Data & Research November 9, 2010

Majority Plans to Work Longer Instead of Saving More

To mitigate retirement savings losses from the economic downturn, more workers would rather work for a few extra years rather than trying to live on a tighter budget.
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Forty percent of individuals state that they intend to work longer, either alone (32%) or in combination with saving more (8%). Only 10% of survey respondents indicated they would only save more in response to the downturn.   

The Center for Retirement Research at Boston College found financial factors dominate the decision to work longer. Respondents who expect more than one-quarter of their retirement income to come from retirement assets have 23 percentage points higher probability of working longer than those who expect retirement assets to fund less than 15% of their retirement income. Respondents who have less than adequate retirement assets before the downturn have 31 percentage points higher probability of working longer than those who have more than adequate pre-downturn assets.   

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Households who experienced very little or no financial loss have, respectively, 14 and 19 percentage points lower probability of working longer than households who lost more than one-quarter of their retirement assets.  

The CRR research found only one employment factor is signifi­cant in the decision to work longer – reason for choice of original retirement age. Respondents who chose their expected retirement age based on when they thought they would have enough money to retire have 18 percentage points higher probability of working longer than those who chose their age because it is a “standard retirement age.” In addition, workers who are further away from retirement – and, thus, have more time to respond – are less likely to plan on working longer. 

The CRR Issue Brief also said higher distress is associated with a greater likelihood of working longer, and those who thought “quite a bit” about how the downturn has affected their long-term finan­cial goals have about 19 percentage points higher probability of working longer than respondents who had thought about it less.  

The research found influential factors for saving more are different from those affecting the deci­sion to work longer. Respondents who have higher household incomes are more likely to save more; households making between $50,000 and $75,000 per year have about 15 percentage points higher probability of saving more than those in households who have incomes below $50,000. In addition, those who expect higher than average stock market returns from now until retirement have about 7 percentage points higher probability of saving more than those expect­ing average returns. 

Compliance November 9, 2010

Schwab Withdraws Approval for YieldPlus Suit Settlements

Charles Schwab notified counsel for the plaintiffs in a consolidated class action lawsuit relating to the Schwab YieldPlus Fund that it is invoking the termination provisions of the settlement agreements in those actions.
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Schwab also filed with the court a notice of withdrawal from the original motions filed jointly by plaintiffs and defendants for final approval of the settlements.  

In a press release, Schwab said plaintiffs’ recent assertions, that they continue to have the right to sue on behalf of non-California class members, means that none of the parties will receive the benefit of the agreement originally negotiated. As a result, Schwab has determined its only option is to withdraw from the settlement and litigate the case rather than subject the company and its shareholders to yet more litigation over the same issues.   

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Schwab said it worked hard to settle this case for the benefit of its clients and shareholders and thought it had accomplished that goal. The company agreed to a generous settlement (see Schwab to Pay $200M in Bond Fund Suit Settlement), but only in return for an end to all litigation over the facts and claims alleged in the consolidated complaints.   

Now that plaintiffs have asserted that Schwab is not entitled to the primary benefit it was to receive under the settlement, the company contends it has no choice but to withdraw from the joint motions for final approval.   

In the spring of 2010, Schwab agreed to a total settlement of $235 million to settle all claims in the YieldPlus class action proceedings, regardless of their merit (see Schwab Settles State YieldPlus Fund Suit). The company said it was fully prepared to contest the allegations at trial but wanted to provide significant and speedy financial benefit to clients who purchased or held the fund during the period covered by the lawsuit and to avoid lengthy litigation.

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