BACK IN 2002, I WAS part of a three-person financial analysis team at a major mortgage lender. I was better qualified than my two male colleagues, thanks to my master’s degree and greater years of experience. Imagine my surprise, then, when I compared my performance review with one of my colleagues. I discovered that, while we both received the same rating, he got a year-end bonus and I didn’t. Like many women, I was aware of the gender pay gap, but thought of it as an abstract idea. The bonus revelation was like a slap in the face. My manager and I discussed my salary in general, agreeing that I should be paid more, given my education and experience. But agreement isn’t action. Nothing was done. I felt trapped. Back then, I was a single mother and the family’s sole breadwinner. If I made an issue of my compensation, would I be seen as a troublemaker and would there be repercussions? Would I be better off starting over at another company—and would the situation be better elsewhere? I felt powerless, forced to wait for my compensation to be adjusted. It never happened. After a year and a half, I decided to look for another job and was fortunate to find an opening in a different department. Chances are, if you are a woman reading this, you’ve faced similar situations where you’ve felt discounted and yet trapped. It’s also likely that, as with me, it wasn’t a onetime event, but a scenario that repeated itself throughout your career. When you’re a woman, you automatically inherit social and financial disadvantages in our “equal” society. No matter how you slice and dice the data, the gender pay gap is real and persistent. In 2017 in the U.S., a woman, on average, earned 80% of a white male’s income. The gap is so institutionalized that salaries adjust depending on whether an occupation is seen as a “male job” or a “female job.” Researchers reviewing data from 1950 to 2000 found that when occupations change from male-dominated to female-dominated, average pay drops, even for the men. But when men enter an occupation, pay increases, even for women in that occupation. The gender pay gap exists across all demographics, in every age group, in all states, in high- and low-paying occupations, and for those with and without advanced degrees. It exists in nearly every line of work, including female-dominated professions like teaching and nursing. The gap is even greater for many women of color: Latina women earn 53% of a comparable white male’s earnings. Asian women fare better, but are still at just 85%. Women start off with this disadvantage as soon as they enter the workforce, and it grows exponentially throughout their careers. The compounding effect of the pay gap makes it harder for women to get out of poverty. It also makes it harder to pay off student loans. Women experience the negative effects of the pay gap from their very first paycheck to their very last Social Security check. They often need a bigger retirement nest egg, thanks to their longer life expectancy. Yet the career wage gap makes it harder for women to save as much as men do. Result? Women retire with two-thirds of the money men have, and receive less from Social Security and pensions. White men over 65 have average annual income from Social Security, pension and other sources of $44,000, while white and black women over 65 get by on $23,000 and $21,000, respectively, and Latinas on $15,000. The upshot: Women are 80% more likely to be impoverished in retirement. Jiab Wasserman recently retired at age 53 from her job as a financial analyst at a large bank. She and her husband, a retired high school teacher, currently live in Granada, Spain, and blog about financial and other aspects of retirement—as well as about relocating to another country—at YourThirdLife.com. Her previous blogs for HumbleDollar were Taking Their Money, Why Wait and Won in Translation. [xyz-ihs snippet="Donate"]

MUCH CRITICISM IS leveled against millennials, often defined as those born between 1981 and 1996. The criticism is frequently directed at their money and career decisions, including their purportedly foolish spending, excessive borrowing, job-hopping, self-absorption and sense of entitlement. The perception is so pervasive that even millennials buy into this view of themselves. But I wouldn’t be too quick to criticize millennials or compare them unfavorably to older generations. Each generation confronts its own unique challenges and difficulties, so it’s unfair to judge one generation’s choices based on what the previous generation did. How any generation turns out is largely a byproduct of two influences: the unique set of circumstances they face and their upbringing by the generation before. While baby boomers grew up in a world of relative security and steadily increasing prosperity, millennials grew up with the global uncertainty wrought by the Sept. 11 terrorist attacks. They came of financial age during the Great Recession, the most severe economic downturn since the Great Depression. They saw the impact of a dramatic decline in property values—touted by the previous generation as one of the safest investments. They also saw the collapse of major companies like Enron, Lehman Brothers and Countrywide. Told that the pathway to success was through higher education, they faced explosive increases in tuition, with the cost of attending a university increasing nearly eight times faster than wages between 1989 and 2016. According to Pew Research Center, millennials suffer higher levels of poverty, student loans and unemployment, along with lower levels of wealth and personal income, than