Squared Away Blog

Half of all American adults view their top financial goal as making sure they have enough money to retire, finds a survey conducted in early April and released last week by the National Endowment for Financial Education (NEFE). That’s barely changed from 47 percent who said so in NEFE’s 2011 survey. These figures are unimpressive if one considers that most everyone eventually retires. Further, fewer than one in five U.S. workers has the luxury of a traditional defined benefit plan that will send them a pension check every month. Saving for retirement hasn’t gotten any easier either: two of three adults in the NEFE survey identified an inability to save enough as a major financial obstacle. That sentiment may b…

The earnings gap between working men and women has narrowed somewhat over time, but it’s considerably wider for older women. Women who are now on the cusp of retirement and working full-time earn 67.5 cents for every dollar men their age earn – or 8 cents more than working women who were the same age (in their late 50s and early 60s) during the 1970s. For younger women, the pay gap persists but things are brighter.  Women in their late 20s and early 30s today earn 84 cents for every dollar a young man earns.  That’s a 20 cent gain over women who were their age back in 1970. These are among the myriad statistics documenting the history of t…

Consider this difficult situation: An elderly woman lends her oldest son $20,000 to help pay for some expensive medical care for his teenage son – her grandson – who’s stricken with cancer. When the woman writes her will, a different son who is also her executor – and happens to be an accountant – advises her to deduct the $20,000 loan, never repaid, from the oldest son’s modest inheritance. This happened in my family, and I was of two minds at the time.  Technically, the money was a loan – not a gift – so not paying it back was unfair to the other siblings who didn’t receive $20,000. But it seemed uncompassionate to take the money out of a…

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,…

As a young adult starting my career in Chicago in the 1980s, I didn’t have a clue how Social Security worked or why money was being taken out of my scrawny paycheck. But trust me on this: the Social Security retirement program becomes a lot more interesting to workers as they age and their retirement horizon comes into sharp focus.  It affects just about every American – and most of us pay into it. It is not only the bedrock of retirement for millions of Americans and their spouses, but it’s also a source of income for their survivors, including children, and workers who become disabled. In this video, officials from the U.S. Social Security Administration explain what its programs…

Only about half of all U.S. workers in the private sector participate in retirement savings plans at their current places of employment, according to a new report by the Center for Retirement Research. Pension coverage in this country “remains a serious problem,” concludes the Center, which also sponsors this blog. The goal of the Center’s report is to make sense of the myriad estimates of how many Americans are covered at work. One prominent source of data is the federal government’s survey of employers, the National Compensation Survey. The NCS shows that 78 percent of full-time workers, ages 25 through 64, have some type of defined benefit or defined contribution plan available to them at work. But that’s the rosiest…

Older workers may have every intention of deciding when they’ll retire, but economic conditions can undermine their well-laid plans. A new study investigating whether macroeconomic events “leave workers with less control over their retirement timing” found that various transitions from career jobs into retirement sharply accelerated during periods when more Americans, including more older workers, were losing their jobs. The researchers analyzed whether periods of rising unemployment over the past 50 years have affected three specific retirement transitions made by older workers: 1) from full-time work to “bridge jobs,” which pay less; 2) from bridge jobs to full retirement; and 3) from full-time work to full retirement. These transitions were tracked based on changes in individuals’ employment earnings documented in…

Retirees can use the equity sitting in their homes to pay for their daily expenses, out-of-pocket medical bills or nursing care, especially toward the end of their lives. Cash-strapped older retirees can access that equity by taking out reverse mortgages or home equity loans or by downsizing to less expensive homes or condominiums. But one in four Medicare recipients has less than $12,250 in home equity, according to a new report by the Kaiser Family Foundation, a healthcare non-profit. Kaiser’s calculations also show that the distribution of home equity among older Americans is – like the distribution of income and financial assets – top heavy.  While 5 percent of Medicare beneficiaries in 2013 had more than $398,500 in home equity,…

Less than $11,300 – that’s how little savings one-quarter of all Medicare beneficiaries have in their 401(k)s, IRAs, and other financial accounts. This grim statistic comes out of a report by the Kaiser Family Foundation, a health care and policy non-profit. Kaiser’s goal was to gauge whether older Americans will be able to absorb rising Medicare premiums, co-pays, deductibles and related costs. “Most people on Medicare are of modest means with relatively low incomes, low savings and low home equity,” concluded Gretchen Jacobson, the foundation’s associate director of the Medicare policy program and lead author of the report. When retirees’ incomes can’t cover their out-of-pocket costs, they need money in the bank to pay for care. But half of a…

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…