Squared Away Blog

No matter how you measure it, older Americans are falling deeper in debt. The number of people in their 60s who have debt has grown from just under half of that age group in 1998 to nearly two out of three in 2010. And their debt, as a share of their assets, has surged during that time from 10 percent to 18 percent. Debt is becoming increasingly common among older people, regardless of their level of income, according to Urban Institute researchers, who presented their findings at the August meeting of the Retirement Research Consortium. (The Center for Retirement Research at Boston College, which sponsors this blog, is a Consortium member.) Among individuals with incomes that place them in t…

This blog is for a part-time Macy’s saleswoman and immigrant whom I met in a hospital waiting room – she’d never heard of Social Security. It is also for a 22-year-old contingent worker I know who lacks steady employment and isn’t regularly accruing credit toward the Social Security pension he will probably need when he retires. And it is for a 62-year-old eager to claim his benefit right away, possibly short-changing his retirement. A substantial share of retirees would fall into poverty were it not for the Social Security program passed during the Great Depression.  It’s especially important for two groups of people to understand how Social Security calculates their pension benefits: young adults making employment decisions that will impact…

Source: U.S. Social Security Administration poster, 1954. When Social Security was created in the 1930s, wives were mainly full-time homemakers, with their pension benefits based on their breadwinner husbands’ earnings. But wives went to work in droves after Social Security’s passage. Today, women make up nearly half of the U.S. labor force.  Yet the program’s design remains the same, with the result being a steady decline in married couples’ replacement rates – the percentage of the combined earnings of two working spouses that Social Security replaces when both retire. A study by the Center for Retirement Research found that the replacement rate for couples has declined from 50 percent for married couples born in the early 1930s to around 45…

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…

A recent blog article, “Retirement Tougher for Boomer Children,” did not elicit much sympathy for Generation X. Many readers who commented expressed a sentiment something like this: Yes, things are tougher for young adults. So deal with it. Members of Generation X, as well as Millennials, are largely on their own with their 401(k)s, in contrast to their parents and grandparents who may’ve had a guaranteed pension at work. But the evidence indicates young adults are not preparing for retirement: well over half of 30- and 40-somethings are on financial path to a lower standard of living once they retire, according to an analysis cited in the article. They need to find “the discipline to save for retirement through a…

If you don’t know this chart on the Social Security website, you should: The chart shows the so-called Full Retirement Age (FRA), which is the age at which you’re entitled to your full monthly Social Security benefit, a pension based on your earnings history. Many boomers see their FRA as the time they ought to retire. But the question they should be asking themselves is: will the monthly benefit I’ll get at my FRA be enough? At a time when many Americans are in danger of not having enough money for retirement, the answer is frequently no. ……

Nearly 8 trillion dollars sits in Individual Retirement Accounts, or IRAs. This is nearly half of all the value held in the U.S. retirement system, which also includes employer pension funds and 401(k)s. A big reason IRAs were created in 1974 under the Employer Retirement Income Security Act (ERISA) was to give individuals not covered by retirement plans at work an opportunity to save in their own tax-deferred accounts. So, are IRAs helping these workers? IRAs “have drifted very far from their original intent” of helping those who need them most, researchers for the Center for Retirement Research conclude in a new study. Who is eligible to receive tax benefits for saving in an IRA has morphed over the years…

The Federal Reserve Bank of St. Louis, based on its analysis of data from the Survey of Consumer Finances, estimates that the recession has ended for only about one-quarter of the U.S. population – the thrivers, who have paid down their debts and restored their savings.  That would leave three out of four Americans who are still struggling. Squared Away interviewed Ray Boshara, director of the Center for Household Financial Stability at the bank; Bill Emmons, senior economic adviser; and Bryan Noeth, policy analyst, for their insights into why most Americans’ net worth – their assets minus debts – hasn’t recovered. Q: You distinguish “thrivers” from “strugglers.” Who are these two groups? Boshara: The thrivers versus strugglers construct is a…

Boston trust attorney Michael Puzo has seen it time and again: people procrastinate about writing a will or putting their estate in order. “It forces them to face their mortality, and they don’t want to,” he said. Even those with modest assets – a house, a 401k, and maybe a life insurance policy – should carefully make an estate plan.  But are the nuts and bolts of wills and estate planning widely understood? This question loomed as Puzo translated these legal complexities in a way anyone could grasp during his presentation to employees of Boston College, where Squared Away is based.  For readers who may not know where to start, here are 10 fundamentals gleaned from his talk: A good…

Over the past 25 years, the difference in wealth held by white and black households in the United States has nearly tripled, to $236,500. In December, Squared Away wrote about the difficulty that black families have in trying to accumulate wealth so they can pass it on to their children. New research out of Brandeis University’s Institute on Assets and Social Policy now finds that the gap between the median net worth for white and black households has widened to a chasm, as blacks have fallen farther behind. The study also quantified the reasons for the widening gap and found that the difficulty of building up housing equity is the largest factor. A house is usually the single largest asset…

The nation’s job market regained some of its momentum in March.  But it’s not just getting a job that’s key to gaining financial security – it’s about getting and keeping a quality job. In a recent report, the Institute on Assets and Social Policy at Brandeis University used interviews with workers around the country to identify three aspects of a job – beyond the size of the paycheck – that help people save money and bolster their financial security.  [Excerpts from some of the interviews are shown.] The report also gave some indications of how common it is for workers to go without them: Benefits – Employer health care, disability insurance, a 401(k) retirement plan with an employer savings match,…

For the sheer simplicity they bring to 401(k) investment decisions, retirement experts have been big fans of target date funds for years. Now, their popularity is soaring with the people who really count: employees. Last year, 401(k) participants poured a record $70 billion into target date funds (TDFs), an investment option that automatically shifts the asset allocation in the portfolio to reduce risk as employees approach a designated retirement date. TDFs have become the first choice for people who, rather than go it alone and pick their own mutual funds, like having their employer’s mutual fund manager do it. According to a new report by Morningstar, the Chicago research firm, the new money flowing in has averaged $66 billion annually…