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Forget restaurants and retail — teens are seizing the jobs they want as ‘desperate’ employers try to fill seats

Published

9 months ago

July 7, 2022

Forget restaurants and retail — teens are seizing the jobs they want as 'desperate' employers try to fill seats — Forget restaurants and retail — teens are seizing the jobs they want as ‘desperate’ employers try to fill seats

With unemployment hitting new lows, employers are turning over rocks these days to find qualified workers. Enter Gen Z — who previously proved their mettle in last summer’s hiring spree.

“I think why we’re seeing this summer be an even stronger labor market for young people than last summer, is exactly because employers did rediscover that teenagers can do jobs,” says Alicia Modestino, an economist at Northeastern University.

Data from HR and payroll company Gusto shows that teens aged 15 to 19 years old accounted for almost 10% of new hires in April 2022 — a sharp rise from when they made up just 2% in April 2019.

And then in the month of May alone, that rose to 13%, according to Gusto economist Luke Pardue.

That spike might not surprise you, given that the unemployment rate for young people is now at a 70-year low, and the number of teens looking for work or currently in the labor market is the highest the country has seen since 2008, Modestino explains.

But teens may be surprised to discover just how much power they hold so early in their careers.

“This is about as good as it gets for young people to be able to find a job.”

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Teens more active than ever in the labor market

With the overall unemployment rate at just 3.6% and plenty of workers quitting their jobs for better opportunities, teen hiring rates have surged, according to Pardue.

“We saw — after the pandemic last year — small businesses look to teenagers to fill some of the gaps as older workers were unable or unwilling to return to the labor force. And we’re seeing that happen this year again to a larger extent,” he says.

He adds that teenagers may even provide employers with an edge in the current labor market, citing advanced digital skills and greater energy.

Modestino says she’s seen plenty of employers where she lives in Boston rehiring the teenagers they had last year for their summer jobs programs. However, she notes that while data shows there’s a strong labor market for youth right now, it’s not necessarily equal.

Last summer, almost four in 10 white teens were employed, compared with 29.4% of Black teens, 28.6% of Hispanic teens and 20.2% of Asian teens, according to the Pew Research Center.

“There’s a whole set of young people who are being left out of this very strong labor market, and that’s where a lot of those summer youth employment programs come in, in the inner cities to try to level that playing field,” Modestino says.

Employers are desperate for new talent

As a group, though, young people are able to aim for jobs both higher and broader than usual.

“It’s never been a better time to be a teenager looking for a job,” says Pardue.

“They’re able to get creative, so they don’t need to look for the usual restaurant or corner retail shop where they might have looked for a summer job before. They can really try to expand their horizons and pick a job that fits their interests and their skills.”

Gusto data shows that while teen hiring has always been strong across the retail and hospitality sectors, there has also been an increase in professional services (such as accounting and law firms) from 1.1% to 5.9% between 2019 and 2022.

Modestino says she hasn’t seen this trend in the data she’s reviewed, but agrees that there’s been strong hiring and wage growth in retail and hospitality.

“I think [teens] should be prepared for employers who are desperate,” she notes.

Employers are offering better pay, perks and bonuses

Part of what may be luring teens into the labor force is that the pay is better than ever. Average hourly wages for teenagers went from $14.47/hour in April to $14.95/hour in May, according to Gusto.

Connecticut’s Department of Energy and Environmental Protection (DEEP) recently made headlines for upping its starting pay for lifeguards (who must be at least 16 to apply) from $16 to $17/hour, and then to $19/hour. The hourly range now falls between $19 and $21/hour.

“It has been difficult to find help,” says Sarah Battistini, an environmental analyst and water safety coordinator at DEEP.

Battistini says DEEP was already on a trajectory to raise the starting pay to $17/hour; however, they boosted the rate in hopes of drawing more applicants.

It’s not just higher pay that teens are looking for — opportunities for professional development or upward mobility are also attractive.

For example, the lifeguard position at Rocky Neck State Park comes with paid training and a yearly raise. Eighteen-year-old Ryan Anderson started lifeguarding three years ago at an entry-level salary of $12/hour but has now worked his way up to over $20/hour.

Battistini says they also prefer to promote from within. The base benefit of hiring a 16-year-old, she explains, is long-term retention.

“You’ve trained, you do a good job, you start to show those leadership skills, then we’re going to work to professionally develop you into a higher-level supervisory position,” says Battistini.

“And then, once I have lifeguard supervisors that are returning, I invest in them and give them additional training and additional certifications.”

Helping teens expand their job-search horizons

Some businesses are sweetening the pot even more to entice young workers. Modestino says she’s seen $500 signing bonuses at some grocery stores, extra pay for working nights and weekends at retailers like Target and even tuition assistance at businesses like Amazon.

