Squared Away Blog

Mental illness, obesity, smoking, chronic disease – researchers have been able to connect the dots between an array of stresses early in life and how people will fare as they age. New research zeroes in on the adversities experienced by children and young adults that ultimately contribute to a premature retirement due to a disability. The basic finding is not terribly surprising – that life’s financial and social circumstances can lead to disabling conditions that will either nudge, or force, older workers to leave the labor force early. More remarkable is the exhaustive list of past experiences that can increase that risk. For example, childhood financial adversity in this study took many forms – an unemployed father, family relocations for…

Conversations about the vast White-Black disparity in U.S. wealth may acknowledge its roots in slavery. But four economists have now made the case quantitatively by charting changes in the wealth gap since the Civil War. The political and societal influences on wealth accumulation between 1860 and today are multifaceted but the basic trajectory is this: The wealth gap shrank by roughly half during the Civil War era from 1860 to 1870 and dropped in half again between 1870 and 1920, the researchers said in their recent paper. The decades of improvements in Blacks’ per capita wealth, compared with Whites’, occurred despite a quick end to Reconstruction after the Civil War and the rise of Jim Crow laws around 1890 that…

Economists have long thought that if employees have disability insurance on the job, they might never migrate over to the government’s disability rolls. A new study finds just the opposite. In Canada, the existence of short-term disability in the private sector increased the number of people going into the national government’s program by 18,300 in 2015 and increased program spending by 5 percent, according to a researcher at the University of Toronto. The logic behind this is that enrollment rises in the government program, which provides long-term benefits, because a negative incentive is at play. If employees with a disability or workplace injury have short-term coverage at work, they will have a regular source of income to tide them over…

The United States has a notoriously complex healthcare system, and Medicare is no different. In the early months of the pandemic, the Medicare Rights Center received a large number of calls to its telephone help line from people over 65 who had suddenly been laid off and lost their employer coverage. Even when there isn’t a crisis, the center’s staff and volunteers answer all manner of questions about Medicare enrollment rules, insurance options, and what to do when an insurance company denies them coverage. Sarah Murdoch is the center’s director of client services and oversees the helpline. She spoke with Squared Away about the common issues retirees face and how they can address them. Question: Your helpline fielded 42,000 questions…

About 5 million employees in state and local government are not currently part of the Social Security system. Federal law tries to protect them by requiring that their traditional government pensions provide the same retirement benefits they would receive if they and their employers were instead contributing to Social Security. But the Center for Retirement Research finds that roughly 17 percent of these workers’ pensions fall short of that modest standard. The reasons involve how long they remain in their government jobs and how their pensions are calculated. Let’s start with the workers who usually do not fall short: career public sector employees. They are protected because their pension annuities are based on their average salaries in the final years…

In the pandemic’s early days, the unraveling of economic life was breathtaking. Some 3.3 million Americans filed for jobless benefits in the second week of March 2020. A record 6.6 million joined them the following week. By April, government checks were starting to land in workers’ bank accounts, bringing the urgent relief Congress intended. The unemployed used the often-substantial assistance – up to $3,400 for a family of four – to cover basic expenses, and the people who were holding on to their jobs saved for possibly difficult days ahead. New research shows that the benefits of this assistance disproportionately went to those who needed it most: low-income workers and people who had financial problems before COVID hit. The relief…

Slack, Citizens Bank, Penguin Random House, Verizon, 3M, Twitter – the list is long and growing of companies that have allowed employees to continue working remotely even though the pandemic seems to be easing. The COVID-19 upheaval in lifestyles – the moving around to larger homes, to the countryside or to an affordable city – is pushing up house prices. John Mondragon at the Federal Reserve Bank of San Francisco and Johannes Wieland at the University of California, San Diego, estimate that remote work fueled a 15 percent rise in house prices over the two-year period that ended in November 2021. That’s more than half of the total price increase for that period, which was a record, the researchers said…

When children grow up and become financially independent, how do parents adjust their finances? Are they finally spending money on themselves? Saving more for retirement? Paying down debt? No one has come up with a convincing answer yet. Especially puzzling is that past research has shown that parents seem to reduce their consumption after the adult children move out. Yet there’s no evidence that much of the extra money is going into 401(k)s. So what’s going on? A new study for the first time finds a missing puzzle piece: parents, freed from the obligation to support their children, are choosing to work less. Parents work one to two hours less per week after their adult children leave home for good,…

For all of Americans’ financial shortcomings, at least we recognize there is a problem. More than 80 percent of adults believe states should require a personal finance class in high school and wish they’d taken one themselves, according to a March survey by the National Endowment for Financial Education (NEFE). Rarely do we see that much agreement on anything, and it indicates people don’t always feel confident about the choices they are making. A famous questionnaire takes the measure of their insecurity: less than a third of people surveyed correctly answered three basic questions about interest rates, inflation, and investment risk. Of course, people over 60 have more experience, and 92 percent of them think financial education is important. But…

The reduction in benefits for some people who collect Social Security while simultaneously working is frequently called a “tax.” It is not a tax. Under a Social Security rule known as the Retirement Earnings Test (RET), some benefits are withheld if the worker earns above a certain level – $19,560 in 2022 – and has not yet reached his full retirement age under the program. At that age, the government starts paying the deferred benefits back incrementally. As older workers plot a path to retirement, they should have a clear understanding of this financial impact. But a new study finds they have a poor grasp of the tradeoff that is the central feature of the RET: a smaller monthly check…

The Savers Tax Credit sounds great on paper. Low-income people get a federal tax credit for saving money for retirement. But this part of the tax code always seems to disappoint. The House recently overwhelmingly passed a bill, the Secure Act 2.0, that – along with numerous other retirement provisions – makes the savers credit more generous for some low-income workers. Under current law, taxpayers can get one of three credits – 10 percent, 20 percent, or 50 percent of the amount they save in a 401(k). The Secure Act, which is now headed for the Senate, would somewhat increase the top income levels for the 50 percent credit – from $20,500 currently to $24,000 for single taxpayers and from…

The following statistic will sound familiar since I use it regularly: about half of U.S. workers are not saving enough and may see their standard of living drop when they retire. A major culprit in this poor state of preparedness is that millions of Americans at any given moment don’t have a traditional pension or 401(k) savings plan at work. A new study takes a close look at who these people are and shows stark differences along racial lines. A large majority of Hispanic workers in the private sector – two out of every three – do not have access to a pension or 401(k)-style plan, and more than half of Black workers do not have access. Although the numbers…