Does Your 401(k) Have an Annuity

 

 

 
By Rob Reuteman
Special to CNBC.com
 
| 05 Sep 2012 | 11:24 AM ET

 Annuities, once confusing to many, even suspect to some, are showing new life.

As more people worry about the finances of retirement, the concept of a guaranteed income stream for life, once available to many U.S. workers through employer pension payments, looks like a vital component of their portfolios.

“The people we hear from express a desire for an income stream protected from market volatility, which can be addressed through some types of annuities,” said Charlie Nelson, president of retirement services for Great-West Life. “People don’t want to be caught, as many were in 2008, with 401(k) losses that cause them to work another five years.”

A May 2012 survey of 500 large U.S. employers found that 16 percent already offer their employees a 401(k) option for a retirement income stream, rather than just a lump sum. Another 22 percent plan to offer their workers such an option this year, the survey found.

In addition, more than 90 percent of workers in their 20s, 30s and 40s want access to guaranteed income through their 401(k)s, according to a 2012 study by The Hartford.

Some of the big insurance and mutual fund companies that offer 401(k) and IRA accounts are on board (Prudential, UBS, Vanguard and Fidelity), as are big plan administrators (Mercer, Hartford, Aon Hewitt and Great-West.)

Employers interested in staying competitive in the job market will need to offer these products in their plans, said Nelson, whose firm administers nearly 19,000 401(k) plans for 2 million workers with $75 billion in assets.

The interest in annuities comes decades after employers began phasing out defined benefit plans that guaranteed lifetime income for workers, replacing them with defined contribution plans, which allow workers to set aside pre-tax income in a savings plan, typically in the form of a 401(k). Many companies also contribute funds to those plans.

Of the $9.7 trillion in private pension assets at the end of 2009, only 22 percent remained in defined benefit plans, while 24 percent were invested in defined contribution plans and 44 percent in IRAs, according to Federal Reserve data.

 

Between 1975 and 2007, the number of defined benefit plan participants fell by a third to 19 million, while the number in defined contribution plans jumped six-fold to 67 million, according to the Department of Labor.

That’s already taken a toll on retiree’s nest eggs.

“With fewer pensions, there’s been a gradual erosion of income from our retirement system,” said Mark Iwry, deputy assistant secretary for retirement and health policy at the U.S. Department of Treasury. “Without imposing anything or forcing anyone, I’d like to see us put pensions back into the private sector retirement system as a very substantial option.”

The federal government is trying to help make that happen. In 2012, the IRS made it easier for savers to convert a portion of their 401(k) savings to an annuity product.

The goal is to encourage people to buy an annuity sooner than later.

Retirees worried about making their money last could always take their 401(k) lump sum distribution and purchase an annuity, but few do it.

In 2008, only about 1 percent of adults over 65 reported receiving income from a private annuity, said Phyllis Borzi, assistant secretary of Labor for employee benefit, in her 2010 Senate testimony.

The growing interest in annuities may be a sign that consumers are overcoming long-held confusion — and in some cases fear — about what experts admit is a complicated product.

“There are a variety of behavioral inhibitions that get in the way of annuity choice,” said Iwry.

Some people are worried about dying too soon. With classic annuity risk pools, the people who die early subsidize those who don’t. Similarly, in many cases, when the participant dies there are no benefits for survivors, which puts off potential buyers.

Others rejected annuities because they were concerned inflation would eat away returns over the course of many years, while also preventing them from putting more money into a bull market.

 

At the same time, annuities have been faulted for being too complex for the average person to understand, with excessive fees. There are steep withdrawal penalties.

Not all annuities, however, work that way, said Iwry, and the market is moving quickly to address consumer complaints and reservations.

New products can offer death benefits, withdrawals, participation in equity returns and other features. A “deferred” or “longevity” annuity doesn’t begin making payments until age 85, or whenever the buyer thinks he’ll run out of other savings.

“The word ‘annuity’ has some scary connotations for some individuals,” admitted Nelson, of Great West. “But annuities exist in all shapes, sizes flavors and colors. Broad generalizations do make some participants — and some plan sponsors — shy away. But I’m actually pretty optimistic this will change.”

Not all plan administrators share that optimism.

We’re hearing buzz in the marketplace about guaranteed income streams but not a lot of action,” said Brian Pietrangelo, managing director of retirement investment services for Charles Schwab. “What we see is if they [people] don’t understand, they don’t act.”

For those interested in researching financial products that offer a lifetime income stream, there’s no shortage of advice. Ratings agencies grade and rank companies offering the products.

“Go with people who have very solid credit ratings,” said Ted Beck, executive director of the National Endowment for Financial Education. “This is not the time to shop on the Internet for the cheapest rate.”