the two prior generations had at the same stage of their lifecycle. The upshot: They are the poorest generation since the Second World War. A survey by TD Ameritrade shows that how parents handle money influences their children’s spending habits. If we don’t like millennials’ lifestyle choices, maybe it’s the way we parents raised them. Hiring a limousine to haul seven-year-olds around for a birthday party? Spending thousands of dollars for a coming-of-age party, prom, homecoming or other event “because they're only [insert age] once”? Eschewing community pools and public parks for far more expensive entertainment alternatives? These all send powerful messages that contradict parental messages to “spend wisely.” So are millennials bad at money? Given these influences and circumstances, one might perhaps excuse millennials for being “worse” with money than previous generations. But in fact, the data suggest otherwise. Despite the general notion that they aren’t good at managing money, at least one survey indicates that millennials are as good as, or even better than, other generations when it comes to managing money, and that they are increasingly getting their financial houses in order. The survey even showed how the savings trend is growing: In 2015, only 33% of millennials had $15,000 or more saved and only 8% had at least $100,000. By 2018, 47% had $15,000 or more saved and 16% had at least $100,000. These figures are even more impressive when you realize that millennials started adult life with a huge disadvantage: hefty amounts of debt. The greatest sources of millennial debt are student loans and credit cards, a reflection of increased college costs, depressed wages during the Great Recession and higher housing costs. Who got all those credit cards for millennials, when they were naïve about money and often still in high school? That would be us, the older generation. As a result of all this debt, millennials are more likely to delay buying a home, saving for retirement, getting married and having children—this despite outpacing other age groups in taking on extra jobs to pay off debt. Another stereotype about millennials is that they have less of a stick-with-it attitude and tend to be job-hoppers. But consider a Pew Research Center study comparing millennials to the prior generation, Gen X. The study found millennials aren’t job-hopping any faster than Gen X did. It also found that, among the college-educated, millennials have longer track records with their employers than Gen X workers did in 2000, when they were the same age as today’s millennials. For less-educated populations, millennial tenure was similar to Gen X. The report concluded that the “job-hopping millennial” characterization doesn’t fit the broad millennial workforce. Another survey shows that millennials advocate for themselves at work more than both Gen Xers and baby boomers. Roughly half of millennials (46%) have asked for a raise in the past two years, versus 36% for Gen X and 39% of baby boomers. This might reinforce the perception that millennials think too highly of themselves. But 80% of millennials who asked for a raise in the past two years received one, suggesting the requests weren't unfounded or based on imaginary accomplishments. Their older supervisors apparently agreed. Throughout history, each generation has been criticized by the prior generation as lazy, entitled, selfish or shallow. But is this a result of generational decline or just a developmental issue of youth? The incidence of narcissistic personality disorder is nearly three times as high for people in their 20s as it is for those age 65 or older, according to the National Institutes of Health. The upshot: Every generation is “generation me”—at least when they’re in their 20s. Last year, at age 53, Jiab Wasserman left her job as a financial analyst at a large bank. She's now semi-retired. Her previous articles include Cutting Corners, Fast Forward and Living for Less. Jiab and her husband Jim, who also writes for HumbleDollar, currently live in Granada, Spain. They blog about downshifting, personal finance and other aspects of retirement—as well as about their experience relocating to another country—at YourThirdLife.com. [xyz-ihs snippet="Donate"]

I WAS SELECTED IN 2015 for the “leadership pipeline program” at the major bank where I worked. It was a 10-month-long program for minority employees just below executive level. We were selected to learn all about corporate culture and what it took to advance to the next level. I felt honored to be among such talented and promising employees. Participants were from various departments from across the U.S.—technology, risk management, operations, compliance, human resources, retail banking, commercial lending and investments. The program opened with a one-week in-person training session at the bank’s corporate headquarters in Charlotte, North Carolina, followed by monthly meetings via video conferencing and online courses. Each participant was assigned a mentor from the executive level. The people I met in the program were diverse in terms of experience, education and age. We were all united, however, in wanting to learn the skills necessary to move up the corporate ladder. Rather than particular job skills, however, a major emphasis of the program was networking. “It’s not what you know but who you know.” Over and over, making the right connections was emphasized. The bank encouraged us to join multiple affinity groups (Asian, veteran, Latino, Native American, women, LGBT, African American and so on), to socialize and