Data & Research June 18, 2008

Boomers Save the Best for Last in ‘Encore Careers’

A new survey indicates that the Baby Boomers who continue to work past retirement age are not only seeking income, but also social impact and personal meaning.
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The 2008 MetLife Foundation/Civic Ventures Encore Career Survey, conducted by Peter D. Hart Research Associates, Inc., estimates that between 5.3 and 8.4 million Americans have already launched “encore careers”—positions that combine income and personal meaning with social impact, according to a press release.

Of those workers ages 44 to 70 not already in encore careers, half are interested in them, specifically jobs in education, health care, and the nonprofit sector, the release said. Respondents most interested in social purpose careers tend to be the youngest: 50% of Boomers ages 44 to 50 say they want to join the 7% of their group already in such careers.

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The report finds that, of those currently in encore careers, 84% report a high level of satisfaction and 94% say they see the positive results of their work and know they are making a difference.

Although eight in 10 respondents expressed concern about having the flexibility to take time off, and a majority are worried about having adequate income and benefits, respondents currently in encore careers reported few problems with these issues. While most (59%) of those in encore careers work full-time, 73% said they have the flexibility they need to work when they want to and take time off when they need to, and three-quarters (76%) report having the pay and benefits they need.

However, more than one-third of people considering encore careers were worried about the need to learn new technologies and skills or go back to school for certifications, and 41% of people in encore careers said this was in fact an issue. Additionally, one-third of respondents interested in encore careers expressed concern about the loss of seniority or status that comes with a new career, and about the same percentage of people in encore careers say they are coping with that issue.

The survey report includes recommendations on changes in workplace practices and public policies that could increase the number of people able to pursue and obtain encore careers.

Copies of the MetLife Foundation/Civic Ventures Encore Career Survey are available at http://www.civicventures.org/surveys.cfm.

Data & Research June 18, 2008

DB Plans Outperform 401(k)s

Rates of return for defined benefit (DB) pension plans outpaced those for employee-directed 401(k) plans over the last decade, according to an analysis by Watson Wyatt Worldwide.
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In a press release, Watson Wyatt said it found that DB plans outperformed 401(k) plans by 1.7 percentage points in 2003, 2.0 points in 2004, 1.1 points in 2005, and 1.6 points in 2006. Overall, from 1995 through 2006, DB plans outperformed defined contribution (DC) plans by an average of about 1% per year over the period.

“The professionals who manage pension funds have considerable financial education, experience and discipline as well as access to sophisticated investment tools. These advantages, coupled with a much longer investment time horizon, help DB plan sponsors maximize their returns and maintain well-diversified portfolios for the benefit of the plan participants,” said Alan Glickstein, a senior retirement consultant at Watson Wyatt, in the release.

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The analysis also found that between 1995 and 2006 larger retirement plans — both DB and DC — realized investment returns higher than those of smaller plans. Over this period, the largest one-sixth of the analyzed DB plans outperformed the smallest one-sixth by approximately 3%, compared with a difference of about 0.7% between the investment returns of the largest and smallest 401(k) plans.

Size influences the performance of DB plans more than it affects DC plans because larger pension plans can hire more expertise to manage assets, while 401(k) plan participants choose their own investments and have access to similar investment options regardless of plan size, Watson Wyatt explained.

The analysis by Watson Wyatt is based on Form 5500 financial and pension disclosure data released by the U.S. Department of Labor. Only companies that sponsor one DB plan and one 401(k) plan, each with at least 100 participants, are included in the data.

More on the analysis can be found at www.watsonwyatt.com/DBvsDCinvestmentreturns.

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