Squared Away Blog

The amount of money a widow receives from Social Security can mean the difference between comfort and hardship. Husbands have a lot of control over how this will turn out. Each additional year they postpone collecting their own Social Security adds another 7.3 percent to the amount a future widow will receive every month from the program’s survivor benefit. But husbands can be a stubborn lot. Previous research has shown that a large minority fail to take their wives into account when deciding to start their Social Security. A new study confirms this in an online experiment designed to raise husbands’ awareness of the financial impact their claiming age could have on a spouse. The men’s ages ranged from 45…

Wyoming government has brought some 535 employees of the state’s executive, legislative and judicial branches into its retirement savings plan since July 2015 under a new policy of automatically enrolling each new hire. They are free to withdraw from the plan at any time, but only 15 of the 535 have done so – “and not a complaint from anybody,” said Polly Scott, who manages the savings plan and heads employee retirement education. This technique, borrowed from behavioral economics, addresses the inertia that prevents many people from ever signing up to save in their employer’s plan.  So why wait for them to join? Instead, Wyoming uses inertia to benefit state workers: when people are automatically enrolled, research shows, they tend…

In the 1960s, half of all wives were housewives, and their husbands often earned enough money to support a family. Today, these traditional families are a rarity and two incomes have become essential to surviving economically. A new joint report by the American Enterprise Institute and the Brookings Institution argues that poor and working-class families’ increasingly fragile family structure – despite the rise of dual-income spouses – often leaves them “doubly disadvantaged.” And lower marriage rates among poor and low-income couples help to explain why “America is increasingly divided by class,” write the authors, W. Bradford Wilcox, a professor and director of the National Marriage Project at the University of Virginia, and Wendy Wang, research director for the Institute for Family Studies. They explain…

Generation X and millennials, there is time. In contrast to baby boomers, who are now mostly too old to rack up appreciable increases in their 401(k)s – though they should try – younger Gen-X and millennials have time and compounding investment returns on their side. This blog examines how they are faring – millennials, because saving and investing well now poises them for a secure retirement, and Gen-X because this “ignored” generation is sandwiched between the financial demands of parenting and parent care.  Their own assessments of their retirement preparedness appeared in a recent report by the nonprofit Transamerica Center for Retirement Studies (TCRS). Millennials “Millennials have heard the word that they need to save for retirement,” TCRS declared in its…

Medical expenses increase unpredictably with age, so the crystal ball gets very hazy when trying to foretell how much you’ll need in retirement. A new study helps clear things up: a single older American spends about $39,000 on average for medical care in the final five years of life, or about $7,800 a year. For couples in which one spouse has died, $51,000 was spent during that spouse’s final years, or about $10,000 annually. These out-of-pocket expenses, which were reported by surviving spouses and family members, are for health care not covered by Medicare: insurance premiums, hospital and physician copayments and deductibles, and expenses for medications, nursing homes, and in-home care. The data also show that the financial burden on…

A new article in the Journal of Financial Planning lays out the unpleasant reality facing baby boomers who really want to retire but can’t afford it: working longer helps a lot. In the article, David Blanchett, who heads the retirement research group for Morningstar’s money management unit in Chicago, calculated the impact of delaying one’s retirement date and found that it can sharply improve a retiree’s odds of financial success. “There is not one silver bullet for success but if there were it would be delaying retirement,” he said in an interview. The same case has been made for years by the Center for Retirement Research at Boston College, which supports this blog. Working beyond age 62, when individuals ar…

Retirees’ primary sources of income are the usual suspects: Social Security and employer retirement plans. They rarely use a third option: the equity locked up in their homes. The Urban Institute recently quantified how much this untapped equity could be worth to seniors in the United States and 10 European countries if it were converted to income – and the amounts are significant. The typical retired U.S. household has the potential to increase its retirement income by 35 percent, researchers Stipica Mudrazija and Barbara Butrica estimate. In Europe, using home equity would add anywhere from 19 percent in Sweden to 100 percent in Spain. ……

Retirement clearly is not a priority for far too many young working adults. Large minorities of the 22- to 37-year-olds who responded to a recent LendEdu survey said their retirement saving every month amounts to less than they spend on various categories of consumer goods. Nearly half of them report they spend more on dining out than on retirement saving. Almost one in three spend more on alcohol or new clothes, and one in four spend more on streaming services such as Netflix and Spotify. What that indicates is that a lot of them aren’t saving very much. It might seem unfair that saving for retirement is such an urgent matter for someone not yet out of their 30s. After all,…

As Americans were riveted to the spectacle of teetering Wall Street behemoths in 2008, another ruinous tragedy was beginning to unfold: a national foreclosure crisis. Black and Hispanic homebuyers were hit hardest by the foreclosures that resulted from unbridled sales of predatory subprime mortgages, which exceeded $500 billion annually at the market’s peak. In the decade since the financial crisis, the stock market has rebounded smartly, but the damage to minority communities remains.  At the height of the foreclosure crisis, entire neighborhoods were littered with bank foreclosure sales and realtors’ signs advertising sales of the properties. About 30 percent of black and Hispanic borrowers’ homes in total have gone into foreclosure in the years since the housing market crash, compared…

Investors will probably see good news in Morningstar Inc.’s annual report showing that the fees charged by actively managed mutual funds continue to come down. The truth is that focusing on fees alone misses the point. What matters is a fund’s after-fee return. There are always fund managers who excel at picking stocks and can deliver strong after-fee returns to investors year after year, justifying the high fees required to pay them. The early years of Fidelity’s Magellan fund is the classic example. The trick is finding that clever manager, which requires a combination of luck and the skill and inclination to compare numerous investment options. One thing making this task a little easier is the mutual fund industry practic…

The equity in older Americans’ homes has risen smartly over the past year, fueled by the housing market rebound. But whether retirees will tap these gains to pay their bills remains in doubt. Equity values for homeowners who are 62 or older was $3.34 trillion in the second quarter of this year – nearly 10 percent above its $3.05 trillion value a year earlier – according to new data released by the National Reverse Mortgage Lenders Association (NRMLA), a trade organization. Rising house prices are restoring equity even in places like Florida devastated by the housing market bust. Seniors’ home equity has surged 14 percent there over the past year, to $241 billion in the second quarter of 2013, thoug…

It’s customary every six months for Squared Away to round up our readers’ favorite blogs. The following were your top picks during the first six months of 2015, based on an analysis of online page views. To stay current on blog posts in the future, click here to join a once-weekly mailing list featuring the week’s headlines on Squared Away. Retirement is a perennial favorite among readers. But the top 10 list below also includes blogs about financial education and knowledge of the U.S. retirement system, longevity, and the hardships specifically faced by older workers: ……