Squared Away Blog

The American psyche gets a lot of credit for fueling the boom in U.S. home prices, which ended in 2006. As houses increased in value, homeowners felt richer, and they spent more. Similarly, falling house prices led to declines in consumer spending as households found themselves poorer and less able to access credit, according to a new paper, “Wealth Effects Revisited: 1975-2012,” by economists Karl Case, the late John Quigley and Robert Shiller. In this interview, Case explains this “wealth effect.” Q: Why were our spending decisions influenced by our psychology during the housing boom? Case: The increase in house prices was like magic. They went from the 1950s until 2006 without ever falling nationally. The numbers are astonishing. If…

More than half of baby boomers and Generation Xers do not realize how much they are likely to pay out of their own pockets for medical bills after they retire. Many “were seriously underestimating the amount of savings they would need to accumulate in order to cover health in retirement,” according to what may be the first comprehensive survey and analysis of what Americans expect to pay – and how far off their estimates are. The good news is that Medicare pays roughly 60 percent of retirees’ total costs. The bad news is that they have to somehow cover the other 40 percent, which is particularly expensive for those who live longer (read women). If this new study carries on…

The Ontario Teachers’ Pension Plan has produced a terrific video that spells out how pension systems got into the trouble they’re in and proposes the outlines of what’s required to repair them. The strength of this video is its broad sweep and perspective. It is worth watching for anyone interested in their children’s and grandchildren’s future financial security – as well as their own. “Pension Plan Evolution” explains that U.S., Canadian, and other western retirement systems were built on the faulty assumptions that the future would keep producing enough younger workers to support retirees, 8 percent annual returns on investments, and economic growth that matched what the baby boom generation enjoyed in its prime. Watch the entire video below. But…

At tax time, many Americans think, often fleetingly, about spending less and socking away more for retirement. Until April 15, the IRS permits people who do not have a pension plan at work to deduct up to $6,000 for money placed in an IRA; taxpayers who do have an employer pension can also receive the IRA deduction if their earnings fall under the IRS’ income limits. The tough question that trips people up is: How much will I need? The easy way to think about this is in terms of the income necessary to maintain your current standard of living after the paychecks stop coming in.  Click here for a tool that estimates both how much you’ll need and how…

No one really needs confirmation of how tough the Great Recession was. But the Center for Retirement Research at Boston College has quantified the decline – and it’s brutal. Investment losses and falling home prices placed 53 percent of U.S. households in danger of a decline in their standard of living after they quit working and retire, reports the Center, which funds this blog. That’s up sharply from 45 percent in 2004, prior to the financial boom, which created a strong – albeit fleeting – increase in Americans’ wealth. The longer-term erosion in Americans’ retirement prospects is even more troubling and reflects deeper issues. The Great Recession just hammered the point home. In 1989, just under one-third of Americans faced…

The flaunting of wealth that marked the Gilded Age is difficult to grasp. Forbes reports there are currently 425 U.S. billionaires, the most in any country. They tend to live in cocoons, flinching when the media write about their vast homes or other trappings of wealth. But Newport Rhode Island’s Gilded Age mansions were built for the express purpose of showcasing the unprecedented fortunes accumulated during the new industrial age. Summer residents paraded in their finery during afternoon carriage rides and held lavish parties for hundreds – sometimes thousands – on the grounds of their seaside homes, which replicated the castles that wealthy Americans saw during their European vacations. [On Aug. 16-19, The Preservation Society of Newport will host a…

The promise of America is progress, but that progress stalled for the youngest generation: U.S. workers under age 45 earned dramatically less than workers who were that same age a decade ago, the Federal Reserve Board’s latest survey shows. For Americans 35 through 44, the median household income – the income that falls in the middle of all earners – was $53,900 in 2010. That’s 14 percent less income than in 2001 when households in the 35-44 age bracket were earning $63,000, according to the Fed’s Survey of Consumer Finances released Monday. For young adults in the under-35 age bracket, median income fell to $35,100 in 2010, from $40,900 for that group in 2001. The median income also declined, by…

nasdaq_80-09 Some of Michael Najjar’s images transport people to the precarious heights of the Andes mountain range in Argentina. Others focus attention on the severe cliffs over which a mountain can slide. Using photographs taken during his climb to the summit of Mount Aconcagua, Najjar used the computer to manipulate the images of surrounding mountain ranges to track the paths of the world’s stock market indexes over the past three decades. Inspired by his ongoing interest in technology, he attempted to evoke the impact of algorithmic trading on stocks and options trading, which carves out some market peaks and valleys. “I wanted to do something extremely physical to rematerialize what has become invisible,” Najjar said in a recent telephone interview…

Chilling. That sums up a documentary about financial fraud against elderly people premiering tomorrow at the Quad Cinema on 13th Street in Manhattan. “Last Will and Embezzlement” is about fraudsters who seek out vulnerable elderly people suffering from cognitive decline for no other purpose than to exploit their trust and steal their money. It’s not uncommon for these con men and women to be family. By first-time producers Pamela Glasner and Deborah Louise Robinson, the film would’ve benefitted from more reporting and more focus – they try to do too much when they get into court systems and solutions. But the film does what journalism does best: It finds people willing to tell personal gripping stories – not easy to…

Tried-and-true financial frauds – Ponzi schemes, high-yield investments, and “pump and dump” stock scams – have victimized unsuspecting targets for decades, even centuries. These well-known frauds are effective, because con men change their disguises so they won’t be recognized. Six common disguises are detailed in a report I wrote for the Financial Security Project at Boston College’s Center for Retirement Research, which hosts this blog…

You have to admire a financial writer and editor with the guts to put this on his LinkedIn profile: “While many Wall Street people go to Harvard or Yale University to learn about business, Ron went to art school.” The cartoons shown here are in a humorous financial book by Ronald DeLegge 2d, who said he first earned his chops as an insurance salesman at a small Midwestern company that eventually became part of AIG. His cartoons appear in “Gents with no ¢ents: A closer look at Wall Street, its customers, financial regulators, and the media.” Dave Clegg was the illustrator. Enjoy…

“Money Matters,” a play that opened last weekend in Cambridge, Mass., demonstrated the financial wit of its teenage actors at the same time that they – and the audience – embraced the complexities of money. Credit versus debt, income differences among classmates, money and relationships, certificates of deposit, needs versus wants – this only scratches the surface of the subject matter in the Youth Underground theater production, which begins touring the Boston area in February. The actors clearly were having fun, but their performance served as an educational tool that might be replicated. For example, the screenplay was based on the actors and other teenagers’ 80-some interviews of community residents about their financial viewpoints and mishaps. The stories generated ideas…