© 2012 CNBC.com

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© 2012 CNBC.com

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The Math Behind the 100-Year, Natural Gas Supply Debate

The Math Behind the 100-Year, Natural Gas Supply Debate

By Rob Reuteman
Special to CNBC | 
 
When President Barack Obama said in his State of the Union speech this year that the United States has a supply of natural gas that can last nearly 100 years, he was using a quick-and-dirty, back-of-the-envelope computation that is nonetheless rooted in recent geological research.

 

Even the nation’s top petroleum geologists, who typically measure natural gas reserves in trillions of cubic feet (tcf) grudgingly admit the need to simplify – even oversimplify – their research for public consumption.

“The 100-year supply is strictly a talking point, and scientists don’t use it, but it gives you a comfort factor that lets you know you’re on the right path,” says John Curtis, a geology professor at the Colorado School of Mines and director of the Potential Gas Committee. The nonprofit group of industry experts and academics regularly assesses the nation’s untapped resources.

“We’re geologists, not economists,” Curtis says.

Obama was using what is called an “R/P ratio” – the nation’s gas “reserves” divided by the amount of gas “produced” in the last year. The result is a number that represents the length of time those remaining reserves would last if production continues at the same rate.

Curtis’ group has estimated there are about 1,898 tcf of recoverable gas resources in the U.S. The nation’s gas producers pumped out 23 tcf last year, he said. Divide 1,898 by 23 and you get 82.5 years of supply.

“We scientists understand how imperfect the variables are in predicting how much gas is there,” saysTerry Engelder, a geosciences professor at Penn State University. “However imperfect the known numbers are, an estimate can be made with a certain confidence, and that is important for making energy policy.”

Technology Advances Supplies

Estimates of recoverable natural gas have exploded in recent years because technology has made it possible to extract huge amounts from areas previously judged infeasible, mostly gas embedded in tight formations of shale rock. The new drilling process known as hydraulic fracturing, or fracking, has become widespread, raising supplies and driving down prices so it’s no longer profitable for many companies to drill for the commodity.

A 2009 study by the IHS Global Insight energy research firm concluded, “Shale gas production has more than doubled the size of the discovered natural gas resource in North America -enough to satisfy more than 100 years of consumption at current rates.”

Pete Stark, IHS vice president of industry relations, says: “Getting all uptight about the 100-year number is ludicrous. There’s all sorts of gas being identified everywhere as potentially recoverable. Since 2009 we’ve known the ‘shale gale’ breakthrough was real. Now it looks as if there will be more than a 100-year supply. It was huge then, it’s huge now.”

A 2011 report by the National Petroleum Council for the U.S. Department of Energy concluded in part, “North America has a large, economically accessible natural gas resource base that includes significant sources of unconventional gas, such as shale gas. This resource base could supply over 100 years of demand at today’s consumption rates.”

Marcellus Shale

The importance of shale gas to the nation’s supply can be seen in the growing estimates of theMarcellus shale, a massive sedimentary rock formation, the bulk of which is in Ohio, New York, Pennsylvania and West Virginia.

In August 2011, the U.S. Geological Survey released its 10-year report on the amount of technically recoverable gas in the Marcellus, raising its estimate from 2 tcf in 2002 to 84 tcf now.

“The increase in undiscovered, technically recoverable resource is due to new geologic information and engineering data, as technological developments in producing unconventional (shale) resources have been significant in the last decade,” the USGS report says.

The assessment caused the government’s Energy Information Administration, the DOE’s data-gathering arm, to drastically reduce its previous Marcellus estimate of 410 tcf, triggering a small controversy in energy circles.

Energy researchers upset about the differing federal numbers aired their grievances at a conference at Penn State in March organized by Engelder. His estimates of gas in the Marcellus formation and those of IHS more closely match the EIA’s earlier, more optimistic, predictions.

“When you see conflicting or at least apparently conflicting information out there, it has implications,” says Patrick Henderson, Pennsylvania Gov. Tom Corbett’s top energy adviser. “It can send a signal for people who want to do business in Pennsylvania that maybe it’s not as promising as what was thought.”

The amount of gas in the Marcellus has been disputed for years, and accurate data are crucial for long-term policy decisions, experts say.

“Resource investment is a dynamic thing that changes over time, says Sara Banaszak, chief economist for America’s Natural Gas Alliance, an industry group. “The historical pattern has shown that estimates change in an upward direction, especially with new technology and geology. That trend has upheld well in the USGS estimates, suggesting we do a good job of staying conservative.”

 

‘Gas Shale Bonanza’

Whichever estimates play out, Engelder says his research convinces him the Marcellus “will become a super-giant gas field.”

