MONEY retirement planning

Half of Workers Are on Track to Retire Well—Here’s How to Join Them

Save 15% of pay for 30 years and you will be fine, a new study shows. Save for longer, and it gets much easier.

The shift from traditional pensions to 401(k) plans hasn’t gone well for most workers. One in two U.S. households are destined for a lifestyle downgrade in retirement, data show, as guaranteed lifetime income from old-style pensions disappears. But new research finds that most families can stay on track to a comfortable retirement by regularly saving 15% of pay over 30 years. Start earlier, and you only need to put away 10%.

The news isn’t all bad if you’re starting late. Even folks past age 50 have time to adjust. But clearly those with the shortest windows to retirement have the steepest hill to climb—and probably need to start factoring in a longer working life and more austere retirement lifestyle right away.

The typical middle-income household headed by someone 50-plus, and with a projected retirement shortfall, would need to boost its savings rate by 29 percentage points to retire comfortably at age 65, according to the Center for Retirement Research at Boston College. That would mean saving, say, 39% of every paycheck instead of 10%.

Calling this savings rate “unrealistic,” researchers Alicia H. Munnell, Anthony Webb, and Wenliang Hou conclude in their paper, “A better strategy for these households would be to work longer and cut current and future consumption in order to reduce the required saving rate to a more feasible level.” One thing the paper does not mention is that one in 10 U.S. workers is limited or unable to work due to poor health—and those past age 65 are three times more likely to have this issue, according to the National Health Interview Survey.

On a cheerier note, younger middle-income workers currently on track to fall short of retirement income still have time to realize their dreams by boosting savings just 7 to 13 percentage points (the younger you are, the lower the savings rate needed), research shows. The impact of starting early and letting your savings compound over more years cannot be overstated.

The typical wage earner planning to retire at age 65 in 2040 would need to build a nest egg of $538,000, the paper states. By purchasing an immediate annuity, you would replace 34% of pre-retirement income. Social Security would replace 36% of pre-retirement income—in all giving the household 70% of pre-retirement income, which is considered an acceptable minimum level. To reach this savings goal this household would have to save 15% of every paycheck starting at age 35. But if the household planned to work to age 70—or started saving five years earlier—it would need to save just 6% of every paycheck.

In general, the typical middle-income household must save enough to produce a third of its retirement income. Low-income households need only get a quarter of retirement income from savings. High-income households (with a more expensive lifestyle) need to save enough to produce half their retirement income, the paper found.

Related links:

Why It’s Never Too Late to Fix Your Finances

The Amazing Result of Actually Trying to Save Money

 

TIME Earnings

Comcast Pulls in $2 Billion in Profit in Q2

National Cable and Telecommunications Association Cable Show
The Comcast Corp. logo is seen as Brian Roberts, chairman and chief executive officer of Comcast Corp., right, speaks during a news conference at the National Cable and Telecommunications Association (NCTA) Cable Show in Washington, D.C., U.S., on Tuesday, June 11, 2013. Bloomberg—Bloomberg via Getty Images

Comcast is in the process of trying to merge with Time Warner Cable

Comcast’s cable and Internet business is generating more money as it prepares to try to merge with Time Warner Cable. The communications giant posted overall revenue of $16.8 billion, a 3.5 percent increase from second quarter of 2013 that slightly missed analysts’ projection of $16.95 billion.

The company had net income of $2 billion, up almost 15 percent from a year ago. Earnings per share were 76 cents, beating analysts’ expectations of 72 cents.

The company shed 144,000 video customers during the quarter, and now has 22.5 million. However, Comcast added 203,000 new Internet subscribers for a total of 21.3 million. Overall revenue from Comcast’s cable, Internet and voice business jumped 5.4 percent to $11 billion from the same quarter a year ago.

Revenue from the company’s NBCUniversal Division, which includes television networks, theme parks and movie studios, was essentially flat year-over-year at $6 billion, a 0.3 percent increase from last year.

Comcast is looking to massively increase its footprint in the cable market by merging with Time Warner Cable. If the merger is approved by federal regulators, the combined company will have about 30 million cable subscribers.

MONEY stocks

The Spoiler Lurking in Netflix’s Blockbuster Growth

Woman watching Netflix on iPad
courtesy of Netflix

Rather than crow about its strong quarter, the streaming-video giant tempered expectations for the remainder of the year. That should tell you something.

