Squared Away Blog

When dementia enters an elderly couple’s home, it can bring financial mismanagement with it. But since both spouses don’t usually become cognitively impaired at precisely the same time, couples have the option of turning over the household financial responsibilities to the person who’s not yet impaired.  The question is whether this transfer of control happens quickly enough. Most couples are waiting until after cognition is very low to make this change, according to a new study. Economists Joanne Hsu with the Federal Reserve Board and Robert Willis with the University of Michigan found that 80 percent of married older Americans who had been in charge of their household finances continued to manage them after a test revealed they were approaching or…

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…

The answer to the above question is definitely “yes,” according to new research by professors Sumit Agarwal at the National University of Singapore and Itzhak Ben-David at Ohio State. They examined 30,000 small business loans made in 2004 and 2005 to compare the loans made by salaried bank officers with those made by officers working under a commission system.  The commissioned lenders were paid 80 percent of their former salary, plus commissions based on the number of loans they originated, their dollar amount, and how quickly they were approved. Not surprisingly, the researchers found that commissioned officers, responding to these incentives, originated 31 percent more loans and the dollar amounts per loan were nearly 15 percent greater – they wer…

Millennials, now in their 20s or early 30s, are ethnically more diverse and better educated than any previous generation.  They also demonstrate different financial behaviors that may partly reflect new trends in society and in technology. Millennials’ financial struggles are a natural consequence of being new entrants to the labor force. Two-thirds of them earn less than $50,000 annually, and they are more likely than Generation X (now mostly in their 40s) to spend more than they earn, according to the FINRA Investor Education Foundation’s newly released survey of some 25,000 adults of all ages. But FINRA’s survey provides clues to the financial habits that may set Millennials apart from previous generations: More than one in three has taken on…

About 15 percent of Americans age 65 and over are poor, according to the federal government’s alternative definition of poverty, known as the Supplemental Poverty Measure, a yardstick that takes into account seniors’ out-of-pocket medical expenses, as well as income and tax effects not included in the standard measure of poverty. A compelling new video profiles poor older Americans who live in Baltimore, rural West Virginia, and Los Angeles. In the video, produced by the Kaiser Family Foundation, a non-profit research and policy organization focused on health care, the seniors identify rising rents and medical expenses as major explanations of financial hardship, which can mean lacking enough money for food. Squared Away also has interviewed seniors living in a Boston…

If so, you have a lot of company. Fully 71 percent of adults identified money concerns as their single biggest source of stress in 2013, according to the American Psychological Association’s annual Stress in America report, derived from surveys by Harris Interactive. The good news is that this money-stress indicator has declined from 76 percent in 2010, in the wake of the Great Recession. But the runner-up sources of stress are also closely related to money: work caused stress in 69 percent of adults surveyed, and “the economy” was identified by 59 percent. Women are slightly more stressed than men.  Could it be because women earn less, on average? On the other hand, more men than women still have responsibility…

Tatiana Andrade (standing), an ambassador for American Student Assistance, hosts a Jeopardy match to educate classmates about their student debt. College students usually plan on repaying their loans after graduation, when they’ve landed a full-time job.  Freshman Tatiana Andrade is making payments while she’s still in school. Andrade is already $14,500 in debt.  She’s on track to owe some $60,000 when she completes her four-year degree at Stonehill College outside Boston, even though her parents are sharing the cost.  To chip away at her debt, she pays off between $100 and $150 per month from her earnings in a part-time job. Andrade is among a slim but growing minority of students and recent graduates becoming proactive to get control of…

If postponing retirement can improve one’s financial security in old age, why do so many people rush to retire when they reach age 62? Much research has explored the financial and health reasons that explain why so few people choose to retire later.  Taking a different tack, a new study found that individuals with higher cognition foresee a higher probability of working longer. There were two steps to this research. First, participants in an Internet survey were asked if they planned to continue working full-time after age 62 and, separately, if they expected to work past 65.  Participants were between the ages of 45 and 61. Next, the researchers measured each survey participant’s “crystallized intelligence,” which is the wisdom acquired…

Did you know that an investor may be more likely to hold on to a money-loser if he bought it himself than if he inherited it? That people born with the “warrior gene” will take more risks? Or that trust is essential to whether individuals prepare for retirement? A new edited volume, “Investor Behavior: the Psychology of Financial Planning and Investing,” is a thorough tour of the research on these and other aspects of behavioral finance.  The book was compiled for financial planners, investment professionals, academics, and finance students and edited by two finance professors, H. Kent Baker of American University’s Kogod School of Business and Victor Ricciardi of Goucher College. The field of behavioral finance is gaining traction as…

When older workers are weighing whether to retire or carry on for a few more years, it’s unsurprising that the characteristics of their jobs are a big consideration: Higher pay keeps workers in the labor force longer. Workers who feel discriminated against are often the first to retire. But personality also matters, says a team of researchers from the University of Southern California (USC) and the RAND Corporation who analyzed data from the Health and Retirement Study, an on-going survey of age 50-plus U.S. households. Consider two types of personalities – highly active and engaged, and passive and reserved.  The researchers found that higher wages are effective in persuading more passive people to continue working.  But monetary rewards are, for…

Whether or not you agree that the minimum wage should be raised, there are very real financial strains on the 5 percent of U.S. hourly workers who earn no more than $7.25 per hour, the current federal minimum wage. This video, produced by Bloomberg TV, puts a human face on a few of these 3.5 million workers.  Data from the U.S. Bureau of Labor Statistics provides more information about who they are: Nearly half are over age 25. Two-thirds are women, and one-third are men. About three-fifths of minimum-wage workers are in service occupations, such as food preparation and food servic…

Medical debt is a primary cause of bankruptcy.  But new research finds that the Massachusetts health reform, by extending health insurance to a greater share of the state’s population, has reduced residents’ total debts and bankruptcy filings and improved their credit scores. This experience is especially relevant now that the federal Affordable Care Act (ACA), modeled after Massachusetts’ 2006 reform, has effectively made health insurance mandatory nationwide, starting this year. Health insurance is central to a household’s financial health, because one medical catastrophe can blow a hole in their savings account or throw them into bankruptcy.  Most households who lack coverage are in the bottom half of the income distribution, and more than one in three uninsured individuals can’t afford…