 

“Coupled with other gas shale plays in North America, the prospects for a reliable supply of natural gas for the next several decades are so substantial that national energy policy will eventually adapt to this gas shale bonanza,” he says.

One reason for differing estimates of natural gas reserves is that they can be measured in different ways.

The Potential Gas Committee, the USGS and the EIA estimate “technically recoverable resources,” which can be produced using current technology, regardless of the current price of gas. Those estimates change as technology changes, as has been the case in the past four years with fracking.

A more conservative estimate is demanded by the Securities and Exchange Commission, which requires public companies to provide reserves data in their annual reports. So-called “proven reserves” are only those that can be produced profitably at current prices. Those estimates change as prices fluctuate.

Another term, gas “in place,” includes amounts that are not currently recoverable, as was shale gas several years ago. Shale gas that was deemed unrecoverable five years ago, now accounts for over 30 percent of overall U.S. gas production.

2011 report by British Petroleum (BP) estimated that, by the end of 2010, the United States had “proven” reserves of 272.5 tcf. That represents a 12-year supply, with most energy experts agreeing that “proven reserves” have a 90 percent probability of going to market.

Are Exports the Answer?

“Going to market” with today’s natural gas prices, however, is problematic for many energy companies. The current price of about $2.50 per British Thermal Unit is more than 50 percent off the 2011 peak and just a fraction of the record highs of 2008. Price is important because as the price rises, more reserves can move from the “technically recoverable resource” category into the “proven resource” category.

The number of operating U.S. gas rigs dropped 30 percent last year, from 900 to 600, says IHS’ Stark. “For a period of time, this will help bring supplies back in line with demand,” he says.

Consultants like John Harpole, president of Denver-based Mercurator Energy, think the answer to current price woes lies in exports.

While prices here are below $3, prices in Asia are $14-$16 mmBTU, and $12-$14 mmBTU in Europe, says Harpole, formerly vice chairman of the Natural Gas Committee for the Independent Petroleum Association of America. “If we start selling more in worldwide markets, we might see a stronger price at home.”

Stark sees a huge U.S. competitive advantage “with such large volumes of natural gas delivered at a very low price.”

“The price in the rest of the world is more than $10 a unit,” says Stark. “We have a lot of options to make some really prudent decisions to support the U.S. economy. The amount of natural gas in North America is huge gift for us.”

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Parking Lots Offer Safe Haven for Real-Estate Investor

Published: Thursday, 1 Dec 2011 |
By: Rob Reuteman,
Special to CNBC.com

If you’re scouting the ravaged commercial real estate sector for a safe haven, parking lots may be worth a look.

Courtesy: International Parking Institute

If you can find one to bid on before it’s snatched up, that is. And if the price isn’t already well out of your range.

“A surface parking lot offers a good rate of return and its rewards are as close to being recession-proof as you’re going to get,” says Ross Moore, chief economist for Boston commercial real estate firm, Colliers International.

“The older ones are nice little cash cows with relatively little maintenance,” adds Moore, who has authored an annual North American Parking Rates Survey for the past ten years.

Says the Alternative Asset Alliance newsletter, “Investors are beginning to realize that a well-located urban parking facility offers stable, long-term revenue growth and that this asset class is becoming an important part of any diversified realestate portfolio.”

The numbers overwhelmingly favor the US parking industry, which grosses some $25–30 billion annually, according to the International Parking Institute.There are nearly a quarter-billion registered U.S. passenger vehicles, which remain parked 96 percent of the time, IPI says.

But two problems loom for the average investor wanting to get into the parking business, says John Roy, co-author of The Ultimate Parking Business Buyer’s Guide.

“Not many show up in real estate listings, and the ones that do are very expensive and usually out of reach for smaller investors,” says Roy.

But with the recession pummeling the price of almost all real-estate assets, “This is the best time to get into parking market,” he says.

A recent search offered slim pickings. There’s a corner, paved lot in downtown Memphis “next to a famous bar/grill” and “near many amenities.” Price: $13,000.Roy’s online newsletter offers a simple starting point: Do an online search for the term “parking lot for sale,” and maybe add the city you’re eyeing.

A half-acre paved lot in Cook County, Ill., is selling for $724,000. The much-higher asking price may be why it’s been online for more than three months.

Commercial Brokers

Another, more traditional approach is to find commercial brokers who specialize in parking lots.

Wade Fletcher and Steve Roesinger do just that in Denver for the Newmark Knight Frank Frederick Ross Capital Group. Roesinger has been buying and selling parking lots for nearly 40 years.

He says he’s on a first-name basis with local lot owners he’s been calling on all that time.