At first blush, Netflix reported what seemed like blockbuster results.

On Monday, the streaming video giant said its earnings had more than doubled, to $71 million or $1.15 a share in the recently ended second quarter. Even better, Netflix NETFLIX INC. NFLX -5.9431% gained 570,000 new streaming subscribers in the U.S., despite hiking costs by $1 a month in May, moving the company past the 50 million-subscriber mark.

Yet rather than spending much time crowing about these results, Netflix officials used its quarterly earnings report to try to temper investors’ expectations for the coming quarter. Why?

Either second-quarter results weren’t that great after all — or the rest of the year will be much more challenging than expected.

It’s the latter.

A few months ago, Morningstar analyst Peter Wahlstrom made this key point:

“The market is too optimistic about Netflix’s future sales growth and profitability potential. We remain skeptical about Netflix’s aggressive international push; we recognize the addressable market is large but sustainable and material profitability will be much harder than management currently anticipates and may drag on cash flow for the foreseeable future.”

He was right to be worried. On Monday, Netflix provided a clue as to how difficult it will be to sustain profitability while making an aggressive international push.

In a letter to shareholders, CEO Reed Hastings and chief financial officer David Wells warned that the company’s international video streaming operations, whose “contribution losses” had been gradually declining lately, would jump from $15 million in the second quarter to $42 million in the third quarter.

Meanwhile, they lowered expectations for third quarter earnings, forecasting that they would come in around 89 cents a share, down from $1.15 in the second quarter and considerably lower than the expected $1.02 a share, according to consensus forecasts by analysts tracked by Zacks.com.

Company leaders also used their earnings release to again reiterate their calls for so-called net neutrality, hinting at another area of potential vulnerability. Backers of net neutrality want Internet Service Providers (ISPs) such as Verizon, Comcast, and AT&T to treat all data equally, without giving preferential treatment — and speed — to preferred customers.

Without such a system, companies like Netflix have had to address speed issues by entering into individual agreements with ISPs to stream their content more quickly. The problem, though, as MONEY’s Taylor Tepper recently pointed out, is that such deals give “Internet service providers leverage to assess more such ‘tolls’ down the road.”

Yesterday, in after-hours trading, Netflix shares jumped immediately after the company announced its earnings.

NFLX Price Chart

NFLX Price data by YCharts

But this morning, skeptical investors are starting to voice their concerns. So don’t be surprised if today, after digesting the actual details, the market reacts in a slightly different way.

TIME Companies

The Next iPhone Will Reportedly Have a Way Bigger Screen

Apple is reportedly increasing the size of the iPhone display from 4 inches to options of 4.7 or 5.5 inches

Apple has ordered larger-sized screens for its next generation of iPhones this year, the Wall Street Journal reports, betting that consumer demand for bigger phone displays will help wrest market share from competitors like Samsung.

The company has asked suppliers to manufacture between 70 and 80 million units of large-screen iPhones with 4.7-inch and 5.5-inch displays. The most recent versions of the iPhone, the 5s and 5C, have only 4-inch diagonal displays.

Samsung, which has a 29% share of the smartphone market compared with Apple’s 18%, produces the top-selling Galaxy S with a 4.8-inch display. Apple’s move into larger screens may be a competitive strike against Samsung just as the company prepares to release its third-quarter results Tuesday and provide a financial outlook for the period ending in September.

Apple’s 70- to 80-million unit initial order for what is being called the iPhone 6 is significantly larger than the 50- to 60 million-unit initial order of the iPhone 5S and C.

[WSJ]

TIME Companies

This Might Be Apple’s New Biggest Problem

Apple Profit Margins
The exterior of the downtown Apple Store in Central Hong Kong in May 2014. George Rose—Getty Images

Analysts’ average estimate for the gross profit margin is 38.1%

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This post is in partnership with Fortune, which offers the latest business and finance news. Read the article below originally published at Fortune.com.

In a note to clients Monday, UBS’s Steven Milunovich raised his Apple price target to $115 from $100 on signs that the company’s gross margins — long the envy of its competitors — are once again on the upswing.

Gross margin, or GM, may be the number Apple analysts watch most closely — even more than iPhone unit sales, although the two are closely linked (the more iPhones Apple sells, the better its gross margins).

