Squared Away Blog

“Self-control” is a catch-all label for resisting all sorts of temptations, including overspending. According to a new study, controlling overspending can be broken down into three distinct behaviors: • Setting goals such as buying a house or saving money. • Monitoring bank statements to systematically track where your money goes. • Committing to the goal in the face of short-term temptations to spend. Data for the study came from a nationally representative U.S. survey of households over age 50. The survey has extensive information about the households’ finances and about each individual’s resolve to set goals, track their finances, and carry out their commitments – whether financial or non-financial. Households lacking self-control disproportionately have lower net worth – no surpris…

Brisk sales of Linda Novak’s crocheted scarves and baby blankets have subsidized the 62-year-old’s Manhattan rent since her 2012 layoff. Boston resident Marcus Queen, 58, receives food stamps while trying to reignite his beloved career: helping city kids get a leg up. Joseph Imperiale, 66, wants to get back into the business world, so he doesn’t have to tap his retirement savings yet. Nearly three years after the Great Recession officially ended, more than 900,000 baby boomers laid off several months or years ago are still pounding the pavement, unable to find employment in an economy that produced only 88,000 jobs in March. They simply are not ready to retire – financially or emotionally – but they often feel that…

Only about one in four older Americans consistently work in a traditional employment arrangement throughout their 50s and early 60s. For the rest, their late careers are punctuated by jobs – freelancer, independent contractor, and even waitress – that do not have any health or retirement benefits. Some older people are forced into these nontraditional jobs, while others choose them for the flexibility to set their own hours or telecommute. Whatever their reasons, they will eventually pay a price. The Center for Retirement Research estimates their future retirement income will be as much as 26 percent lower, depending on how much time they have spent in a nontraditional job. During these stints, the issues are that they were not saving…

This video examines wealth through the prism of race. It compares the share of the nation’s African-American, Hispanic, Asian-American and white populations who have net worth exceeding $1 million; net worth equals financial and other assets minus mortgages and other debts. If the fact that there is a racial divide isn’t surprising, the magnitude of it might be. Other factors also have an enormous influence over who gets rich, and understanding this becomes increasingly important amid rising inequality. The biggest determinant of wealth is whether our parents are rich, as recent research has shown. Age and education are also crucial. That’s because older people have more time to save and accumulate wealth, and a college education typically leads to jobs…

How well you will live in retirement will depend on two things: your income and the local cost of living. A new study that ranks each state based on how many of its retirees can meet a basic standard of living comes up with an interesting combination of places that are financially friendly – or not – to people over 65. For example, who would expect Mississippi to be in the same company with California? The cost of living in Mississippi is much lower than in California – and most states. But 31 percent of Mississippi’s retired single people and 24 percent of its retired couples fall into what the study calls the “gap” between being poor and having barely…

Americans who save for retirement throughout their working lives often hold tight to that savings after they retire. A new study shows they eventually do spend much of this money and sheds light on where it goes. The study focuses on the retirement spending patterns of couples, adding to similar past studies on single retirees. While both spouses are alive, the researchers found that a couple’s wealth remains relatively stable over time – until they start paying for medical care, nursing homes, and other major end-of-life expenses. The researchers examined spending patterns for more than 4,600 households over a 15-year period using a subset of the Health and Retirement Study that collects data on the health and wealth of peo…

For most retirees, figuring out how much money to withdraw from savings every year is a difficult-to-impossible math problem. But the issue goes much deeper: fears about what the future might bring make this decision overwhelming. Extreme caution is a popular solution. A 2009 study estimated that by the time middle-income retirees are in their 80s, they still had not touched about three-fourths of their savings, and 2016 research found that retirees with substantial assets are the most reluctant spenders. Vanguard recently reported that retirees with very modest savings turn around and reinvest a third of the money they’re required to withdraw under IRS rules after age 70½. People saved all of their lives to make sure they will enjoy…

People do not like to hear advice from their “elders.” But shouldn’t retirement be an obvious exception? The options for what most workers can do to salvage their retirement finances rapidly narrow as they get closer to retiring. After 50 or so, it’s also tough to find a better job, and only so much can be saved in short bursts – retirement saving requires years of diligence. If you’re still listening, the following is sage advice drawn from two recent New York Life surveys of older workers on the cusp of retirement and octogenarians. Workers in their 50s and early 60s said they started saving too late for retirement. They put the “magic age” at around 26. Automatic savings vehicles…

In an upside-down aspect of long-term care insurance, about one in four older people with a policy who eventually go into a nursing home had let that policy lapse sometime in the previous four years, forfeiting coverage that would’ve paid for their care. The questions are who does this and why. New research by the Center for Retirement Research (CRR) finds two explanations for why: a scarcity of financial resources and cognitive impairment, which limits the elderly’s ability to properly manage their finances, including their long-term care policies. The researchers found no support for what they call “strategic lapsing” – a deliberate decision to quit paying the premiums by healthy older individuals who, upon reconsideration, conclude that their risk of…

The majority of retirees pay no federal taxes. But taxes should be a concern for retirees who have retirement savings. That’s because the money they take out of their retirement accounts for living expenses will be treated as federal taxable income. It’s difficult enough to figure out how much money to withdraw – and when. Taxes are a separate but related issue.   In this blog, we interviewed Michael Kitces, a well-known financial adviser and partner with a Maryland financial firm, who writes the “Nerd’s Eye View” blog. He discusses the basics of navigating the tax code. The challenge facing retirees is to make tax decisions today that will minimize taxes now and in the future. Question: Do you find…

Seven years after Congress encouraged employers to automatically enroll their workers in the company 401(k), the retirement fix has run out of steam. Corporate America rushed in to adopt the feature in their 401(k) plans after the Pension Protection Act (PPA) made auto enrollment more attractive by giving employers that used it a safe harbor from non-discrimination rules governing their benefits. Immediately after the PPA provision became effective in December 2007, employee participation in 401(k)s increased.  But since that initial bump, it’s been virtually flat for years. In 2008, participation increased to 73 percent of all employees in workplaces that offered 401(k)s, up from 68 percent in 2007, according to Vanguard Group Inc.’s new “America Saves 2013” report, which provides…

The federal government continues to work out the kinks in its reverse mortgage program. The latest change allows a non-borrower to remain in her home after her spouse, who signed the reverse mortgage, has died. The federal government established its reverse mortgage program in the 1990s to provide an alternative source of income for retirees over age 62. These Home Equity Conversion Mortgages (or HECMs) are secured by the equity in borrowers’ houses, and the loans are repaid only when they move or die. The loans are federally insured to ensure that borrowers get all the funds they’re promised, even if the lender fails, and that lenders are repaid, even if the value of the property securing the loan declines…