“There are a limited number of surface lots out there, but as with any real estate, sometimes people don’t know they want to sell until you present them with an offer,” says Roesinger. “Other times, an illness, a pending move or a financial reversal may trigger a sale. “

While $100,000 might get you a small lot “on the periphery of downtown,” a million-dollar lot will net a profit stream of at least $45,000 a year after taxes, insurance, debt service and on-site operation services, he says. That’s a 4.5-percent annual return.

Courtesy: International Parking Institute

“Find somebody to do it for you and it’s not a complicated business,” Fletcher said. “Lots are pretty easy to run, relative to a lot of other commercial real estate products.”

Beware of ‘Leakage’ in Parking Business

Other experts would beg to differ.

“It sounds like an easy thing to do, but it’s extremely difficult to make it profitable,” says John Van Horn, editor of Parking Today magazine. “It’s like buying a bar. If you don’t know how to run it, you’ll lose money. Many companies have gone broke. It sounds like a lot of cash, but there are many ways for it to disappear. You’d better have someone who knows about it to work with you as third-party investor.”

In the parking business, disappearing cash is known as “leakage.” Ten years ago, when parking was largely a cash business, 10 percent to 40 percent of the revenue taken in at a lot never made it to the bank, Van Horn said.

Some, not all, was stolen, though. “A lot of it is incompetence. But tens of thousands a month can disappear, and that’s a problem. “

Even today, with many lots offering payment by credit card or even cell phone, Van Horn estimates the parking business is still 60 percent cash-driven.

Larry Cohen, executive director of the Lancaster,Pa., Parking Authority and a member of the Advisory Council of the International Parking Institute, agrees.

“People don’t realize how sophisticated a business it is to operate,” he says. “Many surface lots, if they’re not run as a true full-time business, underperform.”

If the parking cashier is driving nicer car than you are, there might be a problem, Cohen said.

 

Do Your Homework First

Cohen advises that anyone interested in buying a lot “take the time to do the research, and learn how to manage revenue, construction and design.”

Attend a parking industry convention and ask a lot of questions, he adds. IPI is holding one next June in Phoenix, while Parking Today has another slated for March in in Chicago.

Roy strongly urges any new owner to operate the lot ”hands-on” for a year or two before turning it over to a third-party operator.

“Most people are able to do it,” he says. “It gives them ability to learn the industry — the ins and outs, peak hours, what works and doesn’t, what labor they’ll need. Then, if they decide to turn it over to an operator, they’ll be able to spot leakage and there’ll be no surprises.”

Roy, who also works as a consultant for prospective lot buyers, epitomizes the success a novice can attain. In 2005, when he was studying for his MBA at Notre Dame, he noticed on football game days there was little parking near the South Bend, Ind., stadium. He noticed people parking cars all around their houses, and he noticed the houses weren’t worth much.

So he began buying up properties, tearing down the houses and turning them into dirt-and-grass parking lots. Eventually he sold seven lots to developers who built townhouses and student housing

Seven years later, Roy and some partners are developing a three-acre parcel of raw land into a parking lot adjacent to a the new $340 million San Bernadino County courthouse in California.

He read about the new courthouse in the paper, and quickly scooped up a parcel of raw land adjacent to it “before it became a big deal.”

Roy outlined several paths for the would-be investor. A buyer with access to $500,000 to $3 million could buy a good existing lot that would generate positive cash flow as they paid down debt.

Another angle, he says, is for smaller players without a lot of money — $250,000 or less.

“We specialize in lower-end investments,” says Roy. “There are cheaper ways to get in and buy a lot.”

Look for opportunities in your area, he advises; if you hear or read about a significant new development, start looking for raw land near it.

“Know your area, listen to the news,” he says. “If something big is going to get built, they’re going to need parking. You get to where everything you read about is a potential parking opportunity. It’s amazing how you look at things differently.”

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Housing in Mountain States Climbs Back

Housing in Mountain States Climbs Back

By Rob Reuteman
Special to CNBC.com
| 30 Mar 2012 | 12:52 PM ET

Residential housing in the mountain states of Colorado, Utah and New Mexico is looking stronger than many others, but that’s partly because the comeback hasn’t been as steep.

Simply put, homes in the region didn’t appreciate in value over the last decade as much as in the coastal regions, Arizona or Nevada.  What didn’t go up much before the bubble burst in 2008 didn’t go down much once it did.

Homes certainly lost value, but owners don’t have to regain as much ground to attain their earlier equity.

“We didn’t experience the bubble that California, Florida, Arizona and Nevada did,” said Thomas Thibodeau, a residential real estate expert at the University of Colorado’s Leeds School of Business. “Prices in Denver came down about 14 percent, peak to trough, and it now looks like the decline has come to an end.”

