Squared Away Blog

A March blog post pointing out that a large majority of America’s older population pay no federal income tax seemed to surprise some readers – particularly retirees who must send checks to the IRS at this time of year. “[M]y annual tax liability is and will continue to be greater than when I was employed,” said one such retiree. Readers’ comments are always welcome, and this time they’ve thrown a spotlight on a shortcoming of the article.  It did not fully explore why most retirees – roughly two-thirds of 70 year olds – pay no federal income tax. According to a Tax Policy Center report, “Why Some Tax Units Pay No Income Tax,” tax filers over age 65 are t…

It’s widely recognized that blue-collar workers retire relatively early, when their bodies start wearing out. But the assumption has been that people in less physically demanding white-collar jobs can carry on. However, that does not hold true for all white-collar occupations, according to a newly released study by the Center for Retirement Research, which supports this blog. This finding is especially relevant amid renewed discussions about again increasing the age when workers can claim their full Social Security benefits. This would effectively reduce everyone’s benefits by about 7 percent for each year the age is raised.  Benefits are reduced either because individuals must wait longer to claim their full monthly benefit (which means receiving the benefit for a shorter period…

Our personal biases can play havoc with how we handle our finances. Two such biases have long been suspected as obstacles to saving for retirement. The first is a tendency to procrastinate on decisions that may benefit an individual in the long run, but also involve short-term costs, like saving for retirement – economists call this “present bias.” The second bias is a failure to perceive the power of compounding investment returns and how this can build wealth over decades of saving. But the impact of these biases on how much people actually save wasn’t really understood – until now.  A new study by a team of economists from Stanford University, the University of Minnesota, the London School of Economics,…

Giving money to relatives. Oprah has done it – in the form of a $490,000 house for her newly discovered sister. Former NFL cornerback Phillip Buchanon just wrote a book complaining about it. And Charles Barkley is characteristically blunt about it. “When you continually come to me for money, that’s what ruins relationships,” Barkley explained on NBA TV. “I probably got $4-5 million I lent to friends and family I’ll never see again.” No one is immune to a relative’s appeals for financial help. But this is a perennial and far more prevalent issue among black Americans – and not just the ultra-rich like Oprah and Barkley – according to Rourke O’Brien at the University of Wisconsin. What O’Brien calls…

A survey throws a new spotlight on the employer-employee disconnect over 401(k)s that has also been well-documented in research studies. The survey of 1,000 employees reveals that workers lack confidence in their ability to navigate basic aspects of their retirement plans, while the 200 employers also surveyed have a more optimistic view of how workers are doing. Consider the most basic question of how much to put away for retirement. Two-thirds of employers believe their workers know how much to save, while only one-third of employees feel they know, according to BlackRock. And while nearly two-thirds of employers believe the majority of workers save enough, a minority of workers does. Most employers also believe their workers understand their investment options…

Most of us know how distracting and stressful it is when our credit card balance creeps up or there’s a gap between a bill’s due date and when our paycheck gets deposited. But financial stress can also create serious problems at work like absenteeism, problems that can turn around and compound the financial problems. More than one in four employees who said they deal with “financial stress” admit that it interferes with how well they do their jobs, says a new survey of 5,000-plus workers by the consulting firm Willis Towers Watson. It also increases absenteeism. The study found that workers stressed about their finances are absent from work 3.5 days per year, on average – nearly double the absenteeism…

Rising levels of credit card debt are a good thing and a bad thing. And they are definitely rising: during the final three months of 2015, Americans added $52.4 billion to what they owe on their credit cards, according to a new CardHub report based on Federal Reserve Board data. For context, that is nearly as much as was added to cards in all of 2014. Spending rises when consumers have jobs or get better jobs and when the economy is growing, as it is now, said Lowell Ricketts, an analyst with the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis. With incomes increasing, he said, “they’re in a stronger position to make those investments…

A nearly three-fold increase over the past decade in the number of fraud and related complaints filed with the Federal Trade Commission has pushed the total to 1.7 million filings in 2015, according to the government’s consumer 2015 data book released this month. As Squared Away reported recently, older Americans are often the most vulnerable, as their cognitive abilities decline or they become more socially isolated. Not surprisingly, the FTC said Florida had the highest rate of reported fraud per resident last year (followed by Georgia, Michigan, Texas, and Nevada). One reason for the increase in complaints is that people are increasingly aware of fraud and more likely to report it. Another is that fraud-reporting agencies such as law enforcement…

Taxes are not as inevitable as most people assume. As the chart shows, the share of Americans paying federal income taxes falls precipitously after age 60. Young adults often have little or no tax liability, because they’re either in school or aren’t yet earning very much. Older people revert to a similar picture, after having paid taxes all their lives. The peak occurs around age 50, when nearly 80 percent of households pay federal income taxes. That share plummets to half at age 65 and to just over a third at 70, according to The Hamilton Project at The Brookings Institution, which produced the chart. [The chart is based on 2007 data; there may be some changes in current data,…

Privately financed college loans were less than 10 percent of the $1.3 trillion in unpaid student debt last year, according to the Consumer Financial Protection Bureau. The bulk of student loans are funded by the federal government. But the minority who borrow from private financial institutions often learn painful lessons after graduation: it is much more difficult to negotiate affordable repayment plans with private lenders. Private loans are unlike federal student loans, which have standardized repayment options and procedures. This blog is intended to help parents and future college students avoid getting into difficult situations in the first place with private loans. Squared Away interviewed two student loan experts at Clearpoint Credit Counseling, an Atlanta non-profit: Terrence Banks, a counselor…

This profile is the first in an occasional series about individual baby boomers who either have retired or are facing the retirement decision.   Jane Kisielius Jane Kisielius is at that age – 63 – when she is being pushed and pulled between the work world and the retirement lifestyle that her husband already inhabits. She retired once – temporarily – in August 2014 from a stressful job as head of the nursing team for the public schools in Quincy, a suburb southeast of Boston. But with her administrative and nursing skills in such demand, she was quickly sucked back into the labor market, this time as a part-time coordinator of a wellness program for Quincy residents. She was asked to…

College graduates learn very quickly that paying hundreds of dollars toward student loans each month makes it difficult to afford things like a nice apartment or a car. But they might not appreciate the long-term consequences of their record levels of borrowing: college debt is an added threat to their retirement security, according to a new study by the Center for Retirement Research. The researchers gauged the debt’s impact by looking down the road to retirement and projecting what would happen if working people of all ages had started out with the same profile as young adults: 55 percent of today’s 20-something households have student debt, and they owe $31,000, on average. College debt has a bearing on retirement security…