GM is a ratio calculated by the formula GM=(Rev-Cost)/Rev, and it measures how efficiently a company turns sales into profits — something Apple does better than most because it doesn’t have to cut prices to stay competitive.

Instead, Apple’s gross margins tend follow their own internal rhythms, falling when the company is tooling up to build new products and rising as efficiencies increase and component prices fall.

Gross margins peaked in Q2 2012 at an extraordinary 47.4% on the strength of sales of the iPhone 4S and dropped to 36.9% in Q3 2013 as Apple was gearing up to launch, in the same quarter, two new iPhones and pair of iPads.

For the rest of the story, go to Fortune.com.

TIME Companies

This Is the Scandal McDonald’s Is Dealing With Now

Firms cut ties to Shanghai-based supplier after allegations revive memories of 2012 scandal

+ READ ARTICLE

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This post is in partnership with Fortune, which offers the latest business and finance news. Read the article below originally published at Fortune.com.

McDonald’s Corp and Yum Brands Inc are embroiled in a new scandal over food safety in China after one of its suppliers came under investigation for allegedly selling expired beef and chicken.

The episode threatens to throw a wrench in the pair’s efforts to get over a similar scandal in 2012, when they were accused of selling chicken products with excessive amounts of antibiotics.

Yum is the parent of KFC, Pizza Hut and Taco Bell and is the biggest operator of fast-food restaurants in China, having first opened KFC there in 1987, while McDonald’s has recently been lost second place, in terms of stores, to Taiwan-based Dicos.

Yum had said only last week that like-for-like sales in China had risen 15% in the second quarter, and that KFC sales had risen 21%, a badly-needed boost in view of falling sales in the U.S. at KFC and Pizza Hut.

For the rest of the story, go to Fortune.com.

TIME Earnings

Netflix Crosses 50 Million Customer Streams

Updated July 21 at 5:38 p.m.

Netflix’s customer base has passed 50 million members, the company announced in its quarterly earnings report Monday. The streaming service added 1.69 million new members during its second quarter, bringing the total to 50.5 million customers and generating $1.1 billion in revenue, slightly missing analysts’ projections of about $1.2 billion.

The company had earnings of $1.15 per share, missing projections by a single penny. Overall, Netflix generated $71 million in profit, triple the figure from a year ago.

In a letter to shareholders, the company touted the success of its original programming, noting that Orange Is the New Black is now the most-watched series on the service in every territory. The next shows on the company’s production docket will be the final season of the cancelled AMC show The Killing and a new adult animated comedy called BoJack Horseman, both of which premiere in August.

Netflix is also planning an aggressive international expansion later this year. The streaming service, which already has almost 14 million customers abroad, will launch in Germany, France, Austria, Switzerland, Belgium and Luxembourg in September. Netflix is prepping some original shows aimed specifically at foreign audiences, such as a soccer comedy that it will air in Spanish.

The company reiterated that it does not want to pay interconnection fees to Internet Service Providers to get its video content delivered to customers, an issue it has tried several times to fold into the zeitgeist of the ongoing net neutrality debate. “In the cable industry, there’s been constant conflict between the networks and cable distributors,” CEO Reed Hastings said in a video call with analysts. “We would hate to see ISPs brownout or blackout certain Internet sites while they try to extract payments.”

Netflix has also formally opposed the proposed merger between ISP giants Time Warner Cable and Comcast, unless the two companies are specifically banned from charging interconnection fees.

 

TIME Startups

How Youtube Stars Can Actually Make a Living

Pedals Music Video—Conte

Patreon offers a new approach to crowdfunding

Being a YouTube star doesn’t actually pay all that well. Just ask Jack Conte, a singer and musician who has scored viral hits mashing up Pharrell songs and stripping down pop hits like Beyonce’s “Single Ladies” as one half of the indie rock duo Pomplamoose. Between the group and his solo work, Conte says his videos can rack up as many as four million views each month on the video sharing site. But all those eyeballs do little for Conte’s bottom line—in a good month, he collects $400 in advertising revenue from YouTube.

“There’s great ways for people to build an audience online right now,” he says. “There’s really no great way for people to make a living.”

After a particularly elaborate music video involving singing robots on a handmade replica of the Millennium Falcon earned him just a few hundred dollars, Conte realized that there had to be a better way to earn money online. He wanted what he calls a “quality driven Web,” or a space where artists could make money based on the passion of their fanbases rather than trying to lure millions of mildly interested passersby by “going viral.”