connect across divisions and departments, and to reach out to executives. In other words, we needed to promote ourselves if we wanted to move up to the next level. The emphasis on self-promotion as a career strategy never quite sat right with me. Partly, it’s because I’m an introvert. But mostly, I saw a problem with focusing so much on building a network. I always thought that the time and energy spent maintaining these relationships and joining the many affinity groups would, instead, be better spent learning new skills. And there’s a big reason I felt that way: In 2007, I saw my then-employer, Countrywide, collapse. It was a turbulent and stressful time for the mortgage industry—and the financial reverberations would soon be felt across the globe. As my old company dissolved and we were integrated into a new one, I saw plenty of managers, colleagues and executives let go. All the people retained by the company had one thing in common: They were knowledgeable, hardworking and competent at their jobs. It was the employees who had valuable skills in coding and manipulating large data sets. It was the employees who knew the operating systems so well that they could fix any problem in their sleep. I had one of these unglamorous positions—and it’s why I kept my job. By contrast, the people let go were mostly middle and upper level managers—the people who oversaw others, but didn’t do the work themselves. I had seen so many of these managers focus heavily on networking. I witnessed them claiming the work of the people below them as their own, believing that’s what they needed to do to get ahead. They believed their web of executive contacts would support them, only to find themselves abandoned by those same tenuous connections. In lean times, everything and everyone is under scrutiny. What an institution needs is people who can keep the company going, not keep themselves connected. The Great Recession taught me an important lesson: You need to put skills, knowledge and competency first, ahead of self-promotion and networking. The order can’t be reversed. Jiab Wasserman recently left from her job as a financial analyst at a large bank at age 53. She's now semi-retired. Her previous articles include Living Small, This Old House and The Gift of Life. Jiab and her husband, who also writes for HumbleDollar, currently live in Granada, Spain. They blog about downshifting, personal finance and other aspects of retirement—as well as about their experience relocating to another country—at YourThirdLife.com. [xyz-ihs snippet="Donate"]

THE MOST POPULAR retirement income strategy is built around the so-called 4% rule. Three-quarters of financial advisors say they use some variation on this approach. But is it safe? The 4% rule specifies that you withdraw 4% of your nest egg’s value in the first year of retirement. Thereafter, you increase the dollar amount withdrawn each year at the inflation rate. Based on historical U.S. stock and bond returns, that strategy should carry you safely through a 30-year retirement. But there’s concern the strategy won’t work in today’s world, especially with bond yields so low. A 2013 paper by Wade Pfau and two other researchers even suggested the strategy might suffer a 57% failure rate over a 30-year retirement. In other words, there’s a good chance that retirees will run out of money. What to do? In another study, Pfau proposed a different way to think about retirement income. He looked at a hypothetical 65-year-old couple whose lifestyle required a 4% inflation-adjusted withdrawal rate. He plotted how 1,001 different product combinations might perform if the couple were trying to meet two objectives: generating spending money and preserving financial assets. Pfau found that the best way to meet those two goals was with a mix of stocks and single premium immediate annuities, or SPIAs. SPIAs shouldn’t be confused with other types of annuity, like equity-indexed annuities and variable annuities, which are far more costly and typically a bad deal for investors. Meanwhile, Pfau found that relying on a traditional portfolio of stocks and bonds produced some of the worst outcomes. For instance, at 50% stocks and 50% SPIA, there was a 94% chance to meet lifetime spending needs, while leaving the couple with about 60% of their assets at death. But with 50% stocks and 50% bonds, there was an 88% chance of meeting spending needs, but with only 38% of assets left upon death. In other words, immediate annuities can help retirees meet their retirement spending goals, while still preserving more of their assets. Many retirees will find that latter notion counterintuitive, because buying an immediate fixed annuity means turning over a big chunk of their assets to an insurance company. Why are immediate annuities so helpful to a retirement income strategy? Longevity risk—the risk of running out of money before you run out of time—is retirement’s greatest financial risk. If you live well into your 80s and beyond, there’s a grave danger you could suffer financially because of persistent inflation, a stretch of lousy investment returns or high health care expenses, including the cost of long-term care. Immediate fixed annuities can help protect against these financial perils. Along with Social Security and any pension you’re entitled to, they ensure you’ll have monthly income, no matter how long you live. Annuities also have the virtue of simplicity. That’s an important advantage. As retirees grow older, they often struggle to make good financial decisions. On top of that, income annuities and other predictable income streams