in Saudi Arabia.

"This is a big poker game," said Born.

—By Elaine Pofeldt, special to CNBC.com

How Saying 'No' Can Save Your Retiremen

How Saying 'No' Can Save Your Retirement

Beth Braverman
Tuesday, 23 Jun 2015 | 11:17 AM ET

Fiscal Times

After years of dreaming and planning, you've finally said goodbye to the nine-to-five and retired.

Adjusting to retirement and living with a fixed budget and a more flexible schedule can take months. Experts say one of the key things to do during the early days of retirement is to set limits, on the new demands you may face on both your time and your money.

It's tempting to say "yes" to friends and family who think you now have unlimited time to babysit or run errands on their behalf. And it can be hard to deny requests, especially by grown children, for financial assistance that may have been easier for you to give while you were still bringing home a paycheck.

"We all have different ideas of our lives and what our dream retirement looks like," says Donna Butts, executive director of Generations United. "There are some grandparents or older adults who think that they are being taken advantage of or asked for things too often, but there are many who feel like they aren't asked enough. The most important thing is to communicate ahead of time."

The happiest and most successful retirees have a plan in place around both their finances and their lifestyle before they ever stop working. That may include providing time and money to loved ones, but only as it fits within a retirees' own plans.

Still, saying "no" is one of the most important things you can do to ensure a successful retirement, both financially and emotionally. It may be difficult at first, but it gets easier with practice, and it gives you a chance to say "yes" to the things that can bring you joy. Here are 4 times it's OK to say "no":

1. To family financial needs.

Whether it's your own aging parents or grown kids looking for help launching their own careers, a growing number of Baby Boomers -- more than 43 percent of U.S. retirees -- are providing regular financial support to family members, according to a report in May from HSBC.
If you've got the means to provide the assistance that's fine, but planners say that most retirees are putting their own security at risk by providing that kind of financial assistance. "Retired people who do want to continue to support their children can see what they can afford and make an annual gift to them," says Ryder Taff, a portfolio manager with New Perspectives in Ridgeland, Missouri. "They make it clear that this is all that they will give and it makes it easier to say no when the child asks for more."

If you can't afford, or don't want to continue supporting your kids, talk to them about adjusting their lifestyle so that they need less money or looking into options borrow to cover their costs. (Remember they can borrow money for college or a home, while you can't borrow cash to pay for retirement.)

Saying no to aging parents when aging parents need medical help may be more difficult, but it's worth checking in with your siblings to see if costs can be shared or looking into government programs that can provide assistance to low-income seniors.

2. To time-consuming favors.

You're retired, and suddenly everyone thinks you're free to drive him to the airport or wait around for deliveries. Of course, making life easier for your loved ones is an important part of being a good friend or family member and can offer satisfaction and rewards of its own. And for some people, certain time-consuming activities—like watching grandkids—are the ideal way to spend a retirement.
For others, though, the time commitment of some favors can lead to resentment. "Eventually that resentment is going to squeak out somewhere else," says stress relief coach Ryan West. "Resentment is not a happy place to be, and that's one of the reasons we see so many health problems in retirement."

If that's the case, give yourself permission to set limits on the time you can give to others. Be honest with the person to whom you're saying no, and don't feel guilty. "You don't owe anyone an explanation for anything," West adds.

3. To your boomerang kid.

So much for that empty nest. One in four adults ages 25 to 34 now lives in a multi-generational household, according to the Per Research Center, driven by young adults who have moved back to their parents' home (or never left).
Having your adult children in your home can be costly, especially if it's postponing your plans to downsize or if you kid is not paying his share of the bills. Have a frank discussion with your child about when he or she plans to move out, and start collecting rent. (Teaching your children how to budget for the expense will help once they're on their own. If you don't need the cash, put it into a savings account on their behalf.)

