In The Headlines
Phased Retirement and “Boomerangs” Extend the Work Life Expectancy
With 10,000 baby boomers turning 65 each day, businesses are scrambling to find ways to slow an exodus of the most experienced employees and ensure that they pass along their knowledge before they leave. Some companies are offering employees phased retirement. Others have chosen to hire “boomerang” workers, people who exit gracefully after their career at a company, then return shortly afterward to work there part time.
Companies from Steelcase to First Horizon National in Memphis and Bon Secours Virginia Health System in Richmond are offering older workers part-time jobs and flexible schedules to ease them into retirement. Fourteen percent of U.S. companies offered either a formal or informal phased retirement program this year, up from 10% in 2012, according to the Society for Human Resource Management.
“There’s a need for more companies to do this if they want to preserve their best practices, innovations, and customer relations,” says Paul Irving, chairman of the Milken Institute Center for the Future of Aging. “And there’s receptivity among older workers, a majority of whom want to stay engaged and keep working, but in new ways.”
Phased retirement means different things at different companies. At Bon Secours, full-time employees of retirement age can switch to schedules of 16 to 24 hours a week. At First Horizon, employees within three years of retirement can reduce their schedules to 20 to 30 hours weekly if their duties can be performed in that amount of time, they are willing to mentor successors, and they commit to staying on for one to three years. “It makes sense to have a transition instead of a sudden departure, especially for leaders,” says John Daniel, Executive Vice President. A 35-year veteran on his staff is about to start working a reduced schedule while her successor is chosen and will stay on to offer guidance. “She’s got decades of knowledge about people and processes, and I don’t want that walking out the door, even though it will cost us a bit more to keep her and also hire her replacement,” Daniel says.
Hiring back former retired employees to train new workers is another popular method many companies are using to close the skills gap. More and more companies are establishing formal programs to facilitate this, for reasons that benefit both the employer and the retiree. Leaving a satisfying job cold-turkey for a life of leisure can be an abrupt jolt to people accustomed to feeling purposeful, earning money and enjoying their colleagues. From the corporate perspective, it is useful to have experienced employees who can train younger people, pass along institutional wisdom, and work with fewer strings attached. “People in the U.S. define themselves by their work, and they like their co-workers,” said Roselyn Feinsod, Senior Partner in the retirement practice at Aon Hewitt, the human resources consultancy. Thus, unlike many retirees from past generations, people from both the blue-collar and white-collar sectors are more eager to retain ties to the familiar working world that they enjoyed (and sometimes loathed).
Most boomerang retirees return to work after an informal negotiation with a former boss. Only about 8% of the 463 companies surveyed by the Society for Human Resource Management in 2015 had one—but they are on the rise. They can be tricky to manage, however. Establishing a boomerang retiree program involves a substantial commitment of resources, including systems for navigating complex labor market rules and pension law. Most returning retirees must wait several months before they can come back, and are often limited to 1,000 hours a year. Companies are increasingly turning to outside staffing firms to manage the nuts and bolts of these programs.
Manufacturing companies like Steelcase, an office furniture maker which has instituted a phased retirement program, are especially eager to keep on experienced workers. Its plant, which manufactures more than 5,000 desks, tables, and file cabinets a day, has an apprentice program for millennials, but there is a shortage of Generation X workers. “We’ve got a big gap in the middle, so we have to keep talented people in their 60s a little longer,” says Steve Kempker, manager of skilled trades at the plant, who has three employees doing phased retirement. “It’s like maintenance on a piece of equipment: You can’t just close your eyes to the problem and wait for it to break down.”
Citations
1. http://bloom.bg/2gRr0mH – Bloomberg
2. http://nyti.ms/2htl8iJ – New York Times
Optoro Helps Retailers Beat the Holiday Return Blues
The holiday shopping season is often a peak for retailers’ sales. But the flipside to that boom is that it leads to peak returns season—costing retailers billions to handle unwanted, used or damaged goods each year. The surge in digital shopping is only compounding the pain, as record online sales translate into record online returns. It is not uncommon to see return rates of 30% or more for merchandise that is bought online. Clothing returns can be closer to 40%.
