Squared Away Blog

Dramatic changes in the U.S. family structure over several decades – more divorce, single motherhood, and unmarried couples – could have a big impact on the financial security of baby boomer women as they march into retirement – and on future retirees. A review of studies on Social Security spousal and survivor benefits by the Center for Retirement Research, which sponsors this blog, examines the difficulty of providing retirement security for the growing ranks of women and mothers who do not fit the traditional family mold. Social Security’s benefits were designed for the typical family when the pension program was enacted in the 1930s, a family portrayed at the time by Henry Barbour and his wife, Fanny, in the popular…

Inequality is frequently in the news. A new study puts an interesting spin on this now-familiar topic: rising health costs are a significant reason for wage inequality. The cost of employer-provided health insurance is a larger share of lower-paid employees’ total compensation than it is for the people higher up in the organization. Since insurance costs have been increasing faster than total compensation, squeezing out pay raises, the nation’s lowest-paid workers feel it most. For people with earnings at the 30th percentile of all U.S. workers, total compensation, including the cost of employer health insurance as well as actual earnings, increased by just 9 percent in inflation-adjusted dollars between 1992 and 2010, according to data in a new study by…

It was Gerry Smythe’s final confirmation he had never quite felt at home working in the Oklahoma airplane manufacturing plant.  When well-meaning coworkers bought a cake to celebrate his and another person’s retirement, they got Smythe’s name wrong on the sign inviting everyone to the break room. At age 63, he until recently was one of the nation’s 10 million older Americans working in physically demanding jobs in difficult conditions. He felt worn down by the factory noise, carbon dust, and standing all night on collapsed arches to assemble cabin floor beams for Boeing 777s.  His requests for a transfer away from the hard floor never went anywhere, he said. “It wasn’t really the job – I kinda liked t…

Like the United States, many European countries are concerned about shoring up their pension systems for their aging populations.  In 2000, Austria took action by introducing a series of small increases in the earliest age at which workers can begin receiving their federal pensions. This reform is gradually phasing out early eligibility entirely. Raising the earliest claiming ages, from 60 to 65 for men and from 55 to 60 for women, will cause them to converge, next year, with the pension program’s standard – or “normal” – retirement ages. Prior to the reform, workers who had signed up for benefits before their normal retirement age received only mild reductions in their monthly benefits.  The reform, in addition to gradually raising t…

High school students who participated in Boston’s summer jobs program in 2015 work on a public beautification and landscaping project. It’s a spring rite in Boston.  The mayor’s office and private and non-profit employers hustle to get ready for a program employing more than 10,000 inner-city teens for the summer. A new study of the summer 2015 participants shows that the high school students made remarkable strides, compared with the kids who applied but were not accepted for the limited number of slots available in the program.  New York and Chicago have similar, large programs. The Boston teens, who are mostly either black or Hispanic and from low-income neighborhoods, improved their job readiness, from showing up on time to developing their…

Social isolation kills – literally. In this video, Professor James Lubben, founding director of Boston College’s Institute on Aging, discusses numerous research studies showing that people who lack a social network of friends or family are more likely to neglect good health practices and to experience psychological distress, cognitive impairment, the common cold, and even death – “it’s on a par with smoking,” he said. Seniors become particularly vulnerable to becoming isolated as they decline physically, but isolation then makes them more vulnerable to worsening health. Social health should “be as important as mental health and as physical health,” said Lubben, who also is a professor of social work here at Boston College. Summers are a fun and busy tim…

The economy keeps chugging along, unemployment has been bobbing at or below 5 percent all year, and wages have been creeping up. Yet anxiety is rising, according to a newly released survey by Northwestern Mutual.  In February, 85 percent of Americans said they had “financial anxiety,” particularly about how they would pay for an unexpected emergency or medical bill. And here’s how financial anxiety affects them: 70 percent say it reduces their “happiness,” their mood, or their ability to pursue their dreams, passions, and interests. 67 percent say it impairs their health. 61 percent say it has a negative effect on their home life. 51 percent say it has a negative effect on their social life. For more than half,…

A small group of researchers at the Center for Retirement Research, which sponsors this blog, produces a large volume of analysis of the nation’s state and local government pension funds. Their work isn’t typical of the personal finance information that appears in this blog. But it turns a bright light on the financial condition of the pension funds that millions of state and local government workers and retirees rely on. The bottom line, according to these studies, is that while some funds are in poor condition, many more are managing. The following are short descriptions of the Center’s recent reports, with links to the full reports: The big picture is updated in the new brief, “The Funding of State and…

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…