4. To keeping up with the Joneses.

Once you've said 'no' to everyone else, make sure you're able to say 'no' to yourself once in a while as well. If your retired friends are taking lavish vacations and dining out often, it can be tempting to follow their example. After all, you worked hard for decades to get to this retirement.
"Unlike pre-retirees who are still working and may have an opportunity to bring in more income to offset overspending, retirees have a greater need to live within that budget," says James Nichols, head of retirement income and advice strategy for retirement solutions at Voya Financial. "You need to be honest with yourself and with your peers."

You should certainly allot some money in your budget for leisure and vacations, but only after making sure that your long-term retirement security is on track. After all, you never know what the Joneses real financial picture looks like. Maybe, they need to work on saying 'no' also.

Friday, June 19, 2015

The return on a college education can vary widely

Jennifer Barrett | @JBarrettNYC

55 Mins Ago

CNBC.com

The average cost of attending a four-year private university is now nearly $42,500 per year—triple the price tag in 1990 and the equivalent, after taxes are taken out, of almost a year's income for a median household today.

Even state schools now cost students nearly $19,000 per year on average, a more than 100 percent increase over the last 25 years.

While wages have stagnated, college tuition has continued to climb, growing at a faster rate than both inflation and median income levels. That's put college increasingly out of reach for many families, who have turned to personal savings and student loans to make up the difference, sending student debt levels to a record $1.2 trillion last year—and putting their own retirement savings in jeopardy.

Given those numbers, it's easy to wonder: Is a college degree worth it anymore?
On that question, the consensus is still a resounding yes. New York Fed researchers estimate college graduates earn about $1 million more over their lifetime than those without a degree. And the so-called college wage "premium" -- the difference in average earnings between college graduates and those with just a high school diploma -- has averaged about 56 percent over the last three decades.
But dig deeper into the data and it becomes clear that the value of a degree is eroding—while the premium has remained stable, the cost to attain a degree has risen and earnings for college graduates and non-graduates alike have fallen. And while there's plenty of evidence that a higher education provides a gateway to higher-paying jobs, the return on a college degree can vary widely, depending on a range of factors.

Some college versus no college

Ariel Skelley | Blend Images| Getty Images

For one, there's the matter of completing college.
Only 36.5 percent of students at public, four-year universities have obtained a degree after five years—close to the lowest level in three decades. That number does go up at private universities, where 57 percent graduate within five years, according to an analysis by ACT, which has kept a comprehensive database of completion rates since 1983. But that means that even at private universities, more than four in 10 students don't have a degree after five years.

Different factors can affect schools' completion rates, of course. Some students transfer to other schools, others attend part-time while working so take longer to graduate. But the longer it takes to complete a degree, the larger the cost—both in terms of outlays and opportunities.
Those who put their studies on hold to work, or drop out altogether, don't enjoy the same wage premium that those with degrees do. In fact, those with some college credits don't fare much better as those with just a high school diploma and those with with associate's degrees, according to the U.S. Department of Education. Add in student loan debt, and the costs are even higher.

Read MoreSix lifelong effects of student debt

Some schools have better completion rates than others. So, if your child is admitted, spending more on a private university may be worth it -- especially a prestigious one -- if it means that child is more likely to graduate on time. "The top 200 schools have graduation rates of 87 or 88 percent or more," said Anthony Carnevale, director of the Georgetown University Center on Education and the Workforce. "And at a selective school, you'll have tutors, a peer group with high aspirations...the ambitions and expectations are higher."
That can improve the chances that students will not only graduate on time, but seek out better-paying opportunities when they do. Still, when a student graduates can make a difference. Earn a degree in a recession, and it may be difficult to find a job at all, much less a good-paying one. And that can affect a student's ability to pay off loans, build savings, and hurt their lifetime earnings potential.