In total, Americans returned $260 billion in merchandise to retailers last year, or 8% of all purchases, according to the National Retail Federation. That swells to 10% around the holiday season. Because less than half of returned goods are re-sold at full price, retailers may end up forfeiting 10% of their sales at the busiest time of the year, according to Gartner Research. Unwanted and damaged goods either get tossed out or sent through a lengthy chain of liquidators and wholesalers, paying pennies on the dollar to the retailer before eventually selling them to bargain-hunting consumers.
“Retailers are not very good at managing returns right now, and so unless they invest in their ability to manage returns, the volume of returns coming back will cause problems in their overall supply chain,” said Tom Enright, Supply Chain Research Director at Gartner. He warns retailers that dealing with returns the old way is a “ticking time bomb that is turning into a major cash hole.”
Best Buy is one retailer that is working on ways to recoup losses associated with returns. When it started this focus three years ago, returns represented 10% of its annual sales, or $400 million. The retailer’s ship-from-store capabilities have increased the number of “open-box” products on its website, which means a TV returned to a store in Omaha, Nebraska, can now be re-sold to a shopper in another state on Bestbuy.com. Best Buy has also been working on reducing the amount of product that gets damaged between the distribution center and the consumer by adding protective packaging and better handling.
Meanwhile, third parties have identified an opportunity to cash in on retailers’ return problems, and are trying to disrupt the traditional model for dealing with them. The Washington, D.C.-based startup Optoro claims its technology platform optimizes the efficiency for returned merchandise by finding the best re-sale price the moment the product is returned and scanned. “We help these goods find their next best home, whether it’s an individual, business, charity or recycler anywhere around the world,” said Tobin Moore, CEO of Optoro. “We’re the technology and the systems that retailers are using at their warehouses, in storefronts and headquarters to manage and monitor these returns and to best route them. Many retailers are getting 15 cents to 30 cents on the dollar for these returns because they are having such trouble economically processing them and getting them to the next best markets,” Moore explained. “We’re able to get them to double and triple the recovery.” Sixteen of the top 20 U.S. retailers and manufacturers use Optoro’s technology. Its client list includes Home Depot, Target, BJ’s Wholesale, and Jet.com (owned by Wal-Mart).
After being returned to a store, merchandise ends up at Optoro’s warehouse in Mount Juliet, Tennessee. Once the merchandise arrives at the warehouse, it gets tested and inspected first. When it is determined to be in working order, or refurbished and given a clean bill of health, it is simultaneously listed for re-sale on Amazon, eBay, and Optoro’s retail site, called Blinq.com. If an item is not able to be refurbished easily, it goes onto a pallet of goods sold on Optoro’s Bulq.com website. Bulq.com buyers often do not mind doing the repairs themselves because they get a deeper discount.
Electronics make up the bulk of returned products to Optoro, at just under one-third. Home and garden merchandise makes up 20%, while baby items, clothing, and other consumer electronics are another fifth of the returned products in Optoro’s warehouse. Optoro offers a win-win-win. Retailers get a higher recovery rate for returned goods, waste is reduced, and consumers have another channel to shop for discounted merchandise.
Citations
1. http://cnb.cx/2gKEKut – CNBC
2. http://bit.ly/2gUaIJV – Business 2 Community
The Good News Is . . .
• The number of Americans filing for unemployment benefits fell last week as the labor market continued to tighten. Initial claims for state unemployment benefits declined 4,000 to a seasonally adjusted 254,000 for the week ended Dec. 10, the Labor Department said. Claims for the prior week were unrevised. It was the 93rd straight week that claims were below 300,000, a threshold associated with a healthy labor market. That is the longest stretch since 1970, when the labor market was much smaller.
• Pier 1 Imports, Inc., a specialty retailer, reported earnings of $0.22 per share, an increase of 69.2% over year-earlier earnings of $0.13 per share. The firm’s earnings topped the consensus estimate of analysts by $0.09. The company reported revenues of $475.9 million. Management attributed the results to strength in its e-commerce unit and improved comparable store sales.