His solution was Patreon, a new crowdfunding platform that helps creators earn revenue from their most ardent fans on an ongoing basis. Unlike Kickstarter, where inventors and creative types solicit money from users in a month-long campaign frenzy, Patreon asks users to pay creators each time they produce a new work. That could be a music video, a web comic any other kind of creative project. As on Kickstarter, patrons are given varying prizes based on how much they donate.

The unusual funding model creates a new dynamic between creators and fans. It’s not as much about crafting one brilliant idea and marketing it well but rather building and sustaining an audience over the long term. The idea of individual fans supporting artists on such a granular basis might seem anachronistic in an age where YouTube has helped make media more accessible, but Conte believes people are still willing to pay for art. “Patronage is a very old phenomenon that’s occurred in people and in society for thousands of years,” he says. “It stems from an emotional response to someone’s art. It’s a feeling of responsibility and importance and a desire to be a part of what they’re making.”

Since launching in May 2013, Patreon has attracted 25,000 creators who are requesting funding for everything from science fiction short stories to Minecraft raps to video game reviews. So far patrons have paid more than $2 million for creative works on the site, with $1 million of that coming in just the last two months. The most popular creators can earn close to $10,000 per project on the site.

Molly Lewis, a ukulele player with a small but devout following on YouTube, believes Patreon could eventually become her primary revenue source as an artist. She’s currently convinced more than 400 fans to pledge $2,600 total for each new song she makes, more than double her original funding goal. To attract donations, she promises exclusives like videos of live shows and personalized limericks written for hardcore fans. “It’s kind of like a fan club,” she says. “The money they spend goes directly into my buying food and making more music. They can see their dollars at work in a way that you can’t really when you go to a Katy Perry show or something.”

This desire to get an inside track on the creation of a new project has already helped Kickstarter pull in more than $1 billion in pledges from people around the world. Experts believe the Patreon model can also reach massive scale since it’s appealing to both creators and their fans. ““Here you can evaluate the quality of output over time and then decide whether you want to continue subscribing or not,” says Anindya Ghose, a professor of information, operation and management sciences at New York University who also studies crowdfunding. “It’s a very positive self-reinforcing cycle where people give small amounts of money, which incentivizes artists to do a better job, which then leads people to give more money more frequently.”

Plenty of obstacles remain for the still-nascent startup. It’s not yet clear just how long people will be willing to continually support a single artist’s work—Ghose points out that a few popular creators pumping out subpar work simply to collect a check could sour new users on the platform. More worrying could be YouTube’s entrance into the donations space. The video giant launched a virtual tip jar of its own recently as a response to ongoing gripes that it’s hard to earn money directly on the site. For now, Conte contends that Patreon’s features differentiates it from YouTube’s less robust offering, while YouTube has expressed support for crowdfunding platforms like Patreon and Kickstarter.

Silicon Valley, at least, believes in Patreon’s future. The startup closed a $15 million round of venture funding in June which included leading venture capitalist Danny Rimer and Alexis Ohanian, one of the co-founders of Reddit. The money will allow the company to launch a mobile app and open an office in San Francisco instead of working out of the two-bedroom apartment where Conte and co-founder Sam Yam live.

As Patreon grows, Conte promises that it will remain focused on creators’ interests. The currently unprofitable company charges a 5% commission on all donations, and Conte vows the fee won’t increase in the future (Kickstarter and YouTube charge the same amount). Though he’s now a CEO, he’s still a creator at heart—Conte has 1,300 patrons of his own paying more than $5,000 for each new video he makes. He envisions a future where every creative person isn’t a starving artist or a pop megastar. There’s room in the middle for artists, too, and people will pay for their work because, as Conte says, “Everybody wants to be able to enjoy beautiful things.”

TIME trade

It’s Time for Europe to Get Tough With Russia

European Union Foreign Ministers Meet On Ukraine Crisis
Flags of the European Union seen in front of the headquarters of the European Commission on March 03, 2014 in Brussels, Belgium. Michael Gottschalk—Photothek/Getty Images

Europe has a history of coming together in good times but not in bad. Think about the creation of the Eurozone, and the launch of the single currency, juxtaposed with the piecemeal policy reaction over the last few years to the Eurozone financial crisis. This tendency has been on tragic display recently, with the shooting down of a Malaysia Airlines jet that carried numerous European passengers. This event should have strengthened European resolve to put more and tougher sanctions on Russia. Instead, it’s led to half-hearted measures doled out on a country-by-country basis. France is even going ahead with big deal to supply warships to Russia.