Overeducated and underemployed

While the Great Recession officially ended six years ago, the labor market has not yet fully recovered, and that's left many college graduates struggling to find jobs that match their skills and education level. "The depth of the recession and the slow pace of recovery since it ended means that seven classes of students have now graduated into a weak labor market and have had to compete with more experienced workers for a limited and slowly growing pool of job opportunities," wrote researchers at the Economic Policy Institute in a recent paper.
As a result, unemployment and underemployment among young grads remain particularly high compared to pre-recession levels. For young college graduates, defined as those between 21 and 24 years old, the unemployment rate is above 7 percent and the rate of underemployment -- meaning college graduates who are working in low-paying, low-skilled or part-time jobs -- stands at nearly 15 percent, according to the institute.
"While the labor market has been challenging for those with a degree, it's been even more challenging for those without a degree," said Jaison Abel, a research officer at the Federal Reserve Bank of New York, which has analyzed employment patterns.

Read MoreLooking for the next crisis? Try student debt

Young high school graduates face an unemployment rate of 19.5 percent and underemployment rate of 37 percent, according to EPI researchers.

That explains why the wage premium has remained relatively level, despite the recession. It's not that college graduates' wages are growing (they're not); it's that everyone's wages are going down. That also means the opportunity cost of going to school instead of working has gone down too.
There's no guarantee that your kid won't end up an underemployment statistic, working as an over-educated barista a year out of school. But selecting certain majors can lower the odds.

Majors matter

"All degrees are not created equal," said Georgetown's Carnevale. "What you take more and more determines what you make."
An analysis by Georgetown University's Center on Education and the Workforce found a graduate with a top-paying college major can earn an average of $3.4 million more over a lifetime than someone who graduates in the lowest-paying major.
Not surprisingly, STEM majors -- science, technology, engineering and math -- feature prominently at the top of the pay scale.

Almost all of the highest-paying majors are in engineering fields, with petroleum engineering majors commanding median mid-career earnings of $136,000. But focusing too narrowly in a field can backfire, as Peter Cappelli, a management professor at the Wharton School and author of the new book "Will College Pay Off?" points out, since demand for niche specialties like petroleum engineering can fluctuate, depending on factors as varied as the price of oil to drilling regulations.
"A too-narrow focus on occupational preparation is superfluous," said Richard Arum, a sociology professor at New York University and author of "Aspiring Adults Adrift: Tentative Transitions of College Graduates" "The jobs [within a field] often change or are eliminated."
And if too many students chase a sub-specialty, the supply and demand equation can shift, leaving many graduates clamoring for a shrinking number of spots.

Still, STEM fields in general are expected to experience above-average growth over the next decade—from an increase of 13 percent for accountants and auditors to a 25 percent increase in demand for computer systems analysts, according to the Bureau of Labor Statistics projects. Other high-paying fields like healthcare and economics are also expected to grow by more than 10 percent.
And Kelly Services estimates the country will need nearly 250,000 more engineers over the next 10 years to work in high-growth sectors and industries.

"Building an actual skill -- particularly quantitative and analytical skills -- is going to be better in terms of outcome than getting something more general," said Abel from the New York Fed.
That doesn't necessarily mean that if your kid is drawn to a lower-paying major, like education or history, they're doomed to struggle financially. For one, researchers have shown that a graduate degree can substantially boost the earnings potential for even the lowest-paying undergrad majors (though, of course, that requires more outlay upfront). There's also a wide range in salaries within fields, so even low-paying liberal arts majors may find higher-paying avenues withing their field.
As Georgetown researchers point out, the top 25 percent of education majors earn more than the bottom 25 percent of engineering majors.
Seeking out internships and tapping into professional networks during college can also help to improves a student's prospects after graduation.

Are we reaching the tipping point?

When he was researching his book, NYU's Arum found that students who are involved in internships, apprenticeships and job transition programs are more likely to find a job upon graduation. STEM programs tend to take the greatest advantage of that, he said, in part because -- unlike liberal arts majors -- they were often set up specifically to prepare students for professional jobs.
Of course, there's no reason why arts and science majors can't find internships, he added. It may just require more effort on a student's part.
In fact, ensuring a good return on a degree largely seems to come down to the choices students make: whether they seek out fields with high pay and projected demand, pick a low-paying major but pursue a higher education to boost their salary prospects, or choose a career path within a lower-paying field that can lead to higher-paying opportunities.