In 2008, Thibodeau co-authored a study examining 84 U.S. metro areas for signs of a speculative housing bubble. Twenty-five cities showed housing prices 30 percent over the expected increase, the study concluded.  But with the exception of Las Vegas, all were within 75 miles of the Pacific or Atlantic coast.

“Extreme speculative activity, so prominently publicized, was extraordinarily localized,” the study concluded.

The 2012 story of residential real estate in the so-called Intermountain West can be told in a tale of three cities — Salt Lake City, Albuquerque and Denver — where its population is most concentrated.

Salt Lake City Picking Up

Home sales in Salt Lake City climbed for the eighth-consecutive month in January, up more than 30 percent from a year ago, according to a recent report by the Utah Association of Realtors. Meanwhile, Utah reported its best January in five years, with nearly 2,000 residential closings.

The Utah market began 2012 in much the same way the prior year concluded, says Utah Association of Realtors President Lori Chapman.

“Sales were up, inventory was down. The spring buying season also is looking like it will be stronger than last year,” says Chapman.

Data from Trulia.com, which tracks residential real estate nationwide, also shows a buyer’s market in Salt Lake, with a median sales price of $122,085 reflecting an 11.2 percent decrease from December 2011 to February 2012.

Salt Lake home sales in the past five years have jumped 9.6 percent, according to Trulia.

“We’ve been in multiple buyer situations, [making] it hard to get a property,” says Janet Marroquin, an agent with Sold By An Angel Real Estate. “We’ve been fighting for properties.”

Indeed, housing inventory in Utah fell 24 percent in January year over year, says Chapman.

Denver Almost Tops

The closely watched Case-Shiller index for January showed the Denver market in positive territory for the first time in 18 months.

The slight 0.2-percent, year-over-year increase was the third-best showing among the 20 cities tracked in the barometer.

Other than Denver, only Detroit and Phoenix showed price increases, at 1.7 percent and 1.3 percent, respectively.

Chris Mygatt, president of Coldwell Banker Colorado, says an improving housing market is reverberating throughout Denver’s economy. “I think it’s an important tell-tale sign, one of many pointing to a continued recovery and stability in the Denver housing market.”

Mygatt adds, “I’m being told that there is an increase in furniture sales and landscaping. It really is across the board. Although our strength is modest compared to recoveries of the past, I really do think there is a fundamental shift in consumer confidence and the local economy.”

Another positive sign is the number of unsold resale homes. They plunged 42 percent in February from a year ago, according to the report released by independent broker Gary Bauer.

There were only 10,086 unsold single-family homes and townhomes/condominiums on the market in February, about 60 percent less than the year-ago period, and the least for that month since 2000, says Bauer.

“The inventory is a somewhat challenging situation,” he says. “It’s a good-bad situation, depending on whether you are a buyer or a seller.”

The relative lack of Denver homes for sale has caused Fuller Sotheby’s agent Nancy Levine to reach into her bag of tricks for something she hasn’t used since housing’s heyday in the mid-2000s.

“For the first time in five years I’m getting multiple offers on homes,” Levine said. “So I’m putting escalation clauses into offers again. We tell the seller we’ll pay them $10,000 over whatever other offer they get.”

The biggest problem Denver brokers are having is finding properties for buyers, says Levine. “Relocation clients, people moving here from Nashville or Southern California for jobs, are blown away by the market here. They say they like a house, we go back and it’s already under contract.”

“Prices aren’t up much yet, but I think they’re headed that way,” she adds. I’m seeing more consumer confidence, people feeling better about their jobs and the economy. In Colorado, we feel as if we are finally moving forward, that the worst is behind us.”

Albuquerque Rising

In RE/MAX’s 2012 national housing report, Albuquerque topped all 53 metro areas surveyed, with a 46.6 percent-increase in the number of year-over-year sales.

Another sign of health: according to RealtyTrac, only one in 12 homes sold last year in New Mexico was somewhere in the foreclosure process, versus to one in four nationwide.

But veteran homeseller Kurstin Johnson isn’t ready to say hard times are behind the city.

“Last year was excellent, we recorded the highest volume of sales in three years,” says Johnson, who’s parlayed 25 years of local realty experience into ownership of her own boutique firm, Vista Encantada Realtors.

“This year’s been slow been to start — plenty of buyers but no closings,” she says. “Everyone I speak with is experiencing a bit of a slowdown. People are sitting on the fence. There doesn’t seem to be anything to propel buyers to act. We have fewer active listings than we’ve had since 2006.”

