Squared Away Blog

Moving into a new job late in life involves some big tradeoffs. What do older people look for when considering a change? Work that they enjoy, fewer hours, more flexibility, and less stress. What could they be giving up? Pensions, employer health insurance, some pay, and even prestige. Faced with such consequential tradeoffs, many older people who move into second careers are making “strategic decisions to trade earnings for flexibility,” concluded a review of past studies examining the prevalence and nature of late-life career changes. The authors, who conducted the study for the University of Michigan’s Retirement and Disability Research Center, define a second career as a substantial change in an older worker’s full-time occupation or industry. They also stress…

Like the United States, many European countries are concerned about shoring up their pension systems for their aging populations.  In 2000, Austria took action by introducing a series of small increases in the earliest age at which workers can begin receiving their federal pensions. This reform is gradually phasing out early eligibility entirely. Raising the earliest claiming ages, from 60 to 65 for men and from 55 to 60 for women, will cause them to converge, next year, with the pension program’s standard – or “normal” – retirement ages. Prior to the reform, workers who had signed up for benefits before their normal retirement age received only mild reductions in their monthly benefits.  The reform, in addition to gradually raising t…

The oldest minority retirees are struggling with debt, a new Urban Institute study finds. The researchers’ starting point is that people generally reduce their debt as they age. To prepare for retiring, older workers try to pay down their mortgage balances and pay off credit cards. Once retired, their debt continues to shrink. But on closer inspection, retirees in their 70s and 80s in the nation’s predominantly minority neighborhoods have shed less of their debt than their counterparts in mostly white neighborhoods, who tend to be better off financially. In a sign of financial distress among the oldest lower-income and minority retirees, 20 percent of their loans go to collections for non-payment – double the rate for higher-income and whit…

If the difference in men and women’s pay is a gap, then the wealth difference can only be described as a chasm. Women earn 80 cents for each dollar a man earns. But a woman has 32 cents of net worth to a man’s dollar. One byproduct of the #MeToo movement is the fresh light it has put on the age-old women’s issues of unequal professional status and pay.  But Elena Chavez Quezada, senior director of the San Francisco Foundation, explains in this video that wealth – home equity and financial assets minus debts – provides a more accurate picture of financial stability over the long-term. A 2018 report found that net worth for older women, adjusted for inflation, has…

Wouldn’t it be nice to find some money sitting in a long-forgotten retirement account somewhere? It’s not hard for workers to lose track of an old account as they move from employer to employer, often across state lines. Each state government keeps a repository of unclaimed property – most have been doing this since the 1980s – and residents and former residents can check online through a simple name search in the state’s unclaimed-accounts database. But not everyone takes the trouble to search for the money or is even aware it exists. So billions of dollars have accumulated nationwide in various types of unclaimed accounts, including retirement plans, insurance policies, trusts, and brokerage and bank accounts – so much so…

Not all borrowing is bad. Someone with a low-rate mortgage of modest size on an appreciating house has a very valuable asset. And some retirees pay off their credit cards every month without breaking a sweat. But about four out of every 10 older U.S. households are falling into the trap of having too much debt, a new study finds. These high-risk households, mostly retirees, tend to be burdened by low incomes or large balances on unsecured debt like credit cards, which accumulate interest at a rapid pace. Some are overleveraged and may be unable to afford their homes. The low-risk borrowers are their mirror image: no unsecured debt and relatively low debt payments and debt-to-asset ratios. The share of…

When David Marotta is investing his clients’ money in mutual funds, he scrutinizes the fees. To demonstrate why fees are so important, Marotta charted the fees and 10-year returns for dozens of index funds in the Standard & Poor’s 500 family. Since these funds all track the same index and their performance is roughly the same, the fees will largely determine how much of the return the investor keeps and how much goes to the mutual fund company. “The larger the fee the less that it performs. It’s kind of a straight line,” said the Charlottesville, Virginia investment manager. “Anytime we’re picking a fund” for a client, “we’re trying to find the lowest-cost fund that we can find in that…

Seven states now require employers that don’t have retirement plans to automatically enroll their workers in an IRA, and others have passed legislation to create similar programs. The goal is to get more people to save for retirement at a time financial security in old age increasingly depends on it. Pensions are rapidly disappearing. But only about half of working people are currently saving enough to maintain their standard of living when they retire. A major culprit in the savings shortfall is that workers do not consistently have access to a retirement plan through their jobs. The share of workers with employer plans has barely budged in decades. Information about how employers might react to the state IRA mandates is…

A 1983 reform to Social Security is now in full swing for baby boomers: they must wait at least until their 66th birthday to claim their full pension benefits. But is the gradual increase in the program’s so-called full retirement age – it was 65 for prior generations – having any effect on when boomers retire? Why people decide to retire when they do is complicated, and economists have tried for years to understand this.  Americans are working slightly longer than they did in the mid-1990s, with the average retirement age rising from 62 to 64 for men and from 60 to 62 for women (though this trend may be stalling). Myriad possible explanations for retiring later include the declin…

Boston trust attorney Michael Puzo has seen it time and again: people procrastinate about writing a will or putting their estate in order. “It forces them to face their mortality, and they don’t want to,” he said. Even those with modest assets – a house, a 401k, and maybe a life insurance policy – should carefully make an estate plan.  But are the nuts and bolts of wills and estate planning widely understood? This question loomed as Puzo translated these legal complexities in a way anyone could grasp during his presentation to employees of Boston College, where Squared Away is based.  For readers who may not know where to start, here are 10 fundamentals gleaned from his talk: A good…

New research shows the share of Americans who lack enough ready cash on hand for emergencies shot up in the aftermath of the Great Recession. These families do not have access to the liquid assets – cash or funds in their checking or savings account – to cover emergencies like layoffs, health crises, or even car repairs, according to an analysis of federal data by Caroline Ratcliffe of the Urban Institute, who presented the finding to the Congressional Savings and Ownership Caucus in late September. Ratcliffe’s measure of financial fragility was families who did not have enough liquid assets to subsist at federal poverty levels for three months. That amounts to $2,873 for a single person, $4,883 for a family…

Watch these six videos and walk in the shoes of low-income older Americans. It’s an arduous journey. Social Security is the primary or only source of income for the retirees who agreed to be interviewed for the videos. Since their income doesn’t cover their expenses, they live with family, frequent the Salvation Army, and continually stress about money. “You’re lucky if you come out even or a little behind” at the end of the month, said Howard Sockel. The 81-year-old resident of Skokie, Illinois, supports two sons – one with autism and one unemployed – on his Social Security, a small Post Office pension, and credit cards. The older workers who were interviewed are on the same road to a…