Squared Away Blog

About one in four state and local government employees – some 6.5 million people – do not participate in the Social Security system. They get their disability insurance, as well as their pensions, from their employers. Whether the coverage is more or less generous than Social Security disability depends on the individual worker’s circumstance and how the state or local employer calculates benefits. But a new study concludes that public-sector workers who have a disability generally receive benefits that are at least as generous as the federal benefits. To compare them, researchers at the Center for Retirement Research had to construct a database with each state’s and locality’s eligibility requirements and benefit payments. The sample consisted of 67 different disability…

Americans build wealth as they age, and this pattern of accumulation has been similar over three decades of U.S. Survey of Consumer Finances data collected by the Federal Reserve. In the chart below, net wealth is expressed in terms of annual incomes for ages 20 through 64; for example, someone with $150,000 in wealth and $50,000 in income has a wealth-to-income ratio of 3. Net wealth equals financial assets such as 401(k)s and housing, minus debt and mortgages; income includes employment earnings and investment gains.  This measure does not include Social Security or defined benefit (DB) pensions. The stability of this wealth-to-income ratio over 30 years may, at first glance, be comforting.  But it shouldn’t be – wealth should hav…

Depressing or eye-opening? An online tool tells you where you stand financially by stacking up your net worth against other Americans. The calculator compares a family’s net worth – financial and other assets minus debts – with all other U.S. families. Homeowners can choose to include the value of their home equity in their total net worth – or not. Older people have had more time to accumulate wealth, so the rankings are based on the age of the household’s primary wage earner. The comparison is made with 2016 data from the Federal Reserve Board’s triennial Survey of Consumer Finances, which is the gold standard for personal financial data. Since family – not individual – data are being compared, peo…

As the American family becomes increasingly complex, so do parents’ wills. The result has been a dramatic increase over the past two decades in the share of wills in which parents distribute their estate’s assets unequally among their genetic offspring and stepchildren. New research, based on surveys of older Americans, finds that about one-third of parents today do not distribute their assets equally. The reasons range from the greater incidence of divorce and the inherent disadvantage of being a stepchild to the fact that some children naturally take on the role of caring for their aging parents. With parents now living longer and needing more care, children may receive compensation in the will for providing that care. About 42 percent…

The poverty rate for widows has gone down over the past 20 years. This trend will probably continue for the foreseeable future. Women face the risk of slipping into poverty when a husband’s death triggers a drop in retirement income from Social Security and a pension (if he had one). But beginning in the 1970s and 1980s, women moved into the nation’s workplaces at an unprecedented pace. Women now make up nearly half of the labor force and are more educated, which means better jobs – and better odds of having their own employer retirement plan.  As a result, they have become increasingly financially independent. This trend of greater independence is now showing up among older women. Widows between ages…

A retiree’s sources of money are often described as a three-legged stool: Social Security, pension, and savings. But many seniors’ financial support looks more like a single, sturdy pillar: Social Security. This is shown dramatically in new U.S. Social Security Administration (SSA) estimates of just how critical the federal program is to millions of older Americans.  The data speak for themselves: One in two retired households counts on Social Security for at least 50 percent of their total income. One in four gets virtually all income – 90 percent – from the program. The differences among myriad demographic groups also follow the usual socioeconomic patterns, according to the SSA researchers, Irena Dushi, Howard M. Iams, and Brad Trenkamp. ……

As more baby boomers retire, Social Security’s impending financial shortfall will become more pressing. To restore solvency, Congress can either cut Social Security’s pension benefits or increase the payroll taxes deducted from workers’ pay. Both policies would impact how much is available for households to spend. Researchers at the Center for Retirement Research find that the benefit reductions would have an appreciably larger annual impact on retirees than would the higher taxes on workers. But the taxes would be spread over a longer time period. The new study looks at four specific policies, two that cut retirement benefits and two that raise taxes.  Each policy analyzed would equally benefit Social Security’s finances. Gauging their separate effects required using a model to…

The older people who either consider a reverse mortgage or actually get one don’t have much else to fall back on.  Their primary assets – outside of their homes – are a car worth no more than $7,000 and about $2,000 in a checking account. This was one salient fact unearthed about reverse mortgage users – or people who’ve looked into them – in a 2014-2015 survey led by Stephanie Moulton at Ohio State University. This supports a later study by Moulton that found that people who take out the loans tend to be in worse shape financially than other homeowners. The survey provides a more complete picture of who is turning to reverse mortgages – and why other people find…

No matter how you measure it, older Americans are falling deeper in debt. The number of people in their 60s who have debt has grown from just under half of that age group in 1998 to nearly two out of three in 2010. And their debt, as a share of their assets, has surged during that time from 10 percent to 18 percent. Debt is becoming increasingly common among older people, regardless of their level of income, according to Urban Institute researchers, who presented their findings at the August meeting of the Retirement Research Consortium. (The Center for Retirement Research at Boston College, which sponsors this blog, is a Consortium member.) Among individuals with incomes that place them in t…

The magic number is 35. That’s how many years of earnings the U.S. Social Security Administration (SSA) uses to calculate every worker’s pension benefit.  But 35 years can be a tall order for the many boomer women who took time off or cut back on their hours to raise their children.  Nearly half of 62-year-old working women today didn’t make any money for at least one year in their earnings history on record with SSA. But this also means they have more to gain financially than men from working longer, because each additional year of work substitutes for a zero- or low-earning year during motherhood in the benefit calculation, according to research by Matt Rutledge and John Lindner at t…

It’s a simple concept. Deposit retirees’ Social Security checks right before their big-ticket bills come, especially rent. The U.S. Social Security Administration’s current schedule for depositing pension checks in bank accounts is based on each retiree’s birth date– it can be the second, third, or fourth Wednesday of each month. The problem is that cash-strapped, low-income seniors receiving the earlier checks, on the second or third Wednesdays, can fall into a common behavioral trap: they spend the money soon after it comes in and then can’t cover the rent, mortgages or credit cards due at the beginning of the following month. According to a clever new study, people who get these early monthly checks are at greater risk of resorting…

About 15 percent of Americans age 65 and over are poor, according to the federal government’s alternative definition of poverty, known as the Supplemental Poverty Measure, a yardstick that takes into account seniors’ out-of-pocket medical expenses, as well as income and tax effects not included in the standard measure of poverty. A compelling new video profiles poor older Americans who live in Baltimore, rural West Virginia, and Los Angeles. In the video, produced by the Kaiser Family Foundation, a non-profit research and policy organization focused on health care, the seniors identify rising rents and medical expenses as major explanations of financial hardship, which can mean lacking enough money for food. Squared Away also has interviewed seniors living in a Boston…