Squared Away Blog

A recent Brookings Institution report confirms for the first time how severely uninformed many college freshman are about the impact of the debts they’re taking on to fund their education. This isn’t entirely surprising. But with tuitions continually rising and students now often forced to borrow the equivalent of a house down payment by the time they graduate, the Brookings findings should serve as a wake-up call: Half of the full-time freshmen surveyed “seriously underestimated” how much they were borrowing. Among students known to have federal college loans, four out of 10 either said they didn’t have any federal loans or didn’t have any debt at all. According to the report, “Students who do not have a good idea of…

Years of confinement to a nursing home is everyone’s worst fear for old age. With a semi-private room now costing about $81,000 annually, the prospect of a lengthy stay is also a popular reason for buying a long-term care insurance policy to cover it. Undercutting this rationale is a new study led by senior economist Anthony Webb of the Center for Retirement Research, which sponsors this blog. He finds that U.S. nursing home stays are relatively short: 11 months for the typical single man and 17 months for a single woman.  There’s some unpleasant news in the study, too, because the risk that an older person may one day need nursing home care is 44 percent for men and 58…

Since you are the best judges of what financial information is most useful, it’s a holiday tradition to feature readers’ favorite articles published during the year. Please spread the word among family and friends about the most popular 2014 blogs, listed below, by “liking” Squared Away’s Facebook page.  Readers can also sign up for emails of each week’s headlines. The  articles are ranked in the order of their total page views: Retirees Live on Less. People who’ve already retired say adjustments are required to live on a smaller income. Retirement Delayed to Pay the Mortgage. Paying off the house tilts many baby boomers’ decisions. Retirement: a Good State of Mind. New research tries to resolve the conflicting evidence about whether…

Retirees in one Orlando-area community sustain a lively conversation about every topic under the Florida sun, a conversation that threads through their rounds of horseshoes, dinner dances at the club house, and senior yoga. But one subject must be handled with great discretion: hunger. Judy Cipra knows this, because she and her late husband, Fran Cipra, started, and she continues to operate, Fran’s Pantry to collect money and buy groceries for 18 seniors who struggle financially in the Palm Valley retirement community, where my mother also lives. “If you call me and you tell me that you need food, I don’t ask any questions,” Cipra said. “You just get it.” Cipra said people reliant solely on Social Security are often…

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…