And while some employers may want teens to work as many hours as possible, she adds that in this competitive market, teens have the bargaining power to negotiate — whether that comes to scheduling, responsibility or pay.

Modestino says while teens can afford to be choosy, they do need to put themselves out there.

“The advice that I gave my kids was don’t apply to just one job. Apply to several. But don’t take the first job offer you get, either.”

Anderson adds that finding your first job with no prior experience can still be difficult, but places like Rocky Neck are actively recruiting teens. He’s even recruited several of his friends.

“Most kids I know are going to college, and I hope they know how to pay for that,” he says. “[Working] is a great thing to do during your summers.”

A first job can be daunting, adds 17-year-old Ben Schies, another lifeguard at Rocky Neck. However, it’s also rewarding — and he’s learned skills that he can take with him through the rest of his career.

“You’re gonna have these people’s lives in your hands sometimes. It’s scary, but it’s also a great experience,” Schies says. “I would recommend it to anybody.”

American Weed Stocks Are Cheap. They’re About to Get a Sales Bump.

Published

9 months ago

July 11, 2022

letizo News

However bad the year has been for most stocks, it has been especially harsh for state-licensed cannabis sellers.

In just the past month, the

AdvisorShares Pure US Cannabis

exchange-traded fund (ticker: MSOS), which tracks America’s multistate operators—or MSOs—fell 25%, while the

S&P 500

dropped 7%.

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How Do Mega Backdoor Roths Work?

Published

9 months ago

July 11, 2022

letizo News

A mega backdoor Roth is a unique 401(k) rollover strategy that’s designed for people whose incomes would ordinarily keep them from saving in a Roth Individual Retirement Account. The advantage of using a Roth IRA to save for retirement is being able to make tax-free qualified withdrawals. But not everyone can contribute to these accounts; higher-income earners are excluded. That’s where the mega backdoor Roth comes into play. If you have a 401(k) you’d like to roll over, you could use this strategy to enjoy the tax benefits of a Roth IRA without having income be an obstacle.

Make sure you’re taking advantage of every opportunity to maximize your retirement assets by working with a financial advisor.

Roth Account Basics

Before diving into the specifics of a mega backdoor Roth, there are a few things to know about Roth accounts, including Roth IRAs and Roth 401(k)s.

First, these accounts are both funded with after-tax dollars. That means when you make qualified withdrawals later, you won’t pay income tax on the money since you already paid it upfront. This is the key characteristic of Roth accounts and what makes them so appealing to investors who anticipate being in a higher tax bracket at retirement.

Next, your ability to contribute to a Roth 401(k) is not restricted by your income. But it is for a Roth IRA. For the 2021 tax year, you must be within these modified adjusted gross income limits to make a full Roth IRA contribution:

Single filers: MAGI of $125,000 or less
Married filing jointly: MAGI of $198,000 or less
Head of household: MAGI of $125,000 or less

You can make partial contributions above those income limits. But your ability to contribute phases out completely once your MAGI hits $140,000 (if you file single or head of household) or $208,000 if you’re married and file a joint return. For 2021, the full contribution allowed is $6,000 with a $1,000 catch-up contribution for savers aged 50 and older.

Finally, Roth 401(k) accounts are subject to required minimum distribution rules just like traditional 401(k) accounts. This rule requires you to begin taking money from your 401(k) starting at age 72. A Roth IRA, on the other hand, is not subject to RMD rules.

What Is a Backdoor Roth?

A backdoor Roth offers a work-around for people whose incomes are above the limits set by the IRS. When you execute a backdoor Roth, you roll money over from a traditional IRA to a Roth account. This way, you won’t have to pay taxes on your retirement savings in the Roth IRA when it’s time to make withdrawals. And you’re not subject to required minimum distribution rules either.

But there is a catch. You have to pay income tax on the money you roll over to a Roth account. So while you could save money on taxes in retirement, you’re not escaping the tax liability of a traditional IRA altogether.

How a Mega Backdoor Roth Works

A mega backdoor Roth is a backdoor Roth that’s designed specifically for people who have a 401(k) plan at work. This type of backdoor Roth allows you to contribute up to $38,500 to a Roth IRA or a Roth 401(k) in 2021. This is in addition to the regular annual contribution limits the IRS allows for these types of accounts. To execute a mega backdoor Roth, two conditions have to be met. Your 401(k) plan needs to allow the following:

You can ask your plan administrator whether your 401(k) meets these criteria. And if your plan doesn’t allow for in-service withdrawals or distributions, you could still attempt a mega backdoor Roth if you plan to leave your job in the near future.

If your plan meets the criteria, then you can take the next steps to execute a mega backdoor Roth. This is typically a two-step process that involves maxing out after-tax 401(k) contributions, then withdrawing the after-tax portion of your account to a Roth IRA.

