Squared Away Blog

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…

Two out of three working Americans grade their retirement readiness at no better than a “C.” So how about using the Social Security Statement that lands in their mailboxes, grabbing their attention, to spur them to action? The statement is already valued by millions of Americans. A survey funded by the U.S. Social Security Administration (SSA) found that people who received statements were “dramatically” more knowledgeable about their basic pension benefits than people who had already retired when SSA started mailing them out in the mid-1990s. Social Security is the nation’s most important source of retirement income, and the information in the statements is essential to most workers’ retirement planning. Mailed out before every fifth birthday – 25, 30, 35,…

This video examines wealth through the prism of race. It compares the share of the nation’s African-American, Hispanic, Asian-American and white populations who have net worth exceeding $1 million; net worth equals financial and other assets minus mortgages and other debts. If the fact that there is a racial divide isn’t surprising, the magnitude of it might be. Other factors also have an enormous influence over who gets rich, and understanding this becomes increasingly important amid rising inequality. The biggest determinant of wealth is whether our parents are rich, as recent research has shown. Age and education are also crucial. That’s because older people have more time to save and accumulate wealth, and a college education typically leads to jobs…

Economists like to joke about free lunches. The subtext is that there’s a cost to everything. A free lunch is also literally how high-pressure financial companies sometimes lure older Americans into a room to hear their investment pitches. The FINRA Investor Education Foundation says some 6 million older Americans have attended seminars in return for a free lunch. Every year, my mother’s retirement community outside of Orlando hosts a handful of these seminars, which are presented by financial firms, insurance companies, and even funeral homes. FINRA warns that they can pressure seniors into making “unsuitable, even fraudulent investments.” The above FINRA video explains what’s behind the free-lunch presentations and proposes some questions that people can ask to determine the legitimacy…

The wealth of good financial information available from government, university, and non-profit organizations is an antidote to the television and Internet advertisements selling financial products. Squared Away regularly compiles these resources for our readers’ benefit. This newest installment starts with some that are available in Spanish for the nation’s growing Hispanic population: The FINRA Investor Education Foundation translated its short video about why people make bad financial decisions into Spanish. “Pensando Dinero: la psicología detrás de nuestras mejores y peores decisiones financieras” – or “Thinking Money” – explores how emotions get in the way of common sense when making decisions about money. Several other FINRA resources also in Spanish include a glossary of online financial publications and a video about financia…

Sitting at her computer in the oversized studio apartment she shares with her boyfriend in Portland, Oregon, Melanie Lockert received confirmation on Dec. 10 that her ordeal was over: $81,000 in college and graduate school loans were finally paid off. She had two reactions. The first was an existential panic. “Who am I without debt?” the 31-year-old asked herself. Then a grin spread across her face. “I started dancing and screaming in my apartment. It was such an amazing moment, and I felt incredibly happy to be done with this,” she said. Recent college graduates might despair that their day of liberation is far away or might never come. But Lockert’s single-minded focus on demolishing her debt, particularly by accelerating her…

Total U.S. spending on prescription drugs by individuals, insurers and governments jumped 13 percent last year – the largest increase since 2001. One in four Americans report having difficulty paying for medications. Older Americans are somewhat shielded from the full impact of rising drug prices by Medicare’s Part D program, which greatly expanded their coverage. Since Part D’s implementation in 2006, seniors’ average out-of-pocket spending on medications has actually declined, from $708 to $564 annually in 2012. But a recent trend of price spikes for specialty drugs might be a snake in the grass for seniors on fixed incomes. Since most take multiple prescriptions, they face greater odds of needing at least one of these expensive medicines. Drug cost stability…

Day care, sneakers, cell phones, maybe college – kids are expensive. When they grow up, empty-nesters face a decision about what to do with their extra money. What they choose is crucial to their retirement security for two reasons – one obvious, and one subtle but very important. The Center for Retirement Research estimates that about half of U.S. workers might not have enough savings to maintain their standard of living after they retire. So, the obvious thing to do after being freed from child-rearing obligations is to put more money into an employer retirement plan. But 401(k) saving increases only modestly after the kids leave home, according a study by the Center comparing empty-nesters with parents whose kids ar…

Poverty is the scourge of women in old age. This problem was aggravated, according to a new study, when older workers started claiming their Social Security benefits sooner after the earnings test was lifted in 2000 for those who reach the program’s full retirement age. The earnings test withholds benefits from older workers earning more than a specified amount – the withheld benefits are returned later, in the form of an increase in monthly Social Security checks. But the earnings test is, nevertheless, often viewed as a tax in the mistaken belief that these benefits are never restored. Researchers at the U.S. Treasury Department and the University of California at Irvine found that people reacted in one of two ways…

Over the long Christmas holiday, I got a sneak preview of what retirement could be like. Frankly, it was a little boring. I fully appreciate that most workers don’t have the perk provided by my employer, Boston College, which gives us generous time off between Christmas and New Year’s. By cashing in a few unused vacation days prior to Christmas, I was able to string together 16 glorious days off. It felt like a lifetime. After cleaning off my desk, running long-neglected errands, reading a book about the sinking of the Lusitania, wrapping gifts, stocking the pantry, going to a holiday party, exercising at the gym, seeing most of the 2015 Oscar contenders at local cinemas, and getting together wit…

In the 1960s and 1970s, the baby boom generation had a reputation for breaking down societal norms for behavior – and they’re at it again. Between 1990 and 2010, the rate of individuals over age 50 who become newly divorced in a year doubled to more than 10 people affected per 1,000 married people, according to Susan Brown, a sociologist at Bowling Green State University. Studies by Brown and others are emerging that show this important trend of “gray divorce” is having negative consequences for baby boomers’ financial security in old age. “Individuals who go through gray divorce are considerably economically disadvantaged, and they are a growing demographic group,” Brown said. She estimates nearly 650,000 people over 50 were involved…

Will you retire when you want to, when you have to, or when you can afford it? This is crucial, because when Americans retire is more important than it’s ever been to our financial well-being in old age. Yet the research indicates this doesn’t carry enough weight in people’s decisions. This doesn’t make any sense. The typical combined 401(k)/IRA balance is a slim $111,000 for working households between 55 and 64 years old that have a 401(k). And fewer and fewer retirees have defined benefit pensions, which provide reliable income. More than half of us are at risk of experiencing a decline in our standard of living after we retire, estimate economists at the Center for Retirement Research, which supports…