can improve retiree happiness, and may even provide the incentive to keep going and live a longer life. As Jane Austen wrote in Sense and Sensibility two centuries ago, “If you observe, people always live forever when there is an annuity to be paid to them.” Despite all these benefits, immediate fixed annuities remain one of the financial world’s least popular products. Even insurance agents don’t make much effort to sell them, because the commissions they earn on immediate fixed annuities are small. But if your goal is a more comfortable, less anxious retirement, you might want to ignore the naysayers—and stash a slice of your nest egg in immediate fixed annuities. In 2017, Jiab Wasserman left her job as a financial analyst at a large bank and is now semi-retired. Her previous articles include When You're No. 2, Grab the Wheel and In Withdrawal. Jiab and her husband Jim, who also writes for HumbleDollar, currently live in Granada, Spain. They blog about downshifting, personal finance and other aspects of retirement—as well as about their experience relocating to another country—at YourThirdLife.com. [xyz-ihs snippet="Donate"]

THERE ARE A GREAT many terrible problems. Having too much cash typically isn’t seen as one of them. Yet that’s where we are. Following our move back to the U.S. from Spain, we found ourselves with an abundance of cash sitting in our brokerage account. And these days, with interest rates the way they are, that cash doesn’t do much more than sit. The upshot: We decided to purchase some rental properties. We have one rental unit already—our former home—but we plan to make it our home once again. With the help of our property manager, Jeannette, who is also a realtor, we searched for and found one property we liked, and with a price that was already reasonable but which we hoped to negotiate lower. We thought we could jump to the front of the buyer’s queue by offering cash. Jeannette said we would need to show the seller proof of sufficient cash on hand. That’s when the problems arose. We didn’t want to just show our Vanguard Group brokerage statement, because that would tip the seller as to how much cash we had available, likely making her hold firm on the price and reject our request to pay for improvements in the heating and air conditioning system. Jiab called Vanguard to inquire if the folks there would issue a “line of credit” letter for the amount we wished to offer. We had more than enough cash to buy the property three times over and we could have borrowed the necessary sum using a margin loan—and yet they declined. They didn’t want to take the risk of backing us, despite the cash they were so graciously holding for us. Not to be thwarted, Jiab called around to see if we could quickly qualify for an investment loan for the amount we wished to offer. We didn’t need the loan, but we could use a preapproval letter to show the seller our ability to pay. We didn’t qualify, even with our 800-plus credit scores. Apparently, real estate loan systems are set in formulaic stone, where the key factor is the loan-to-income ratio. As retirees, our income is low. Wealth—as in cash on hand—apparently doesn’t factor into the formula. Our sons, who are just starting out in the work world and so have a solid income but no accumulated wealth, could better qualify for a loan than we could. It seems you could win a $1 billion lottery, but—if you then quit your job—you might nix your ability to get a loan. [xyz-ihs snippet="Mobile-Subscribe"] Why didn’t we simply open a financial account elsewhere and move part of our cash into that account, shielding it from the seller’s view? That would have taken longer than our five-day option period. Don’t get us wrong. We’re not advocating going back to the purely subjective It’s a Wonderful Life days when George Bailey gave a loan to his friend Ernie because he believed him to be good for it. In that sort of world, totally inappropriate factors—such as race and gender—became systematically factored in. We must continue to guard against such biases in lending and, when we do see them, address and eliminate them. On the other hand, the cold, formulaic real estate lending analysis of today seems geared solely toward people who want to leverage their income into accruing debt to gain housing. Jiab spent years in credit risk management for a major bank. She, of course, looked at debt-to-income ratios to assess risk, but she also considered other mitigating factors, including wealth and credit scores. Such factors should be included as well. Jiab found another lender who was willing to give us a preapproval letter, but it took time and searching on her part. Evidently, this second company did factor in credit scores and assets into its loan approval logic. Meanwhile, our realtor also suggested depositing the money with the title company as a neutral third party to verify we had the funds. This could have triggered more fees, plus it would have locked away the money prematurely before closing. In the end, we showed the seller an email confirming a wire transfer from Vanguard to our bank account for the amount of the asking price. This seemed to satisfy the seller and her realtor. There are more and more retirees who, by luck or hard work, rely less on income and more on the nest egg they’ve built over the years. Maybe the lending system should stop punishing them for finishing the rat race early. Jiab and Jim Wasserman just returned to Texas after spending the first three years of their retirement in Spain. Check out earlier articles by both Jiab and Jim. [xyz-ihs snippet="Donate"]