Squared Away Blog

U.S. workers’ wages, adjusted for inflation, are stagnating, but their share of health care costs keeps going up. “Something has got to give, right? That something could very well be the 401(k) or 403(b) plan,” said Mark Zoril, a personal financial planner and benefits adviser to small companies. Six in 10 workers agreed: the rising cost of their health insurance “directly affects” how much they set aside in their retirement savings plan at work, according to a new survey gauging the “financial stress” of more than 2,000 full-time employees with health coverage. The random survey was conducted by LIMRA, a financial services research organization. Despite a slowdown in medical inflation, employees are paying a growing share of the tab for…

The Earned Income Tax Credit is a critical lifeline that lifts some 9 million low-income Americans out of poverty – half of them children. But the federal tax refund program isn’t perfect. The large refunds come just once a year, in the spring tax filing season. A cash crunch is a year-round problem for working families with low or erratic incomes who can’t always pay their bills. A new study by the Center for Economic Progress identified additional financial benefits from the Earned Income Tax Credit (EITC) when participants in a Chicago pilot project received smaller, regular EITC payments throughout the year. For example, workers who received the quarterly payments – in May, August, October, and December – were muc…

Some Boston University students cruise city streets in their BMWs or Lamborghinis. Three of Donald Trump’s five children have joined the family business so far. And the financial media are full of useful advice for parents who might want to buy a house for their adult offspring. Nature versus nurture? Not surprisingly, nurture won out when researchers applied this question to who has more influence on the wealth of young adult Swedes who were adopted as children – their biological parents (nature) or their adoptive parents (nurture). Wealth “is not due to the fact that children from wealthier families are innately more talented,” the international team of researchers concludes. “Instead, it appears that even in a relatively egalitarian society lik…

Health insurance is really starting to hurt. Premium increases and deductible creep, documented in the Kaiser Family Foundation’s comprehensive annual survey of employer health benefits, are eye-popping figures. Although there has been a slowdown in medical inflation and health care spending overall, the growing prominence of high-deductible plans is evidence that more of these costs are shifting to employees. One in four workers today is enrolled in a health insurance plan with a high deductible – up from 4 percent a decade ago – exposing them to larger out-of-pocket expenses than traditional health plans if they become ill. [Kaiser’s definition of high-deductible plans is that they are accompanied by a tax-preferred savings plan to help workers pay their medical bills.]…

HICAP, SHIP, SHINE – whatever your state calls the program, the mission is an urgent one. With some 10,000 baby boomers turning 65 every day, these programs help new enrollees grapple with their Medicare options and make decisions, especially during open enrollment, which begins on Thursday and ends Dec. 7. Medicare is “confusing” to boomers, because they “have more than one option, and most of us, when we were working, had only the PPO or the HMO” to choose between, said Christina Dimas-Kahn, program manager and a telephone counselor in San Mateo County, California’s Health Insurance Counseling and Advocacy Program (HICAP). The top requests for assistance coming into her office are from new enrollees to Medicare, followed by the elderly…

If two people – one black, one white – have good jobs with comparable incomes, the black person would still be less likely to have a taxable investment account, such as a mutual fund, a new study finds. Numerous reports have shown that black Americans have fewer retirement and other savings accounts, and less money in those accounts than white Americans. But the problem with many of these comparisons is that they lump people together, regardless of how much they earn. A new study by the FINRA Investor Education Foundation looks at one type of account – taxable investment accounts – and controls for income as well as two other characteristics that influence wealth: education and age. The study, using…

When Bob Mauterstock asked how many financial advisers in the room had elderly clients showing signs of diminished mental capacity, a few hundred raised their hands. Next, he asked, how many have a protocol for these clients? Fewer than 10 put up hands. With the U.S. population over age 85 growing at a rapid clip, advisers increasingly are facing this issue, he explained last week at the Financial Planning Association meetings in Boston. A 2009 Fidelity survey backs him up: 84 percent of advisers said they had clients touched by Alzheimer’s disease. Mauterstock, the author of “Passing the Torch, Critical Conversations With Your Adult Children,” shared seven tips to help advisers, clients, and their families. While many of his suggestions…

Brandi and Frank, the hypothetical couple in the above video, are drawn from extensive nationwide interviews with real Americans who work extremely hard, live modestly, and carry their financial anxiety through the day. Ten of these families were also featured in written profiles by the U.S. Financial Diaries project. Like millions of working Americans, these families are buffeted by economic forces ranging from stagnating paychecks to a scarcity of employer benefits in low-wage jobs. The project identified common traits running through their financial lives. They are continually trying to improve their lot, with education or by taking on extra jobs and by saving. Retirement saving, however, is a luxury – their saving is done to pay the unanticipated emergency or…

The adage that money won’t buy happiness has been proved wrong – at least up to a point. One famous study found that one’s well-being increases as income rises, though the benefits subside around $75,000 per year. But what about the reverse? Do people who are happy earn more money? Yes, say two British economists. Their study in the Proceedings of the National Academy of Sciences concluded this after following American teenagers for a more than decade through the National Longitudinal Study of Adolescent Health. In 1994 and 1996, this survey asked high school students to react to statements like “You were happy” and “You felt hopeful about the future.” In a 2008 follow-up survey, when most of them wer…

The federal government continues to work out the kinks in its reverse mortgage program. The latest change allows a non-borrower to remain in her home after her spouse, who signed the reverse mortgage, has died. The federal government established its reverse mortgage program in the 1990s to provide an alternative source of income for retirees over age 62. These Home Equity Conversion Mortgages (or HECMs) are secured by the equity in borrowers’ houses, and the loans are repaid only when they move or die. The loans are federally insured to ensure that borrowers get all the funds they’re promised, even if the lender fails, and that lenders are repaid, even if the value of the property securing the loan declines…

The job market appears in fine form. August’s unemployment rate, at 5.1 percent, is now at half of its Great Recession levels. But while the media latch on to the unemployment rate in the federal government’s monthly jobs reports, economists like Gary Burtless of the Brookings Institution are interested in a different number that’s also part of the monthly update: labor force participation among people in their prime working years, ages 25 through 54. They are the heart of the labor market, and the trend in their participation rate paints a bleaker picture of the job market, Burtless noted in a recent report. In August, the rate was just 80.7 percent – and still below the 83 percent level prior…

Longer lives, eroding Social Security benefits, and rising health care costs – these are just some of the reasons older workers need to save more in their 401(k)s. To encourage them, Congress in 2001 approved a “catch-up contribution” for workers over age 50.  The size of this additional tax-deductible contribution started at $1,000 in 2002 and jumped to $4,000 by 2005 and $5,000 in 2006.  (After 2006, it continued to increase, though only at the rate of inflation, and is currently $6,000.) But the catch-up contribution has not turned into a broad-based solution to Americans’ retirement woes that some proponents had claimed at its passage.  According to researchers at the Center for Retirement Research (which supports this blog), it helps…