Squared Away Blog

Roughly half of U.S. employers with a 401(k) plan enroll their workers automatically, deducting money from their paychecks for retirement unless they explicitly opt out of this arrangement. This strategy is widely viewed as a good way to get people to save. But auto-enrollment might not be as effective as it seems, if individuals are compensating for a smaller paycheck by borrowing more. A new study of civilian employees of the U.S. Army used credit and payroll data to gauge whether debt increased for employees who were automatically enrolled in the federal government’s retirement savings plan. The researchers compared changes in debt levels for people hired after the government’s 2010 adoption of auto-enrollment with hires prior to 2010. The good…

The decline in U.S. life expectancy is unlike anything we’ve seen   Bombshell headlines like this popped up in major news outlets last November after the government reported that life expectancy in 2017 fell for the third year in a row. This is a troubling break from the steady improvements in lifespans since 1900, which were powered by a combination of medical breakthroughs and healthcare policy. Early in the 20th century, antibiotics dramatically increased infant lifespans. Later, new treatments like statins and stents, as well as expanded access to healthcare through Medicare and Medicaid, increased life expectancy across the age range. But there’s another story behind this story: life expectancy very much depends on where one falls on the economic ladder…

Rural hospital closings can be a matter of life or death. Residents in these remote locations may have to drive 100 miles or more for emergency medical care. One new study found that hospital closings increase mortality in rural areas by 6 percent. No such impact occurred in urban areas with multiple medical centers. Both urban and rural hospitals serving poor and low-income patients face myriad financial pressures, led by Medicare and Medicaid’s relatively low reimbursement rates for their disproportionate numbers of older and sicker patients. The 2013 federal budget, which cut Medicare reimbursements for hospitals and physicians by 2 percent, compounded the problems. But what has become increasingly clear in rural areas is that the option given to states…

You’re as young as you feel! This cliché is meant to be uplifting to older people. But it really just begs the question: what, exactly, is it that makes a person feel young? Having a sense of control over the events in one’s life is the answer that emerged from a 2019 study of 60- to 90-year-olds in the Journal of Gerontology. “[B]elieving that your daily efforts can result in desired outcomes” lines up nicely with what the researchers call “a younger subjective age.” This makes a lot of sense. Feeling in control becomes important as we age, because it counteracts our growing vulnerabilities – we can’t move as fast, hear as well, or remember as much. Wresting back som…

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…