Squared Away Blog

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,…

In a videotaped experiment testing her financial cognition, an elderly woman must prepare three utility bills for mailing. She’s seated at a table holding the bills, along with three filled-out checks, and three envelopes – each with one utility’s name on it.  After considerable effort and confusion – checks paired with the wrong bills; bills placed into the wrong envelopes and taken back out – she finally finishes her task. New difficulty carrying out simple financial tasks or understanding financial concepts that were once familiar can be warning signs of cognitive impairment due to aging, early stage Alzheimer’s or other causes, said Daniel Marson, a neurology professor and director of the Alzheimer’s Disease Center at the University of Alabama, Birmingham…

It would be nice to think that careful financial planning is behind the critical decision of when to start collecting Social Security benefits. But psychological traits – perhaps impatience or one’s fear of losing money – can also affect whether an individual claims his benefits right at age 62 or waits a few years to increase his monthly income from Social Security.  A new study reveals another powerful influence that can jeopardize financial security: how a person’s dollar benefits might appear on the printed Social Security statement. Business professors Suzanne Shu at UCLA and John Payne and Namika Sagara at Duke University tested this on people over age 40, controlling for psychological influences on the research subjects, such as their…

Our 401(k) retirement system requires most workers to save for the future. But it’s difficult to reach this increasingly important goal, because our emotions – overconfidence, pleasure, fear of loss – get in the way. “We believe our own nonsense,” is how Daylian Cane, a professor in the Yale School of Management, explains financial behavior in a new public television program, “Thinking Money: The Psychology Behind our Best and Worst Financial Decisions.” The short video above is taken from the program. Further clouding our judgment are a vast array of consumer products, and the stress produced by how easy it is to purchase them with a credit card swipe and how hard it is to pay off the cards. “Thinking…

Sometimes research seems merely to confirm the obvious. One example is a new study showing that the cognitive decline that naturally comes with aging makes a senior more vulnerable to fraud. This isn’t especially surprising, but it is important. Amid a shortage of solid research about fraud among the elderly, this study provides important insight into how and under what circumstances they are increasingly being taken to the cleaners by scammers. In their study, Keith Gamble at DePaul University and researchers at the Rush University Medical Center used a survey of older Chicagoans known as the Rush Memory and Aging Project, which contains an unusual amount of information about aging, cognition, and financial fraud. In addition to measuring changes over…

A new report by the FINRA Investor Education Foundation finds “a financially fragile renter population relative to homeowners.” It’s hardly surprising that apartment dwellers who rent are worse off financially than homeowners. It takes money to buy a house.  But things got markedly worse for renters after the Great Recession. Millions of homeowners, foreclosed on by their lenders, were thrown back into the market for apartments, driving up rental rates and squeezing all renters. A new FINRA Foundation report, “American Renters and Financial Fragility,” dramatizes the growing rift between the nation’s haves and have-nots through a comparison of owners and renters. Click on “Learn More” below to see a FINRA Foundation chart contrasting the personal financial situation for renters versus…