Johnson concedes it’s only March, with the year’s hottest buying and selling yet to come. But even when she gets a buyer and seller together, there’s tighter credit and stricter loan requirements, especially in the Mountain States, she says.

“I’m sitting on a million-dollar closing right now, and there aren’t that many in Albuquerque,” Johnson says. “I’m waiting for an underwriter in New York City to approve a loan. He’s questioning why the local appraiser would put more value on a home with a mountain view than one with a golf course view.”

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Book Review: How to Survive the Coming Retirement Storm


Reviewer's ChoiceHow to Survive the Coming Retirement Storm

Robert Margetic
Xlibris, 282 pages, (paperback) $19.99, 9781462847594
(Reviewed: December, 2011)

 

By Rob Reuteman

Special to BlueInk.com

As current as a 2011 issue of Smart Money magazine, yet deserving of a spot on the shelf alongside other treasured reference books, financial advisor Robert Margetic’s How To Survive the Coming Retirement Storm, describes in sobering detail the “retirement storm” that is already upon us. Major changes in taxation, health care, Social Security, inflationary risk and investment security are a certainty.

But by utilizing prudent and up-to-date guidance, a successful retirement is still well within grasp, the author maintains. “The new retirement is a marathon,” Margetic writes. “The race is not over the moment you retire. You’re just getting started and there are many laps to go.”

Margetic’s book goes well beyond the importance of measuring investment performance. There’s much more to getting ready for retirement than just saving enough money, he notes. Encouraging the reader to make a “mental video” of ideal retirement, he charts a path – using simple diagrams, mnemonic devices and personal assessments – to managing the crucial balance between income sources and lifestyle expenses. Social life, health, long-term care and estate issues are dealt with separately, but also inter-connectedly with finances, in a way that shows how a reader can navigate the volatility we already encounter, with more sure to come.

If Margetic’s writing seems repetitive at times, which it is, it’s more along the lines of a high school teacher drilling important lessons into a student who may not yet realize their import. You can’t be exposed to some of these hard-to-grasp financial concepts too many times when your well being for decades into the future is at stake.

Margetic has delivered a well-written, well-organized book of advice on how to successfully leave the workforce in today’s recessionary landscape. For someone contemplating retirement, or already in its midst, this guidebook is a valuable source of counsel, and will be for years to come.

 

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Selling Fear for Fun and Profit

By Rob Reuteman
Special to CNBC.com

| 21 Oct 2011 | 04:06 PM ET

Whether you took in a screening of “Scream 4” this year, visited a haunted house this month, or bought a zombie Halloween costume, you’re a customer in the “business of fear.”

Yes, people continue to pay good money to get scared out of their wits.

Broaden the customer base to include extreme sports enthusiasts. Mix in sedate readers of Stephen King, Anne Rice, or Charlaine Harris, and you’re talking about tens of millions of Americans plunking down billions of dollars annually.

“A lot of people like to be scared,” says Paul Dergarabedian, a Hollywood.com box-office analyst. “It’s one of the most basic emotions people have.”

In the mid-1980s, Temple University psychologist Frank Farley coined the term “Type T” to define a thrill-seeking personality.

“These thrill-seekers thrive on the uncertainty associated with activities that most people would consider scary,” says Farley. “The ‘fear business’ usually offers us a cocktail of thrills, excitement, intensity, and challenge. It represents departures from the baselines of our lives.”

Farley estimates Type T personalities represent 10 percent to 30 percent of the global population.

“America to some extent is a Type-T nation,” says Farley. “I see the risk-taking quality at a deep level in this country. After all, we’re founded by fearless risk-taking types.”

Rest assured, whatever the behavior, business is there cater to it. Here are some examples.

Halloween

Seven of 10 Americans — 161 million people — plan to celebrate Halloween this year, spending an average of $72.31 on decorations, costumes and candy, according to a National Retail Federation survey.

Once you tally spending for parties, visits to a haunted house, pumpkin carving — even pet costumes — total Halloween spending is expected to reach $6.86 billion, tops for a non gift-giving holiday.

Per-person spending on Halloween has increased every year but one since 2004, when the average was $41, said Kathy Grannis, NRF’s director of media relations.

“There’s a large belief that it’s become so popular because it’s no longer seen as a children’s holiday,” says Grannis. “Fifteen years ago, the adult costume selection was very limited, often just a black plastic trash bag.”

This year, more will be spent on adult costumes ($1.2 billion) than children’s costumes ($1 billion), with pet costumes taking in another $310 million.

An entire Halloween industry has been built on people’s enjoyment of fear.

“Festivities run the gamut,” says Grannis. “Costume parties at bars and theme parks now start on Oct. 1.”