Still, while students can up their odds of success, college remains a risky, and expensive investment for families—and one whose value diminishes if costs increase faster than wages. At some point, if tuition costs continues to climb, the benefits simply may not be worth the price of admission for some.
Some researchers thought that point may have come a few years ago. Between 2011 and 2013, college enrollment actually started to fall. "We were thinking it could be the tipping point," said Will Kimball, a research assistant at the Economic Policy Institute, but then the trend reversed.
"The question now is how much more are potential students able to take on when they can't necessarily anticipate increasing returns on their degree?"

Even millionaires live paycheck to paycheck

Charisse Jones

Wednesday, 17 Jun 2015 | 7:16 AM ET

USA Today

It seems the rich are like the rest of us after all.
One in five respondents with investable assets of $100,000 to $1 million, and 1 in 10 with investable assets of $1 million up to $10 million believe they have too much debt and are living paycheck to paycheck, according to a poll taken by MaritzCX.
Among the 1,044 investors surveyed in November and December, 45% are worried they won't have enough income to last through retirement. And 30% believe they will have to work during that period of their lives.

"What this is saying to me is even when you start looking at people who have managed to accumulate some wealth, they are also concerned about their future and about retirement,'' says Rich Brose, senior director strategic consulting for financial services at MaritzCX, which provides customer experience software and research services to help companies improve sales and customer retention. "They share a lot of the same concerns as ... the middle class and even people who might be struggling a little bit more.''
Many seem to still be shaken by the deep recession of 2008 and its aftermath, despite the gradual uptick currently occurring n the economy.

"Since 2008, I have encountered more people worrying about retirement,'' says Artie Green, a certified financial planner based in Palo Alto, Calf. "Not so much whether or not they'll have enough to live on but really whether or not they'll be able to enjoy the kind of lifestyle they'd been planning. I think one of the key reasons is the vulnerability experienced by many in their 50s who lost jobs and subsequently discovered how difficult it has been to get new ones.''

The survey also revealed that even the well-off have gaps in their financial knowledge. Nearly one in four do not realize they should wait for a market correction rather than hastily selling during a market dip. And half don't realize they should aim to live off income generated by their retirement assets, rather than dipping steadily into their principal.
"People probably know ... the difference between mutual funds and individual stocks, and (that) it's wise to stay in your 401(k),'' Brose says. "But there are areas, almost blind spots, where they're either not aware or have a misconception. ... There's still room for fundamental education, even among the folks that are investing and have the wherewithal to invest.''
There was a bright note. Insecurity about the future seemed to fade when investors had an up-to date-investment plan. While 41% of investors said they weren't sure they'd have enough money when they retired to live in comfort, the number who were uncertain dropped to 26% when they had an up-to-date financial blueprint.

"People need to face the reality of where they are now and where they want to be in retirement,'' says Jan Valecka, a certified financial planner based in Dallas. "By having a well-thought-out and realistic financial plan, they have all the facts before them. Will things change in their journey to retirement? Yes. But they can always adjust their plan.''

Monday, June 15, 2015

How to boost your Social Security check

Sharon Epperson | @sharon_epperson

Thursday, 11 Jun 2015 | 8:32 AM ET

CNBC.com

Do you know how much money you'll receive in Social Security benefits in retirement?

Research shows only 4 out of 10 workers—and slightly more than half of retirees—have estimated the amount of their Social Security benefits at the age they plan to retire. Yet, doing some quick calculations will allow you to figure out how you can increase your Social Security benefit so that you can get the highest amount of guaranteed income possible in your 60s, 70s and beyond.
Calculating this figure early can help you determine how long you may need to work as well as how much to save and how to invest your retirement dollars. Your monthly Social Security check is based on the total of your taxed earnings in the 35 highest-paid years of your career. Here are three free online tools to help you crunch the numbers:

You can head to Retirement Estimator on the Social Security Administration's website for a ballpark estimate. Enter some basic information—your name, Social Security number, date of birth, mother's maiden name and last year's income—and the tool will calculate your benefits based on your earnings history. You'll get estimates for the amount you'll receive if you take your benefits early—at age 62. Another estimate for benefits at your full retirement age—whether it's 65, 66, or 67—and you can also find out the maximum benefit you'll receive if you wait until age 70. Of course, the estimates are based on current law and could change by the time you retire.

