Squared Away Blog

The stock market’s 19 percent climb in 2017 was nothing short of impressive. This year, it has gained another 6 percent. This means that many boomers with 401(k)s are feeling a little more secure about retirement – at least for now. That more people feel they will be able to afford a vacation this summer with their children. And that Warren Buffett is getting richer even faster. But one in two Americans isn’t at the party. According to the Survey of Consumer Finances in 2016, the Federal Reserve Board’s latest triennial survey and the most comprehensive look at Americans’ personal finances, 48 percent of U.S. families do not own equities. Less surprising is how stock holdings break out at various income levels. About 30…

Baby boomers have limited time and only a few options to improve their financial prospects when they retire and give up a regular paycheck. Millennials have more time to do something about it. They should start thinking about it, indicates a study by the Urban Institute’s Richard Johnson, Karen Smith, Damir Cosic, and Claire Xiaozhi Wang. Their test of a comfortable retirement was set at a 75 percent replacement rate, meaning retirees need 75 cents in monthly income for every dollar earned in their final decade of working. For this analysis, the researchers estimated retirement income at age 70 – an age when most people have already retired – for every individual in the federal data sources used in their analysis. They…

This milestone must be noted: about half of baby boomers are now over 62 and can claim their Social Security benefits. The year 1955 was the midpoint for the post-World War II population explosion – and those boomers born in 1955 will turn 63 sometime this year. This marks the time to take stock of differences between the old boomers (born 1946-1955) and young boomers (1956-1964).  Of course, Social Security eligibility doesn’t automatically mean retirement, and boomers of all ages are retiring later than their parents.  Today, only around a third of 62-year-olds file immediately for Social Security benefits – it was closer to half for the oldest boomers. The downward trend should continue. But a yawning difference between the two boomer…

Financial experts and writers often tout the Roth 401(k)’s main selling point: when the money is withdrawn in retirement, it won’t be taxed. Well, that’s not entirely true. An employee’s own money saved in his Roth account over the years is, indeed, shielded from income taxes when he retires and starts pulling out the money. That’s because the worker had paid the taxes before he put the money into the Roth. But employer contributions to Roths are different. Employer contributions and any resulting investment earnings are taxed as income in the year that the money is withdrawn. “Most everyone I talk to is shocked by this and surprised,” said CPA Sean Stein Smith, a business and finance professor at Lehman Colleg…

Mothers often work less because, well, they’re also moms. Still, they generally work consistently enough to qualify for Social Security pensions based on their own earnings records – rather than on their husbands’, as was common when more women were full-time housewives or worked just a few hours a week while the kids were at school. Yet today’s working mothers do take a hit to their earnings when they temporarily reduce their hours or take a hiatus from work for childcare. The upshot of lower earnings is less Social Security income later for mothers, according to a new study by researchers for the Center for Retirement Research (CRR supports this blog). The researchers, Matt Rutledge, Alice Zulkarnain, and Sara Ellen…

During Boston’s mayoral election in November, Mayor Marty Walsh boasted that his administration has overseen $100 million in housing investment. Walsh’s challenger, City Councilor Tito Jackson, responded that this new investment has been dominated by the luxury apartments and condominiums sprouting downtown and around GE’s new headquarters in the booming Seaport neighborhood. Walsh retained his seat, but Boston’s housing debate is playing out from Orlando to Austin to San Francisco. “The lack of affordable rental housing is a consequence of not only increases in the number of lower-income households but also steeply rising development costs,” Harvard University’s Joint Center for Housing Studies concluded in its annual report on the nation’s housing stock. An unprecedented 1 million new renters have com…

This New Yorker cartoon by Trevor Spaulding is cute, but – spoiler alert – it’s not quite right. A company offering a 401(k) retirement savings plan to its workers is a good thing, but it’s no “favor,” noted my long-time editor Steve Sass, an economist with a hawk eye for inaccurate retirement information. Setting up and funding a 401(k) is a big expense for employers. But many think it is worthwhile, because 401(k)s – and, more so, employers’ matching contributions – help them attract and retain the sharpest, most productive, or most-skilled workers. Another employer calculation is that the income tax deduction employees get for saving, which costs the employer nothing, is especially valuable for those on the payroll who…

Appropriately, the most popular blogs over the past six months were about retirement, among both the young adults looking ahead to it and the later baby boomers heading toward it. Based on page view counts, here were the most-read blogs on Squared Away during the last six months of 2017: Retirement Calculators: 3 Good Options Why Many Retirees Choose Medigap Reverse Mortgage: Yes or No? Why Most Elderly Pay No Federal Tax The 411 on Roth vs Regular 401ks Medicare Advantage Shopping: 10 Rules ……

However you celebrate, we wish you a wonderful holiday season and coming new year – from the staff here at the Squared Away blog at Boston Colleg…

Lenny Higginbottom   A social worker hands Lenny Higginbottom, 52, the keys to a 378-square-foot apartment, the first home of his own after 24 years on the streets. “Try to fight the tears,” he says, gripping the keys during a video accompanying a story by Boston public radio (WBUR) reporter Lynn Jolicoeur. “Something I thought I’d never be able to do,” Higginbottom says. His past issues are not uncommon among the homeless: a father who died when he was six, depression, substance abuse, and a failed marriage. He had a Section 8 housing voucher but couldn’t find a landlord willing to rent to him due to minor criminal activity in his past. ……

This Donald Duck cartoon, funded by the U.S. government in 1943, urged Americans to pay their income taxes to support the war effort. Paying taxes was a patriotic act, to build up the inventory of war planes and battleships to defeat the Nazis – “sink the Axis!” the narrator bellows. Nobody liked paying taxes then, and they still don’t. Yet there was a growing awareness as the war played out in the 1940s that taxes – like saving your scrap metal – were necessary to advance the greater good. Things are different today. There doesn’t seem to be as much room in the public conversation for the benefits that federal taxes bestow, such as Social Security, Medicare, Medicaid (nursing home funding)…

Reflecting a lofty ambition to educate Delaware residents about financial management, state government officials put together some terrific videos. This is not high-level finance – the speakers tell stories about real people facing up to the dimensional challenges of money and retirement.  Viewers outside Delaware might find one of the 10 online Tedx talks valuable to them. Here are three: Javier Torrijos, assistant director of construction, Delaware Department of Transportation: His take on the immigrant experience in a nutshell: “The parents’ sacrifice equals the children’s future,” said Torrijos, who has two sons and whose own father left Columbia for a tough neighborhood in Brooklyn, New York, in 1964 so his children would have a shot at escaping poverty. Today’s immigrants…