Haunted Houses

Nearly 23 percent of Americans — 37 million people — celebrating Halloween this year will visit a haunted house in October, according to the NRF.

Those numbers will translate into ticket sales worth more than $360 million, says Leonard Pickel, editor of Haunted Attraction magazine. In addition, he says an estimated $150 million was spent this year on building and refurbishing haunted venues, which now number between 3,000 and 5,000.

Some houses will take in more than 50,000 attendees, paying $20 or more a ticket during an average 20 days of operation in October, says Pickel.

Haunted house operators even hold an annual convention, HAUNTcon, which features several days of workshops designed to help attendees learn new makeup techniques, prop and set building, advertising and marketing, and actor training, as well as other tips to make their attractions more successful.

This year’s tradeshow, held in early May in Monroesville, Pa., brought more than 40 exhibitors, including Gore Galore, the Hot Wire Foam Factory, Rotting Flesh Radio and Fright Props.

Film and Television

The domestic box office take for horror films in the past three years has been about $1.5 billion, according to an analysis done for CNBC by Hollywood.com, which tracks the entertainment industry.

Horror movies are popular with film makers because they typically don’t cost much to make and enjoy a built-in audience, offering the potential for stellar profits. Horror movies consistently have the most films in the top 20 for return on investment and the least in the lowest 20 ROI, according to web site The Numbers.

Best exemplifying this business model is the 2007 hit “Paranormal Activity,” which was made for $15,000 but grossed nearly $162 million. As with most current horror films, there have been two sequels, so far.
Top Ten Grossing Horror Movie Franchises

For the movie-going public, horror films can offer gut-wrenching fear in a safe setting.

“The promise of thrills, of controlled scares, and the sense of engaging in mildly transgressive behavior certainly explains why some movie watchers gravitate to scary movies,” says film historian Richard Nowell from Charles University in Prague.

“People can vicariously exorcise their own demons,” adds Hollywood.com’s Dergarabedian. “In the safety of your own home or theater, you can visualize something you’d never live through in your life or want to.”

Television has been cashing in on the horror genre in recent years, especially with programs about vampires. HBO’s “True Blood” is the network’s biggest hit since “The Sopranos,” with 5 million regular viewers. At an average price of $40, more than 1.4 million DVDs of “True Blood: The Complete First Season” were sold. The show just finished its third season.

Since the three-film “Twilight” franchise began a little more than two years ago, vampire films have brought in $7 billion, according to the Hollywood Reporter.

Books

Most experts track the current vampire trend back to the 2005 publication date of stay-at-home-mom-turned-author Stephenie Meyers’ “Twilight” series.

Vampires have always been fascinating to people, but “Twilight” put them on another level, took it into the mainstream,” says Hollywood.com’s Dergarabedian.

The ensuing series of books has sold more than 100 million copies, according to the publisher.

Last year, eight of Amazon.com’s top 10 best-selling fantasy books were about vampires. Fully half of the books on the Barnes and Noble Best Selling Fantasy Books list were about vampires.

Meyer’s vampy counterpart, Charlaine Harris, has sold more than 8 million copies of her 10-book Sookie Stackhouse series that spawned the “True Blood” TV show.

Vampire author Anne Rice wrote 12 vampire novels, starting with 1976’s “Interview With The Vampire” (later a film with Tom Cruise and Brad Pitt).

Before that, according to The Hollywood Reporter, about 1,000 vampire titles had been published. Since then, more than 41,000 vampire titles have been published.

The all-time king of horror authors, however, is Stephen King, who has sold more than 350 million copies of his 49 scary novels.

Zombie Walks

Ever since horror film director George Romero spawned the zombie craze in 1968 with his cult film, “Night of the Living Dead,” the movement seems to get a little bigger each year.

According to NRF’s 2011 Top Costumes survey, more than 2.6 million men, women, and children plan to dress as zombies this Halloween. For adults, zombie costumes jumped this year from seventh to fourth on the list of most popular.

Why so trendy? More Romero films and a hit cable TV show, “The Walking Dead,” helped.

By popular definition, zombies are corpses risen from the dead in vast numbers by some supernatural force, usually for some evil purpose.

“Zombies tap into a lot of different elements of our psyche,” says Hollywoood.com’s Dergarabedian. “People wonder what happens to souls when they die. People relate to it.”

In large numbers, apparently. Since 2001, groups around the world have successfully promoted zombie walks, in which thousands of participants dress up as zombies, shuffle and lurch along city streets together, for fun and, increasingly, for charity.

In 2008, a Zombie Fest in Pittsburgh gathered more than 2,000 pounds of food for the hungry. In Detroit, World Zombie Day Walk Against Hunger has gathered more than 8,000 pounds of food and 18,000 in the past four years. In Manchester, U.K., and Dublin, Ireland, thousands of zombies raised money to fight cancer.