If you're married and want to find out about various opportunities that could help you and your spouse maximize Social Security benefits, check out the Social Security Planner at Financial Engines, an investment advisory firm. The online tool asks you a few questions and then will spit out the best claiming strategy that is tailored to your specific situation. In general, the higher-earning spouse should delay claiming his or her own benefits until age 70, but that doesn't mean that they can't receive benefits in the meantime. If you're married, depending on the age and income difference between you and your spouse, one of you may be able to get spousal benefits while the higher earner delays claiming benefits. This strategy increases the higher earner's own benefits—as well as the benefits of the lower-earning spouse's survivor benefits if he or she outlives the higher-earning spouse.

The Social Security Calculator at AARP's website is another useful tool to help you decide when you should claim your benefits. Since the rules for married couples can make it a little more complicated to know when to claim, this tool helps you figure out how much more or less you will each receive as a payout depending on when you apply for benefits. Waiting to claim can be particularly important for higher-earning spouses. The tool will also let you calculate how much of your expenses will likely be covered by your Social Security benefits and how much your benefits will increase for every year that you wait to claim up to age 70.
Since you may live longer and need more money than you expect to in retirement, most financial advisors recommend that if you can work, you do so for as long as you can to boost your Social Security benefits.

Homeowners deepest underwater: No relief in sight

Diana Olick | @DianaOlick

Friday, 12 Jun 2015 | 12:14 PM ET

CNBC.com

Home prices are rising, and homeowners have collectively regained trillions of dollars in home equity since the worst of the real estate crash. For some borrowers, however, it is not enough, not nearly enough to bring them back into the black on their home loans.

These so-called underwater borrowers are stuck in place, unable to sell without paying into their mortgages. For those deepest underwater, there is very little hope in sight.
"It's great news that the level of negative equity is falling, but what really worries me is the depth of negative equity. Millions of Americans are so far underwater, it's likely they may not regain equity for up to a decade or more at these rates," said Zillow Chief Economist Dr. Stan Humphries.

Family sitting on roof of underwater home

John Lund | Blend Images | Getty Images

Nearly eight million borrowers, or 15.4 percent of homeowners with a mortgage, still owe more than their homes are worth, according to Zillow. While the numbers continue to improve, about half of those borrowers owe the bank at least 20 percent more than their homes are worth.

U.S. homeowners lost about $5 trillion dollars collectively in the housing crash, but home prices are now up about 30 percent from the trough of the market in March of 2012, according to the S&P/Case Shiller Home Price Index. They are still, however about 15 percent below the peak of prices in the summer of 2006. Home equity rose to $11.7 trillion in the first quarter of this year, the highest since 2007, according to new numbers from the Federal Reserve released this week.
That is causing ripple effects up and down the chain of the housing market, and leading to severe shortages of homes for sale nationwide.
"Because negative equity is concentrated so heavily at the lower end, it throws a real wrench in the traditional housing market conveyor belt," said Humphries. "Potential first-time buyers have difficulty finding affordable homes for sale because those homes are stuck in negative equity. And owners of those homes can't move up the chain because they're stuck underwater in the entry-level home they bought years ago."
David and Heather Littlejohn would have been moving up to a larger home this year, but they are still underwater on their mortgage. They are expecting their third child this summer, and their home, about an hour south of Eugene, Oregon, is bursting at the seams.
"We're structurally trapped," said David.

When we first interviewed the Littlejohns two years ago, they said they expected to be able to move soon, but doing that now would still require paying into the mortgage. Home prices in their area have rebounded somewhat, but they were deep underwater at the worst of the crash and are still recovering.

