Squared Away Blog

Marketplace recently estimated that a family’s common expenses have increased 30 percent since the 1990s. This was based on the inflation-adjusted prices for 11 necessities and small luxuries, from food, housing, college, and medical care to movie tickets and air fare. On the income side of the household ledger, one well-known study estimates that the lifetime, inflation-adjusted income of a typical 60-year-old man today is substantially less than it was for a man who turned 60 back in 2002. Women, who have benefitted from getting more education, are earning more, but they started out at much lower pay levels and still trail men. These trends – rising expenses and shrinking paychecks – get to the essence of the middle-class struggle described in Alissa…

Moms don’t need a research study to tell them that their earnings will never be high as dads’. Nevertheless, a new study confirms this – and the pay gap may be larger than some suspect. In the two years surrounding the baby’s birth, mothers’ earnings fall by 12 percent, on average, as their careers stall or they take a hiatus from work to care for the child. Meanwhile, fathers’ careers clip along, with bonuses, pay raises, more hours, or better jobs bumping up their pay by 34 percent. Mothers don’t get back to their pre-baby income levels until the child is 9 or 10 years old. The mom-dad wage gap will never be smaller than it was before the baby, becaus…

One of Americans’ biggest financial challenges is proper planning to ensure that their standard of living doesn’t drop after they retire and the regular paychecks stop. A new study has practical implications for baby boomers in urgent need of improving their retirement finances: working a few additional years carries a lot more financial punch than a last-ditch effort to save some extra money in a 401(k). This point is made dramatically in a simple example in the study: if a head of household who is 10 years away from retiring increases his 401(k) contributions from 6 percent to 7 percent of pay (with a 3 percent employer match) for the next decade, he would get no more benefit than if…

Despite the mounting pressures on Americans of all ages to save for retirement, our saving habits haven’t changed in 10 years. The combined employer and employee contributions to 401(k)s consistently hover around 10 percent of workers’ pay, according to “How America Saves 2018,” an annual report by Vanguard, which administers thousands of employer 401(k)s and other defined contribution plans. Retirement account balances aren’t going up either. The typical participant’s 401(k) balance is no larger than it was in 2007, even though accounts grew 7 percent last year, to $26,000, thanks to a strong stock market. The balances, when adjusted for inflation, are slightly smaller. The growing adoption of 401(k) plans that automatically enroll their workers is having both negative and…

Men with high school diplomas are retiring around age 63 – three years before college-educated men.  The gap in their retirement ages used to be smaller. The reasons behind the current disparity are explained in a review of research studies on the topic by Matt Rutledge, an economist with the Center for Retirement Research.  The trend for women is similar, though their story is complicated by a sharp rise in their participation in the labor force in recent decades. Rutledge provides four reasons that less-educated men are still the lion’s share of early retirees: Health. Older Americans are generally getting healthier and living longer – so why not wait to retire? Well, the health of less-educated people is poorer and…

It’s not too late to sign up to attend the Retirement Research Consortium’s (RRC) 20th annual meeting in Washington on Thursday and Friday, August 2 and 3. Its purpose is to provide RRC researchers from around the country an opportunity to present their working papers to colleagues, the press, policy experts, and financial professionals. The consortium’s studies are all funded by the U.S. Social Security Administration. The researchers will cover a variety of financial and policy issues facing workers and retirees. Topics will include the gains in longevity when retirement is delayed, widows’ poverty, and an analysis of low-income workers’ earnings and retirement prospects. Another paper explores the decline in the share of total U.S. earnings that are being covered by Social Security…

A theme runs through the infographic below: aging baby boomers are still a force of nature. Created by Georgetown University’s Center for Retirement Initiatives, the infographic uses demographic data to show that boomers remain important to the labor market even as they grow older. More than 9 million people over 65 work – a steep 65 percent increase in just a decade. Two things primarily explain this increase. One reason is hardly surprising: the post-World War II baby boom that created the largest generation in history also created the largest living adult population (though Millennials will soon catch up). On top of this, baby boomers are working longer for myriad reasons – among them, better health, inadequate retirement savings, and…

Two of our readers’ favorite articles so far this year connected difficult bread and butter issues – personal finance and retirement – with a far more pleasant topic: travel. The most popular blog profiled a Houston couple scouting locations for a dream retirement home in South America, which has a lower cost of living.  Another well-read blog was about Liz Patterson, a young carpenter in Colorado who built a $7,000 tiny house on a flat-bed trailer to radically reduce her expenses – so she could travel more. The downsizing efforts of 27-year-old Patterson inspired several older readers to post comments to the blog about their own downsizing. “From children’s cribs and toys in the attic, to collectible things from my…

The grocery shopping for five is over, the family cell phone plan has been canceled, and the college tuition has been paid one last time. So what’s next? Newly minted empty nesters, having poured a couple hundred thousand dollars into raising each child, respond to their financial liberation in one of two ways. Some start saving more for their golden years. The others keep spending at that elevated level – but this time on themselves. This personal decision, made at the critical juncture in the pre-retirement years, will have consequences for retirement – save more and things could turn out pretty well, or keep spending and jeopardize financial security in old age. In the aggregate, at least some older households…

What a drag. One in four Americans said they can’t afford to take a vacation this summer. The 3.8 percent unemployment rate is at its lowest since 2000, when the high-technology industry was going gangbusters. Despite the economy’s current strength, the cost of a vacation puts it out of reach for millions of people. The average family of four spends about $4,000 on vacation, Bankrate said. Air fares don’t seem to be the issue – they are lower now than they were five years ago. But families living on a limited budget are more likely to drive, and the price of gasoline has shot up 25 percent over the past year, to around $2.90 per gallon. Many people are shortchanging themselves on vacations,…

Medicare pays for the bulk of the medical care for Americans over 65, but a lot of their income is still eaten up by medical expenses. The list of expenses is long. The lion’s share goes toward various insurance premiums – for Medicare Part B coverage, Part D prescription drug coverage, and supplemental insurance, whether Medigap, a Medicare Advantage plan, or employer health insurance for retirees. The remaining costs, for copayments and deductibles, are also significant. These out-of-pocket costs, when added together, averaged about $4,300 annually per person, finds a new study by researchers Melissa McInerney, Matthew Rutledge, and Sara Ellen King of the Center for Retirement Research. Out-of-pocket costs consume a third of the amount that retirees receive from Socia…

When young people are dissatisfied with a job or feel it intrudes too much on their personal lives, they find a new one. Not so easy for older workers. Their decision is complicated partly because they have fewer employment options as they age, but also because they must ask themselves whether or not it’s time to retire. A study out of the University of Michigan’s Retirement Research Center found that people in their 50s, 60s, and 70s often choose to retire when long hours, inflexible schedules, and work responsibilities don’t allow them to do what’s required to help a family member or a sick spouse or to enjoy more leisure time. Many things are constantly pushing and pulling older workers toward…