It just goes to show, even the horror business has a heart.

© 2011 CNBC.com

URL: http://www.cnbc.com/id/44786033/
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© 2011 CNBC.com

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Move up the Corporate Ladder Stalls for Women

Move up the Corporate Ladder Stalls for Women
Published: Monday, 10 Oct 2011 | 11:31 AM ET

By: Rob Reuteman,
Special to CNBC.com
Women may be happy about the strides they’ve made in corporate America, but they’re hardly satisfied.

“The corporate landscape is changing for the best, but the numbers remain stagnant,” says Charlotte Laurent-Ottomane, president of ION, a consortium of 14 regional organizations advancing women in business.

“It’s true women are increasingly becoming fixtures in corporate America, in higher-ranking positions,” says Sheryl Skaggs, a sociology professor at the University of Texas-Dallas.

“It’s fantastic, but to say it’s enough is missing the boat,” adds Skaggs, who landed a National Science Foundation grant this year to study so-called “glass ceiling” issues that continue to stifle gender equality in the workplace.

The progress of working women through the ranks to the tops of companies is stalled, says Deborah Soon, a senior vice president at the Catalyst Foundation, a nonprofit group that researches gender-equality issues.

As evidence, Soon cited Catalyst research findings:

The number of women in the boardroom has stagnated, holding around 15 to 16 percent for the past several years.
The number of executive officers has not improved appreciably, rising from 13 percent to just 14 percent over the past couple of years.
In 2010, women held 14.4 percent of executive officer positions at Fortune 500 companies and 7.6 percent of top earner positions.

The high-profile September 6 firing of Carol Bartz as CEO of Yahoo dropped the number of female chief execs in the Standard & Poor’s 500 Index to 17, a little more than 3 percent. There were five in 2001, according to the executive search firm Spencer Stuart.

“The number of women and minority board members and executives has remained essentially flat over the past several years, demonstrating a clear disconnect between diversity initiatives and outcomes,” says Barbara Krumsiek, chief executive of Calvert Investments, in the preface of her firm’s influential 2010 report, Examining Cracks in the Ceiling.

The research found that while women make up 18 percent of director positions in S&P 100 firms, they represent only 8.4 percent of the highest paid positions “that provide the opportunities to develop the expertise and networks needed for future board-level appointments.”
What’s most frustrating to gender-equity advocates about the stagnant, low numbers is the growing body of research that shows diverse management teams produce better financial results than all-male teams.

Soon cited Catalyst’s groundbreaking 2004 report, “The Bottom Line: Connecting Corporate Performance and Gender Diversity,” which concluded that companies with the greatest gender diversity at the top had an average 35 percent better return on equity and 34 percent better total return to shareholders than companies with the least gender diversity at the top.

Catalyst’s 2007 report,“The Bottom Line: Connecting Corporate Performance and Women’s Representation on Boards” reached similar conclusions, Soon said.

A recent study by the McKinsey management consulting firm found that companies with three or more women in senior management positions score more highly on nine organizational excellence criteria than companies with no women at the top.

It makes perfect sense if you think about it, according to Skaggs.

“Women bring different perspective to the playing field, which often helps bottom line,” she says. “They bring different problem solving strategies, different networks offer different opportunities to companies.”
Laurent-Ottomane contends that a female perspective brings substantial value to management. “Women tend to be more risk-averse. They have a different approach to negotiation,” she says. “They tend to be peacemakers and consensus builders, in my opinion. There’s more give and take in decisionmaking, rather than ‘this is the way it’s gonna be, take it or leave it.’ As a result, companies run better.”

“I’m not saying men don’t act this way, I’m saying women tend to do it more often,” she adds.

The International Monetary Fund  identified such “group-think” — caused by a lack of diversity of thought — as one reason for the global financial crisis, says Melissa Anderson, editor at the Glass Hammer, a blog for women executives.

“People of similar backgrounds are likely to rubber-stamp the plans of those who look and sound like themselves,” Anderson says. “The presence of diverse individuals with fresh viewpoints encourages teams to take a closer look at management practices and performance.”

Women’s frustrations with the slow rate of progress in corporate America are tempered with some signs that equality is making strides. Laurent-Ottomane cites a Securities and Exchange Commission ruling last year that companies now must disclose in their regulatory fillings what, if any, diversity policies they have, and how they are measured and enforced.

“The balance is slowly shifting, from a societal standpoint and a corporate one,” she says. “My generation has trained its daughters to be more self-confident and to achieve what they want. For young women now, it’s an easier push up the corporate ladder than it was 30 years ago.”

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