Again, whether you can follow through on the second step depends on whether your plan allows in-service withdrawals. If it doesn’t, you’ll have to wait until you separate from your employer to roll over any after-tax money in your 401(k) into a Roth IRA.

You also need to watch out for the pro rata rule. This IRS rule says you can’t only withdraw pre- or post-tax contributions from a traditional 401(k). So if you’re completing a mega backdoor Roth, you couldn’t just withdraw post-tax contributions if your account holds both pre- and post-tax funds. In that case, you may have to roll over the entire balance to a Roth IRA.

Benefits of a Mega Backdoor Roth

There are three key benefits associated with executing a mega backdoor Roth. First, you can contribute significantly more to a Roth IRA upfront this way. For 2021, the contribution limit is $38,500 on top of the regular annual contribution limit and any catch-up contribution limits that may apply.

You’ll need to know the maximum amount you’re allowed to contribute to the after-tax portion of your 401(k). So for 2021, the IRS allows a maximum contribution of $58,000 or $64,500 if you’re 50 or older. You’d subtract your 401(k) contributions and anything your employer adds in matching contributions to figure out how much you could add to the after-tax portion.

Next, you can enjoy tax-free withdrawals in retirement. This is a benefit you may otherwise not being able to get if your income is too high to contribute to a Roth IRA. By reducing your tax liability in retirement, you can help your investment dollars go further. And you may have a larger legacy of wealth to pass on to future generations.

Finally, a mega backdoor Roth IRA would allow you to sidestep required minimum distribution rules. This means that you could retain control over when you choose to take distributions from a Roth IRA.

So who is a mega backdoor Roth right for? You may consider this move if you:

Have an eligible 401(k) plan at work
Have maxed out traditional 401(k) contributions
Are not eligible to contribute to a Roth IRA because of your income
Have additional money that you want to invest for retirement
Want to leverage the higher Roth IRA contribution limits allowed by a mega backdoor rollover

Talking to your financial advisor can help you decide if a mega backdoor Roth makes sense. And your 401(k) plan administrator should be able to tell you if it’s possible, based on your plan’s guidelines.

Mega Backdoor Roth Alternatives

If you can’t execute a mega backdoor Roth because your plan doesn’t allow it, there are other ways to increase your retirement savings. For example, you could try a regular backdoor Roth instead. This might be something to consider if you still want to enjoy the tax benefits of a Roth IRA but your plan doesn’t fit the criteria for a mega rollover. You could also elect to make Roth 401(k) contributions to your retirement plan at work. This way, you still get the benefit of contributing after-tax dollars and making tax-free withdrawals. You’d be subject to the regular contribution limits and you’d still have to take the required minimum distribution. But that may outweigh the value of tax savings in retirement.

Investing in a Health Savings Account (HSA) is another option. While these accounts are not specifically designed for retirement, they can yield multiple tax benefits. Contributions are tax-deductible and grow tax-deferred. Withdrawals are tax-free when used for eligible healthcare expenses. And at 65, you can take money out of an HSA for any reason without a tax penalty. You’ll just owe ordinary income tax on any withdrawals that are not used for healthcare expenses.

Finally, you could open a taxable brokerage account to invest. This doesn’t necessarily save you money on taxes since you’ll owe capital gains tax when you sell investments at a profit. But it could help you to diversify your investments and there are no limits on how much you can invest in a brokerage account annually.

Bottom Line

A mega backdoor Roth strategy could work well for higher-income earners who want to take advantage of Roth account benefits. There are certain rules that need to be followed to make it work, however, so you may want to talk to your plan administrator or a tax professional before going ahead. Keep in mind also that even if you can’t complete a mega backdoor Roth rollover, you still have other options for growing retirement savings.

Tips for Retirement Planning

If you’re saving for retirement in a 401(k) or IRA, pay attention to the fees you’re paying. For instance, check the expense ratios for each fund you’re invested in to understand how much you pay to own that fund on an annual basis. You can then compare that to the fund’s performance to determine whether the fees are justified. Also, consider any administrative fees you might be paying and how those affect your net returns.
Consider talking to your financial advisor about a mega backdoor Roth and whether it could be right for you. If you don’t have a financial advisor yet, finding one doesn’t have to be complicated. SmartAsset’s financial advisor matching tool makes it easy to connect with professional advisors in your local area. You can get your personalized recommendations in minutes just by answering a few simple questions. If you’re ready, get started now.

Uncategorized

Alibaba Is Tumbling. Chinese Tech Stocks Have a New Headache.

Published

9 months ago

July 11, 2022

letizo News

Chinese tech stocks were tumbling on Monday as two of the embattled sector’s leading players faced fresh fines from market regulators over disclosure rules.

China’s State Administration for Market Regulation announced Sunday a wave of penalties for improperly reporting past deals, in breach of competition law.

Alibaba

(ticker: BABA) and

Tencent

(0700.H.K.) were among the companies fined as a result.