The key issue, of course, is that Europe is in very deep with the Russians economically, much deeper than the U.S. Or China, for that matter; The recent Russia-China gas deal was small potatoes compared to the business that the Europeans do. Europeans get about 30 percent of their gas from Russia, and are dependent on other natural resources, like oil and minerals, from Russia too. Indeed, the Netherlands, which lost more people than any European country in the crash, took in the largest share of those exports from Russia last year. They aren’t alone—German banks and multinationals do lots of business with Russia, and countries like the UK are a big destination for oligarchs looking to stash cash outside their home country.

That’s why it’s so crucial that European foreign ministers come together at their meeting over the Ukraine situation and Russian sanctions in Brussels. Until they are on board with more serious sanctions, particularly in the energy sector, it’s unlikely that the current rounds are going to make a serious dent in the Russian economy, which, as a recently Capital Economics report pointed out, still has a strong international investment position.

The bottom line is that Europe needs a much smarter and less Russia-centric energy strategy. As I’ve explained before, that’s a need that’s unlikely to filled by the gas rich US anytime soon. Rather it’s something that will have to be driven internally within Europe. It’s an opportunity not only for Europe to become more secure, but to prove to the rest of the world that it can work together and live up to the promise of the EU itself—in both good times and bad.

TIME Careers & Workplace

Doing This on Social Networks Could Cost You a Job

A portrait of the Facebook logo in Ventura
A portrait of the Facebook logo in Ventura, Calif., on Dec. 21, 2013 Eric Thayer—Reuters

With his Blurred Lines parody, Weird Al is onto something: America’s grammar stinks. And there’s strong evidence that it’s so bad, it’s costing us jobs. A new survey from CareerBuilder finds that about a third of HR managers say they’ve taken an applicant out of consideration because of “poor communication skills” on social media.

Yes, people know by now that posting pictures of them funneling beer or making racist jokes on Facebook will probably take them out of the running, but even the types of grammar errors Weird Al is skewering can be enough to cost somebody a job.

CareerBuilder says a third of the roughly 70% of HR managers who use social media to check out candidates have dropped them from consideration because of “poor communication skills.”

More than nine out of 10 HR professionals say they see poor communication displayed on candidates’ pages, says Susan Vitale, chief marketing officer at iCIMS, a talent acquisition company. “Job seekers should pay special attention to their social media profiles, ensuring all publicly accessible information is professional,” she says. “It’s difficult for a recruiter to ‘unsee’ these references.”

In other words, sometimes it’s not what you say online: It’s how you say it that can be a dealbreaker. We asked HR pros what would give them pause if they ran across it on an applicant’s social media page.

Bad or nonexistent punctuation: “If they can’t punctuate, if they can’t make a coherent sentence, then they are not, in my opinion, what we’re looking for,” says Thomas Anderson, a panelist with the Society for Human Resource Management and director of HR at the Houston Community College System. “If they don’t punctuate properly, you get a sense that the way they probably write all the time.”

Misspelled words: According to Vitale, 47% percent of recruiters say spelling errors are their biggest turn-off when reviewing a social media profile. Spell-check is there for a reason, people.

Incoherent rambling: “The employer is more apt to question your professionalism if you show a pattern of misspelled words… or your commentary seems rash, uninformed or non-cohesive,” says Jennifer Grasz, spokeswoman at CareerBuilder.

A stuck caps-lock key: “If they’ve got it all in capitals, that’s a big red flag… that indicates in social media or email that you’re shouting,” Anderson says. This is a widely known bit of online etiquette, so an applicant that isn’t savvy enough to pick up on this might have serious knowledge or social skills gaps elsewhere.

Using words the wrong way: Using words incorrectly can also trip you up in an employer’s eyes, Grasz says. If you’re not sure what a word means, look it up.

Texting shortcuts: It might be natural for people — especially young adults — to abbreviate words with letters or numbers when texting, but Grasz says it can be a turn-off for hiring managers if your conversations on social networks are riddled with this kind of shorthand.

 

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