Squared Away Blog

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…

Staying healthy is becoming a preoccupation for baby boomers as each new medical problem arises and the existing ones worsen. The stress of having too much debt isn’t helping. The older workers and retirees who carry debt are less healthy than the people who are debt free, and higher levels of debt have worse health effects, according to Urban Institute research. The type of debt matters too. Unsecured credit cards have more of an impact than secured debt – namely a mortgage backed by property. Debt can erode an individual’s health in various ways. The stress of carrying a lot of debt has been shown to cause hypertension, depression, and overeating. And it can be a challenge for people to…

A major government program helps poor and low-income retirees and adults with disabilities defray what can be substantial healthcare expenses that aren’t covered by Medicare. But enrollment is unusually low in some states because of more stringent eligibility standards. The Medicare Savings Programs, which are administered by the states and funded by the federal government, subsidize Medicare’s Part A and Part B premiums and cost-sharing obligations for more than 10 million Medicare beneficiaries. But participation varies widely from state to state, according to a new report by the Kaiser Family Foundation, due to a combination of differences in need and varying eligibility standards. No more than 10 percent of the retirees in Nebraska, New Hampshire, North Dakota, Utah, and Wyoming…

The twin goals of prescribing opioids to workers with a bad back or arthritis are to alleviate their pain and keep them employed. But the use and abuse of opioids can cause poor memory, extreme drowsiness, and an inability to engage in normal social interactions – all of which limit workers’ ability to function. Opioids also have serious physical effects outside of the dependence itself. The resulting detachment from the labor market, revealed in a new research study, calls into question any benefits the medications have. Between 2012 and 2018, average employment declined by nearly 2 percent for every 10 additional opioid prescriptions per 100 adults in a county-sized area, the researchers found. Wages also dropped by 6 percent, indicating…

Previous research has shown that spending drops immediately at the moment the paychecks stop, and a few studies have found that households, once retired, reduce their consumption over time. But a new study that also takes the long view suggests that the spending decline is not what retirees want to do but what is necessitated by their financial and health constraints. The analysis, which used data from two national consumption surveys, divided retired households into groups to get a sense of what goes into their spending decisions. The researchers compared the consumption patterns of retirees at three different wealth levels over a 20-year period and then compared consumption for three states of health. The evidence that financial resources drive behavior…

Regular working folks can always find something about their finances to be stressed about. But today’s stress is coming from a new place: a level of inflation this country hasn’t seen in four decades. A large majority of workers – 76 percent – identified rising prices as having a negative impact on their finances. And among households earning under $55,000, 84 percent are feeling stretched, according to the financial services website Salaryfinance.com. Nearly half of the 3,000 workers the firm surveyed in February specifically said that inflation is stressing them out, causing anxiety, depression, or both. They said the inflation makes it tough to afford basic necessities or save money. The stress is understandable. The consumer price index has risen 8.5 percent…

The connection between Americans’ socioeconomic status (SES) and their health was established long ago and the evidence keeps piling up. Less-educated, lower-income workers suffer more medical conditions ranging from arthritis to obesity and diabetes. And the increase in life expectancy for less-educated 50-year-olds was, in most cases, roughly 40 percent of the gains for people with higher socioeconomic status between 2006 and 2018. More recently researchers have connected SES and mental health. The foundations are laid in childhood. In one study, the children and teenagers of parents with more financial stresses – job losses, large debts, divorce, or serious illness – have worse mental health. And COVID has only aggravated the nation’s mental health crisis. In a new book, Dr…

When older workers are laid off, the timing of the career disruption could not be worse – when they should keep working and saving for retirement. Their situation is even more precarious if a parent or spouse is in need of care. A new study shows that people who become unemployed mid-to-late career are more vulnerable to being pulled into the demands of caregiving, which can derail their efforts to find another job. Intensive caregiving spells usually kick in about four months after a job loss and can continue for up to 12 months – and possibly longer – according to the research, which was based on U.S. Census surveys of the unemployed prior to the pandemic. “Family caregiving needs…