Squared Away Blog

Like many baby boomers, I’ve received an offer from a former employer that’s meant to entice: “The Company is offering you a limited-time opportunity to receive this benefit now, rather than waiting until you otherwise become eligible to receive payments from the Plan.” My 17-year employment as a Boston Globe reporter entitles me to a $1,762 monthly pension for life, starting at age 65. I’m 57 now. But a few weeks ago, the company put two alternatives on the table: take a smaller pension that starts now or trade my pension for a lump sum of $170,000 in cash. The deadline for accepting the new offer: the day after Christmas. The New York Times Co., which used to own t…

Two times more widows than widowers say their spouse’s death carried significant negative financial consequences during the first year after their loss. This sharp contrast recurred in numerous financial questions recently posed to widows and widowers by New York Life.  The contrast also seemed to persist across various income levels, in questions revolving around both essential needs and luxuries.  Here’s a sampling of answers given by nearly 900 Americans whose spouses have died sometime in the past decade: Their answers beg the question: Why the divergence? One reason is certainly that two-thirds of the widows surveyed reported their income was under $35,000, while a majority of the widowers earned more than that. Adults over age 18 were canvassed, so working…

‘Tis the season to acknowledge progress! The share of Americans who are still paying off credit card debts they ran up during the year-ago holiday has dropped for a second consecutive year. According to an annual Consumer Reports survey, conducted during the first week in November, 7 percent of Americans still had unpaid Christmas bills left over from last year. That’s down from 10 percent in 2013 and 13 percent the year before. One likely explanation is the drop in the U.S. unemployment rate, to 5.8 percent last month from 7 percent in November 2013. Plummeting gasoline prices have also left more cash in shoppers’ wallets. But did a lackluster Black Friday – retail sales were down a whopping 11…

“Self-control” is a catch-all label for resisting all sorts of temptations, including overspending. According to a new study, controlling overspending can be broken down into three distinct behaviors: • Setting goals such as buying a house or saving money. • Monitoring bank statements to systematically track where your money goes. • Committing to the goal in the face of short-term temptations to spend. Data for the study came from a nationally representative U.S. survey of households over age 50. The survey has extensive information about the households’ finances and about each individual’s resolve to set goals, track their finances, and carry out their commitments – whether financial or non-financial. Households lacking self-control disproportionately have lower net worth – no surpris…

The biggest financial hurdle facing workers with low incomes is just that: inadequate income to meet their daily needs. Low-income households are further tripped up by their greater tendency to borrow at high interest rates – rates they are the least able to afford in the first place. Some academic research blames this on poor financial literacy.  But a new study out of Northern Ireland examines two separate aspects of financial literacy and finds the problem is not a lack of knowledge but rather an absence of money management skills. Among “financially vulnerable” people, the study concluded, “money management skills are important determinants of consumer debt behavior” and “numeracy has almost no role to play.” The study involved researchers conducting…

The staff at Squared Away wish our readers a Happy Thanksgiving with your family and friends. Our twice-weekly articles will resume next Tuesday…

Ken Sullivan and Michelle Palomera with their daughters Leah (left) and Abby. Ken Sullivan’s diagnosis of Alzheimer’s disease at age 47 unleashed a torrent of feelings: shock, isolation, fear.  It’s probably why he lost his demanding job at a large financial company. The diagnosis was also emotionally devastating for his wife, Michelle Palomera. But for both of them, it was a rude awakening to the myriad financial preparations required for Alzheimer’s.  Even though both are financial professionals, they had no idea how complex it would be to revise their existing financial plan, how hard it would be to find professionals with the specific legal and financial expertise to help them, or how long this project would take – 17 months…

The differences in Americans’ longevity, depending on one’s income level, are striking. The annual death rates for 50- to 74-year-old men and women with the lowest earnings are more than double what they are for high earners. This gap in life spans, which is well-documented in the research literature, has been growing with each new generation.  A recent study digs deeper to uncover specific ailments, such as heart disease, that may be driving the growing disparity. Brookings Institution researchers Barry Bosworth, Gary Burtless, and Kan Zhang used data from a nationally representative sample of almost 32,000 older Americans that included the causes of individual deaths occurring between 1992 and 2010.  The survey contains detailed information about the cause and timing…

Cuts in public pensions taking place around the country could reduce the ability of state and local governments to recruit and retain top-quality workers, according to new findings by the Center for Retirement Research, which sponsors this blog. Economists have long argued that pensions and worker quality are related.  Pensions, like paychecks, are a form of compensation, one that particularly appeals to workers with the foresight to value financial security in a retirement still decades away.  And these are often better, more productive workers. To examine the effect of pension generosity on worker quality, the Center’s researchers first had to find good measures of each.  For worker quality, they used U.S. Census Bureau survey data on workers who have moved…

Here’s a conundrum: Americans struggle to save for retirement or reduce their credit card spending.  But only about one out of three seeks help with financial issues. So what lies at the heart of our decisions about whether and when to seek help?  Trust. In the video below, Angela Hung, director of the RAND Center for Financial and Economic Decision Making, describes research showing that people who trust financial institutions – the markets, financial services companies, brokers – are also more likely to ask for advice from a financial adviser or similar professional. Further, Hung’s research found that people who trust the industry are also “more likely to be satisfied with their financial service provider.”  Watch the video for Hung’s…

In last Tuesday’s election, voters in Massachusetts and three cities – Oakland, California, and Montclair and Trenton, New Jersey – approved paid sick time initiatives that benefit working mothers in particular. These election results come on the heels of a slew of similar initiatives approved in the past year covering all or certain groups of workers in California and in San Diego, Washington, DC; Eugene, Oregon; several New Jersey municipalities; and the Tacoma suburb of SeaTac, according to an inventory of sick time laws compiled by the advocacy group, A Better Balance. Mandated paid sick time for employees is growing in popularity but is still unavailable to significant numbers of working mothers, who, the data show, are more often responsib…

Social Security’s old-age pensions were designed to replace more of the earnings of retired low-wage workers than of higher-wage workers. But how is this progressivity affected by the federal income taxes paid by all workers and retirees?  A study by economists at the Center for Retirement Research, which sponsors this blog, analyzed this complex issue and found that income taxes have not had any real impact on the overall progressivity of the Social Security program. To reach this conclusion, the researchers used the actual experiences of older American households contained in survey data linked to their lifetime earnings.  There were several different tax effects to consider. First, the payroll tax that funds Social Security is shared by workers and employers,…