Squared Away Blog

A monthly disability check from the federal government is a lifeline for poor and low-income persons with disabilities, but they still face a daily struggle to meet their basic needs and cover their expenses. In in-depth interviews, 35 low-income people in Worcester, Massachusetts, described how they make ends meet on the disability benefit they get from Social Security, which averages $912 a month and is their largest source of income. Another $300 comes from other forms of public assistance, family support, or minimum-wage jobs, according to a new issue brief by Mathematica’s Center for Studying Disability Policy. The daily struggles that each individual faces are as unique as they are. Here are a few excerpts from the study: “My rent…

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…

A person’s finances are not determined simply by obvious factors like how much they earn – personality can also make a difference. A new study has identified three personality traits that play a role in how individuals handle their nest eggs. For example, conscientious people – self-disciplined planners – are more careful and have more wealth at the end of their lives. The University of Illinois researchers looked at two types of wealth: within employer retirement plans and outside of these plans. They did not find a connection between the wealth levels in employer plans and various personality traits, a result they anticipated because retirement wealth has more to do with a retiree’s work history and earnings. But they did…

Ask middle-class Americans how they’re doing, and you’ll often get the same answer: there are still too many demands on my paycheck. Several recent surveys reach this conclusion, even though wages have been rising consistently at a time of low inflation. Student loans trump 401(k)s. Two top financial priorities are in conflict: student loan payments, which people described as a “burden,” and saving for retirement, which they viewed as “important” in a TIAA-MIT AgeLab survey. The debt seems to be winning: three out of four adults paying off student loans say they would like to increase how much they save for retirement but can’t do it until their loans are paid off – and that can take years. One woman…

It’s always interesting to see which Squared Away blogs get the strongest reaction from our readers. The June blog, “Husbands Ignore Future Widows’ Needs,” was one of them. Some readers felt that the results of the study described in the article don’t match up with their experiences. The researchers determined that husbands often are not sensitive to the fact that if they sign up for Social Security in their early 60s, they could be locking in a smaller survivor benefit one day for their widows. “The elderly couples with whom I do retirement planning are typically very conscious of each other’s needs,” said a critic named Jerry. But financial planner Kathleen Rehl has the opposite experience when working with couples…

This report about online casinos is incredible. The PBS Newshour reports that these gambling websites – for poker, roulette and slots – are able to target people who are the most vulnerable to gambling addiction. The video features a site that assigns VIP status to encourage vulnerable customers to keep playing. That’s not the only problem. Customers pay real money to buy chips to gamble or cover their losses on the gambling site. But when the customer wins, the website “do[es]n’t pay real money. They only…give you virtual chips to continue to play on their apps,” said a Dallas woman who said she lost $400,000 while gambling online. Only 1 percent of Americans are gambling addicts, so the problem, while very…

Our recent blog post about the merits of delaying Social Security to improve one’s retirement outlook sparked a raft of comments, pro and con. In the example in the article, a 65-year-old who is slated to receive $12,000 a year from Social Security could, by waiting until 66 to sign up for benefits, get $12,860 a year instead. By comparison, it would cost quite a bit more – about $13,500 – to buy an equivalent, inflation-adjusted annuity in the private insurance market that pays that additional $860 a year. The strategy of delaying Social Security “is the best deal in town,” said a retirement expert quoted in the article. Aaron Smith, a reader, doesn’t agree. “It will take 14 years…

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…

Angela Mahany was completely in the dark about how complicated her late husband’s finances had become. Dick Mahany, in a loving effort years ago to make sure she would be set financially when he died, had borrowed money from a whole life insurance policy that had built up a cash balance to buy a term life insurance policy payable at his death. But when he used up the whole life policy’s value, he had to come up with enough cash to pay the premiums for both policies. Angela discovered her husband had been doing this just a few months before he passed away in February 2017. By then, he was suffering the effects of Agent Orange exposure during the Vietnam…

When older workers are able to get health insurance from a source outside of their jobs – Medicare, a spouse’s job, or an employer’s retiree health coverage – they become much more likely to decide it is time to retire. So it’s reasonable to ask whether the Affordable Care Act, which provided millions of people with health insurance for the first time, has also helped to nudge more older workers into early retirement. The answer, surprisingly, is no, according to a recent study for the University of Michigan Retirement and Disability Research Center.  This finding is important, because baby boomers who are poorly prepared financially to retire should be working longer – not retiring sooner – to improve their retirement…

A popular idea for reducing healthcare costs is to arm consumers with detailed information about the prices of drugs and medical procedures so they can make smarter decisions. But the academic community is reaching the opposite conclusion: people don’t understand the information they already have and are making bad decisions based on these misconceptions. The latest example is a survey of Wisconsin state workers who sometimes defer care because they are under the mistaken impression that they can’t afford it. “Workers do not understand how health plans work, the role of deductibles, co-insurance and co-pays … and what goes into out-of-pocket costs,” concludes a report by the University of Wisconsin public affairs school, which surveyed 2,200 government workers. Before getting…

Employers beware: changing your retirement plan’s design can have unfortunate, unintended consequences for your employees. That’s what happened to the Thrift Savings Plan (TSP) for federal workers, says a new study by a team of researchers for the NBER Retirement and Disability Research Center. Like many private-sector savings plans, the $500 billion TSP – one of the nation’s largest retirement plans – has automatic enrollment. Federal employees can make their own decision about how much they want to save and, in a separate decision, how to invest their money. But if they don’t do anything, their employer will automatically do it for them. In 2015, the TSP changed its automatic, or default, investment from a government securities fund to a…