• 21st Century Fox said that it had reached a deal to take full control of the British satellite television giant Sky, paying $14.8 billion for the 61% of shares it does not already own. Analysts had been anticipating that 21st Century Fox would make a bid as media companies in recent years have sought to gain scale, control more content and distribute that content directly to customers. Under the terms of the transaction, 21st Century Fox will pay $13.61 a share for the remainder of Sky.
Citations
1. http://bit.ly/298eR69 – Dept. of Labor
2. http://cnb.cx/1gct3xa – CNBC
3. http://bit.ly/294Kdfc – Pier 1 Imports, Inc.
4. http://nyti.ms/2hHmuEe – NY Times Dealbook
Planning Tips
Guide to Donor-Advised Funds
If you are looking to make a charitable donation, you may consider donor-advised funds. Donor-advised funds accounted for $78.64 billion in charitable assets in 2015, up 11.9% from 2014, according to the National Philanthropic Trust. Generous individuals put $22.26 billion into these funds last year, up 11.4% from 2014. But not all donor-advised funds are the same. It is important to do your research first. For example, you may run into hurdles when donating certain assets and your fund may impose restrictions on who receives grants. Below are some factors to consider when evaluating donor-advised funds. Be sure to consult with your financial advisor to make sure these are appropriate for your situation.
How donor-advised funds work – Donor-advised funds help simplify the giving process. Donors can open accounts at many brokerage firms or large foundations, and then make gifts of cash, marketable securities, and even hard-to-value assets. In return, donors receive an immediate income-tax deduction. Afterward, the fund disburses money to charitable organizations that you designate. One of the pluses of these accounts is that unspent funds continue to grow tax-free.
Asset expertise – The fastest and easiest way to give to charity is to write a check to the organization, but cash is not necessarily the most effective asset to donate. Rather, gifting highly appreciated stocks allows you to save on capital gains taxes that you would have otherwise incurred if you sold those securities and handed over the cash. You also get the immediate advantage of an income-tax deduction that you can take in the year you made the donation. This is more complicated if you are giving assets that are harder to value, such as collectibles, or a stake in a small business that you own. Obtaining valuations for these investments is not necessarily a speedy process, and moving those complex holdings can take time. For stock in a privately held business, you will have to get the approval of the charity.
Control over grants – When you give to a donor-advised fund, you tell its sponsor how you would like to see the grants made. The catch is that you are only making a recommendation, and not a mandate. The final say on how to make those distributions is up to the sponsor. This is especially the case if you recommend a grant in support of a non-profit whose mission runs counter to that of the organization sponsoring the fund. Further, while private foundations are subject to an annual payout of 5% of the market value of their assets, donor-advised funds are not held to the same rules.
Direct and local impact – If you have a particular cause that is near and dear to you, consider a donor-advised fund that is offered through a community foundation, which are charitable organizations with a local focus. These groups generally work with local non-profits, and can give you guidance on which organizations are the most effective. Donor-advised funds that are sponsored by a community foundation tend to have a more singular focus and they have the local pulse of charitable activity.
Fees – It costs money to give money. Some donor-advised funds require minimum amounts for opening accounts, subsequent contributions and charitable granting. Further, your donated assets are subject to investment and administrative fees. How much you will be charged varies from one sponsoring organization to another. Some organizations will offer discounts for large gifts, or charge tiered fees that go down as your balance in the fund grows. For the largest donor-advised fund sponsors, a $100,000 fund can incur administrative fees as high as 1.25% of the balance annually; according to the National Philanthropic Trust and investment fees can be as high as 1.5% of the invested assets each year. Certain services can add an extra layer of expenses. The additional cost of making an international grant, for instance, averages around $1,500 per grant, according to the Trust.
Citations
1. http://bit.ly/2hajxLF – IRS
2. http://bit.ly/2hQuB4G – Forbes
3. http://cnb.cx/2hDX25e – CNBC
4. http://bit.ly/2hQsSfA – Investopedia
5. http://bit.ly/2hQxVwz – US News & World Report
