Squared Away Blog

If so many human characteristics are universal, why does something so basic as the household saving rate vary from 10 percent in Belgium to 4 percent in the United States? Traditional economic explanations point to built-in retirement account defaults, government mandates or financial incentives. But UCLA behavioral economist Keith Chen mines the study of linguistics for an unorthodox explanation of the wide global disparities in saving. Discussing his early findings in this new field in the video above, Chen explains one aspect of grammar that may influence saving. To find out what that is, watch the video. This Ted talk was filmed in Edinburgh, Scotland in 2012. ……

Ken Osborne with his mother. Ken Osborne became vigilant about safeguarding his 81-year-old mother’s savings as her memory loss set in. She often failed to recall what she’d said during frequent, unsolicited phone calls from people prying into her personal life and financial affairs. “She’s vulnerable,” Osborne, a resident of Jacksonville, Florida, says about his mother who lives 140 miles away. Osborne took preventive action. He signed his mother up for a debit card funded by, but segregated from, her primary bank account.  Osborne maintains a $500 balance in the card account, giving his mother the freedom to spend her own money – whether for groceries or a church excursion to North Carolina – while giving him control of t…

The tax landscape shifts suddenly when most Americans leave the labor force to retire.  The single most important thing to remember is that income taxes can fall dramatically, because retirement incomes are typically lower and because all or a portion of your Social Security benefits will be tax-exempt. This was among the tax insights supplied by Vorris J. Blankenship, a retirement tax planner near Sacramento, California, who has just finished the 2015 edition of his 5-inch thick “Tax Planning for Retirees.”   The following is an edited version of tax information he supplied to Squared Away: Lower taxes in retirement. Brian and Janet are a hypothetical couple renting an apartment in Nevada, a state with no income tax. In 2013, Brian…

The interactive chart above illustrates the increasing U.S. disparity over the past 50 years between how much wealth the rich own – shown on the right side of the chart – and everyone else on the left. The vast majority of Americans build wealth week by week, saving a little bit of their paychecks. Workers set aside wealth in less obvious ways too, by contributing some of that paycheck to Social Security and possibly paying down a mortgage. Differences in earnings add up over a lifetime and contribute to how much wealth people are able to accumulate.  This is explored in the Urban Institute’s series of nine charts, including the one above. Take the earnings trend over a half century…

Retirement is a joint project for married couples, but remarkably only 43 percent of couples plan for it together. Are wives to blame? Some husbands expressed frustration that their wives don’t engage in planning during a focus group conducted by Hearts & Wallets. One man reported that his wife “is not interested in investing,” and another said “all my wife cares about is if we’re going to have the money.” A San Francisco man volunteered this worst-case scenario: “If I were to get hit by BART on the way home, she would be clueless about what to do with whatsoever there is or how to handle anything.” Hearts & Wallets cofounder Laura Varas calls it the issue of the “uninvolved…

In this video by KUTT-TV in Anchorage, Alaska, Fred Keller and Judy Foster show off their retirement project: they transformed a 1976 pickup truck into an oversized replica of a Radio Flyer wagon they can drive around town. While a new red wagon isn’t for everyone, it illustrates an important point: retirees need to find ways to remain active. Older people warn that retirement shouldn’t be viewed exclusively as a time to “relax,” a well-deserved break.  People who enter retirement expecting nirvana often find they’re bored stiff, or even depressed, due to an abrupt drop in productivity after decades of working. Retirees also spend a lot of time alone or watching television. This blog often promotes the benefits of financia…

Americans build wealth as they age, and this pattern of accumulation has been similar over three decades of U.S. Survey of Consumer Finances data collected by the Federal Reserve. In the chart below, net wealth is expressed in terms of annual incomes for ages 20 through 64; for example, someone with $150,000 in wealth and $50,000 in income has a wealth-to-income ratio of 3. Net wealth equals financial assets such as 401(k)s and housing, minus debt and mortgages; income includes employment earnings and investment gains.  This measure does not include Social Security or defined benefit (DB) pensions. The stability of this wealth-to-income ratio over 30 years may, at first glance, be comforting.  But it shouldn’t be – wealth should hav…

Anger, frustration, confusion, and regret – high emotion permeates the nearly 8,500 complaints about student loans posted last year on the Consumer Financial Protection Bureau (CFPB) website. A college education can pay dividends in the form of higher lifetime earnings and more opportunities, and millions of graduates repay their loans without incident. But many of the one in three borrowers facing extreme difficulty with repayment have legitimate reasons. The job market, while improving, is not robust for recent graduates. And interest rates on student loans are higher than mortgage rates, so the amount of debt accumulated – and the monthly payments – can be substantial. Borrowers report that lenders and the firms hired by lenders to service customers are often unwilling to renegotiat…

With snowstorms hammering the eastern United States, some baby boomers may be looking for a permanent escape when they retire. Yet Southern cities did not come out on top in the Milken Institute’s new ranking of the Best Cities for Successful Aging, a ranking based on a fairly comprehensive set of factors important to seniors. Take frigid Iowa City, the No. 1 small city: it gets credit for its transportation and the affordability of its assisted living and adult day care services. Milken Institute economist Anusuya Chatterjee saw common themes among the top-ranked metro areas.   They tended to have vibrant economies, quality healthcare services, opportunities for intellectual stimulation and active lifestyles, and easy access to amenities like grocery stores, transit,…

In a divorce, splitting up the pension is trickier than dividing the house. Divorcing couples and their advisers “who aren’t hip to divorce splitting of retirement plan assets often do it improperly,” said Howard Phillips, a Delray Beach, Florida, actuary and author of “Dividing Retirement Plan Assets in a Divorce.”  He knows, because he values pensions for couples negotiating their divorce settlements and then drafts the order that will be entered into the court. Dividing a house is easy.  Two realtors pouring over sales of comparable nearby properties can readily agree on a value – once the house is sold, the parties pay the realtor and split the proceeds.  But a pension plan’s value greatly depends on how and when…

Manuel Carvallo immigrated from Mexico at age 40 and became a U.S. citizen at 51.  The Georgia pension consultant just reached another milestone, accumulating the 10 years of U.S. work experience required to receive a small Social Security pension when he retires. Millions of immigrants from around the world who work here illegally could get the same opportunity as Carvallo under President Obama’s executive actions on immigration, which propose to give many of them temporary legal work papers and Social Security numbers.  Great uncertainty remains about where U.S. immigration policy is heading as Congress actively seeks to reverse the president’s administrative actions What is clear is that when undocumented immigrants – farm workers, hotel workers, and household and restaurant staff…

Lose your SSA-1099 tax form showing your total Social Security benefits in 2014? Or perhaps you moved and never received it in the mail. Last year, more than 156,000 retirees did just that and had to call the U.S. Social Security Administration for a replacement. But help has arrived. For the first time, retirees can go to the agency’s website to retrieve and print out a duplicate SSA-1099 form. The SSA-1099, which is mailed in January, provides benefit information necessary for filing an individual’s income taxes. The SSA-1042S, a similar form for immigrants and other non-residents, is also available online. ……