Archives for July 2015

Working Too Much?

In a recent survey conducted by the Department of Labor, Americans are working more hours than they have in the past few years. On average, American spend 3 hours and 35 minutes on work related activities, which is an increase of 7 minutes from 2013. The last time American spent this much time on work was in 2008, at the beginning of the recession, when they would spend 3 hours and 44 minutes on work related activities.

The American Time Use Survey is conducted by the Department of Labor every year to see how Americans spend their time. Not only are we spending more time at work, but we are also finding more time for sleep and watching TV. The portrait of the Average American is based on civilians 15 years old and older. It includes people with and without jobs, and includes weekdays and weekends. For Americans with jobs, they spend an average of 7 hours and 45 minutes on the job, which is up 10 minutes since 2013. Women saw a larger jump then men did.

Not only did Americans work more last year, but also more Americans were working. The employment rate dropped to 5.6% at the end of 2014 from 6.7% earlier in the year.

Even with all the work, Americans still found plenty of time to spend on leisurely activities, which took up 5 hours and 18 minutes. An increase of 2 minutes. The average time people watched TV was 2 hours and 49 minutes, three more than in 2013.

Sleeping is still the number one activity for American taking up an average of 8 hours and 48 minutes a day. That is up 4 minutes since 2013.

Other things we spend our time doing is homework, which averaged 25 minutes, down from 29 minutes in 2013. American also spent 1 minute less on sports, exercise, and recreation in 2014, and 1 less minute on housework and shopping. Childcare stayed a steady 25 minutes per day.

This data was based on interviews of around 11,600 people who were asked how they spend a recent 24-hour period.

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Stretching 401(k) Match

Everyone is looking to stretch a dollar, including companies that match contributions to employee’s 401(k). Many of us will go to great lengths to save money. When it comes to retirement savings, people are content to take the easiest path. Many, 33%, decide on how much they will contribute to their 401(k) by how much their employer match. For many the employer match is a great incentive and a positive step for retirement savings. But this point can become an unintentional anchor allowing employees to get stuck where they don’t adjust their deferral rate.

According to research done by Boston College in July 2014, people that plan to retire at age 65 will need to start saving 10% of their income if they start at age 25 and 15% in they start at age 35 to maintain their standard of living once they are retired.

The problem is that many fall short of this threshold, even with employer match. For some of them, they cannot afford to contribute that much of their salary. For others they are mistaken in the amount they are contributing by aligning their contribution with the company’s maximum match, leaving them with a total contribution of 8% instead of the recommended 10 or 15%.

To overcome this behavioral barrier and nudge employees into the proper savings threshold, some companies are getting creative and using a “stretch match” approach. An example would be:

  • Instead of offering 50-cent match to every dollar contributed to a 401(k) plan to 5% of their salary, an employer may instead offer 25 cents for anyone that contributes up to 10% of their salary.

This approach considers human nature because employees will be more inclined to save at the higher level in order to get the full match. Employers also win with this contribution plan because they avoid additional matching contribution expenses.

It is still good not to leave the responsibility of stretching the contribution in the hands of the employer. Employees should contribute an extra 1% to their 401(k) plan each year whenever they get a raise in salary. This approach keeps individuals honest with themselves and they know that they will be contributing the right amount for their retirement.

For more information on achieving your retirement goals, speak to an expert to help you determine what would be right for you.

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Focusing in the Future

In the last century, companies predominantly focused on cost efficiency. Companies achieved mass productions in the early part of the century, standardizing products while bringing the cost down so everything became affordable. In this century, customers want more than just affordability. They want customization and quality. To be able to deliver all the aspects the consumers want, companies need to have superior intangible assets, such as human capital and innovative capability. CFO need to find a way to ensure that the future they build meets the needs of the consumers. How can they build a future that delivers these dimensions? [Read more…]

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Delaying Major Life Events

In recent years, Americans are making the decision to delay at least one major life decision due to financial reasons. In a survey conducted in March by the AICPA, 51% adults are putting off buying a home, retiring, or advancing their education. This is in contrast to 31% of respondents that reported delaying major life events in a survey conducted in 2007. [Read more…]

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