Squared Away Blog

Yes, income inequality has risen dramatically over the past 35 years. But something else has happened that might surprise you. The size of the upper middle class is expanding, as Americans migrate up from the ranks of the middle class and poor, according to a new analysis from the Urban Institute. Economist Stephen J. Rose uncovered this finding by defining how much income families needed in 1979, just before inequality really took off, to be counted as rich, upper middle class, middle class, lower middle class, or poor. He anchored his class divisions largely around incomes relative to the federal poverty level. For example, he set the income floor for the upper middle class at five times the poverty lev…

Here’s a reminder that parents should start their homework this summer to minimize college loan repayments over the long haul. A few basic decisions can add or subtract thousands of dollars. A little help came last week, when the interest rates on all federal student loans were reduced. Despite the declines, the rates for the PLUS loans available to parents remain much higher than the loans available to their offspring – taking out a PLUS loan will nearly double the interest paid on $50,000 over 20 years, compared with an undergraduate Stafford loan. This is an argument for having prospective students take out the loans, rather than the parents.  As for paying them back, financial advisers tend to agree that…

There’s plenty of evidence of the unfortunate consequences for employees overwhelmed by too many investment options in their 401(k) plans. Studies find that confused employees might not join the plan at all, select investment funds that are not well diversified, or throw up their hands and put an equal amount in each fund offered by their employer. And as employers add more options, the new funds often carry higher fees and produce lower returns. A new study took the opposite tack, examining how employees reacted when one large U.S. employer reduced the number of investment options. The results were lower fees and less turnover, saving employees an average of $9,400 over a 20-year period. Further, their new portfolios were less…

There’s one problem with expecting all baby boomers to delay retirement beyond their 60s: it might not be fair. That’s because people with lower incomes and less education die younger than the well-to-do with more education. Think about what would happen if everyone retired at, say, 70. Those with less education and a lower socioeconomic status (SES) would enjoy fewer years in retirement than people with higher SES. This gap in retirement duration has also widened in recent decades. That’s because the lowest SES group has seen much smaller improvements in their life expectancy, according to economists at the Center for Retirement Research, which supports this blog. Their study tracked adults surveyed by the U.S. Census Bureau over time and…

It’s the time of year when we highlight blogs that attracted the most page views over the previous six months, according to Google analytics. Today, we’re listing a “baker’s dozen” – 13 blogs – popular with our readers, instead of the usual top 10.  This allows us to highlight some interesting themes that were apparently on readers’ minds: Many retirees weighed in with their comments on two blogs about how and why they’re taxed: How Federal Taxation Drops for Retirees Why Most Elderly Pay No Federal Tax A new feature called “Boomers: Rewriting Retirement” that profiles people who are either approaching retirement or recently retired made the list: A Familiar Dilemma: to Work or Retire Squared Away tried something els…

Technology, coffee, investments, beer – most consumers value choice in some aspect of their lives.  But what if having too many choices leads to bad decisions and costly mistakes? Carnegie Mellon University economists Saurabh Bhargava and George Loewenstein, and Justin Sydnor from the University of Wisconsin School of Business, found this to be the case at one company that required employees to select from a menu of options and build their personal health plans from the ground up. The researchers found that the employees typically designed health plans that would cost them more than other plans with similar coverage. The cost of these choices was large for the average employee – about one-quarter of their annual premium payments in t…

Reverse mortgages, health insurance, marital histories, social networks, and even student debt – any or all of these can play a role in the financial security and well-being of America’s retirees. These are among the topics that will be explored during the 18th annual meeting of the Retirement Research Consortium, which features researchers from top universities around the country whose work is supported by the U.S. Social Security Administration. The meeting will be held on Thursday, Aug. 4, and Friday, Aug. 5 in Washington, DC. To learn more about the research papers being presented, click here to read the agenda…

In the late 1990s, six out of ten retirees found retirement “very satisfying.” Today, not even half do, according to a recent analysis of a long-term survey of older Americans. The news isn’t all bad, since the “moderately satisfied” share rose – and moderately satisfied is probably a more realistic goal for most people anyway. But the question of why so few people are very satisfied with their retirement state of mind is difficult to pin down. The survey analysis by the Employee Benefit Research Institute (EBRI) and past academic research provide some clues. Health.  It’s well-established that health and satisfaction are inextricably linked: healthier retirees are happier retirees, according to a 2005 study by the Center for Retirement Research, whic…

When a spouse or parent requires long-term care, quality is the top priority. But a report last year by the US Government Accountability Office (GAO) cited concerns about the quality of the federal data essential for monitoring the quality of care.  For example, three key indicators point to improvements: better nursing staff levels and clinical quality and fewer deficiencies in care that harm residents. Yet consumer complaints jumped 21 percent between 2005 and 2014, even though the number of nursing home beds has remained roughly flat in recent years. Anthony Chicotel, an attorney with the San Francisco non-profit California Advocates for Nursing Home Reform, said care quality is intertwined with affordability, payment sources, and dramatic changes under way in nursing…

These personal finance videos are like sensible shoes: they won’t win any awards, but they can be useful. Produced by the College of Financial Planning, the short videos demystify the fundamentals of personal finance that the planners who teach and take courses at the college rely on in their practices. “Free Money” (above) features Dirk Pantone, a vice president and certified financial planner, interviewing Kristen MacKenzie, who teaches there, about 401(k)s, 403(b)s, 457(b)s and the employer match. “Living on Borrowed Time,” has Pantone and MacKenzie discussing the difference between good debt and bad debt, both of which impact credit scores. “The Road to Investing Your Assets” explains why low fees and portfolio diversification are so important. There are 13 videos. …

Low-income residents are in better financial shape in the 31 states that have expanded their Medicaid health coverage under the Affordable Care Act (ACA). That’s the bottom line in a new study finding that they have fewer unpaid bills being sent to collection agencies and their collection balances are $600 to $1,000 lower than their counterparts in non-expansion states. This contrasts with the years prior to the 2014 Medicaid reform, when residents of would-be expansion and non-expansion states had very similar financial profiles. State decisions about whether or not to expand their Medicaid rolls are having “unambiguous” and “important financial impacts,” concluded researchers at the University of Michigan, the University of Illinois, and the Federal Reserve Bank of Chicago. Medica…

As Squared Away readers scatter to the winds this summer, those going overseas should take a close look at the currencies in their travel destinations. There are some gorgeous currencies out in the world, in places like Sao Tome & Principe off of the coast of Gabon in West Africa. June begins peak season for the island country, which The Lonely Planet says has a relaxed “leve leve” vibe to go with its miles of beaches, “swaths of emerald rainforest, soaring volcanic peaks and mellow fishing villages.” Sao Tomean Dobra Currency as art is a refreshing contrast to U.S. currencies, with their button-down images of presidents and buildings.  Try the red-billed kingfisher bird on Sao Tome & Principe’s 50,000 dobra…