The Littlejohns paid $325,000 to build their home as newlyweds in 2005. It was then appraised at $425,000. David estimates it is probably worth about $280,000 today, but they owe about that much on the mortgage. Moving, with all its added costs, not to mention paying for a bigger home, is out of the question for now, but not necessarily for the future.
"Work has been healthy. If things continue down the path we're going, we'll do it the old fashioned way: We'll buy our way out. We have the capacity to save for that," David said.

Monday, June 8, 2015

How early retirees are different from the rest of us

Kelley Holland | @KKelleyHolland

Monday, 1 Jun 2015 | 12:23 PM ETCNBC.com

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COMMENTSJoin the Discussion

Most people are not trust fund babies, but that doesn't mean retiring early is out of the picture.

Far from it, actually, according to newly released data from Allianz Life's 2014 LoveFamilyMoney study. Americans planning to retire early share several traits, but coming from a life of privilege is not among them.

"You don't have to be born lucky with money as you start out in order to retire early," said Katie Libbe, vice president of consumer insights at Allianz Life. "The people that plan to retire early did just that. They made it a priority. They made it a plan."

Having children also did not appear to affect people's plans to retire early, even though raising a child to age 18 costs close to a quarter of a million dollars. Some 87 percent of those intending to retire early had children, in line with those not ready to stop working.

Allianz Life commissioned the January 2014 survey of 4,500 people with incomes of more than $50,000, and it has since released several sets of findings. In this batch, 25.9 percent of the respondents said they intend to retire before age 65.

The average retirement age has barely budged for a decade, according to the Center for Retirement Research at Boston College, and in 2013 stood at 64 for men and 62 for women. Meanwhile, participation in thelabor force for people over age 65 has been increasing for years, and stood at 22.1 percent for men and 13.8 percent for women in 2010, up from 17.7 percent for men and 9.4 percent for women in 2000.

But that doesn't mean early retirement is out of the question. Here are six of the most common behaviors Allianz Life found that early retirees share:

Have happy marriages. Early retirees tended to describe themselves as in sync with their spouse. Some 76 percent of these people were married, compared to 68 percent of the people who never planned to retire, and they were also more likely to be in their first marriage. And 90 percent of early retirees found it at least somewhat easy to talk about money with a spouse or significant other, well above the 77 percent of people planning to never retire.

Allianz Life's data are in line with findings in an earlier study for the National Institutes of Health that found a happy marriage played a clear role in a decision to retire early. "After traditional economic factors, marital satisfaction actually turned out to be the strongest predictor of retirement timing," the researchers wrote.

Appreciate what they have. People planning to retire early were significantly more likely to describe themselves as wealthy or financially comfortable, but that depends on their perspective, Libbe said. "One person might be able to live on $50,000 a year and consider themselves affluent, versus another couple that needs $200,000 a year."

Follow their parents' example. The would-be early retirers in the Allianz Life survey were more likely to compare their financial situation to their parents', with 21 percent of them doing so, compared to 14 percent of those not planning to retire. They also tended to emulate their parents' money behaviors.

Teach their kids about money. Only 14 percent of people planning to retire early taught their children about money and finances, but that was well above the 6 percent of people not planning to retire who did so.

Keep calm and carry on. Having a fairly calm financial life also seems to encourage people to plan early retirement. Some 46 percent of those people said they had not experienced financial hardship as an adult, versus just 31 percent of those planning to stay in the workforce.

Worry about an early death. On the downside, early retirees were more likely than other workers to worry about dying young. Only 47 percent of them worried about running out of money in retirement, but 53 percent worried that they would not live long after they retired. (Among people who planned to not retire or wait until age 65 or later, at least 53 percent worried about outliving their money.)

Worries about dying young may be valid for some people planning to retire early, but the good news is that leaving the workforce won't hasten the process. Researchers at the Australian School of Business at the University of New South Wales studied the effect of early retirement on life expectancy and found that "retirement age in itself has no significant effect on subsequent mortality."