Squared Away Blog

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…

In the aftermath of the women’s movement of the 1960s and 1970s, the incidence of divorce climbed, peaking around 1980. Millions of women were suddenly on their own at a time when women were still having to prove themselves to many employers.  But I remember being impressed by a college friend’s mother whose divorce wasn’t the disaster her family feared: she marched into a high-profile non-profit in Chicago and landed an impressive job. It’s been well established in academic research that women often face financial struggles after divorce.  Married women are typically better off, since couples can live more cheaply and since two incomes are better than one. But a new long-term study of women who divorced during the mid-1970s…

In this video, an expert in financial behavior explains the common errors in reasoning, whether people are thinking about love or money. Thoughts like: • This time is different. • I can change things. • Wishing on a star. • Being afraid of loss…

The Great Recession is receding into the past, but many people may still be feeling the strain in their personal finances. Post-recession, “the fact remains that Americans are fairly unsatisfied about where they are financially,” Gerri Walsh, president of the FINRA Investor Education Foundation, said in a recent video in which she discussed her organization’s 2012 National Financial Capability Study. The study, the nation’s most comprehensive survey of financial literacy and well-being, reported some areas of progress for average workers. Compared with 2009 – the depths of recession – more people felt they were better able to make ends meet in 2012. But a substantial minority of Americans were still living paycheck to paycheck. A previous blog post provides other…

Jessica Smith, mother of four, was never much of a saver.  But a credit union that dispenses prizes has changed all that. She now saves $150 every month out of her pay and bonus as a restaurant buffet manager.  Each $25 deposited into her account gives her one more entry in a monthly drawing for cash prizes at the Communicating Arts Credit Union in Detroit. Jessica Smith and her winnings. By coincidence, she won three times last fall – a total of $100 in prizes. But in contrast to throwing money away on a lottery ticket with bad odds, she earns a little interest on her credit union account. These so-called prize-linked accounts aren’t a new concept: one of t…

The IRS effectively gives money away to low-income Americans who save for retirement. Workers meeting the agency’s income requirements can receive a Saver’s Tax Credit equal to as much as half of their total deposits into a 401(k) or IRA. The lower one’s income, the bigger the credit. The program, which was made permanent in 2006, gives a nice boost to the nation’s lowest-paid workers, who are also most vulnerable in retirement. And not taking advantage of the credit, said Jim Blankenship, a financial planner in New Berlin, Illinois, “is a lot like giving up an employer match for a 401(k).” Low-income workers do just that, a previous study found: 40 percent decline to participate when their employer offers a…

In this video clip from “Shameless,” young adults may relate to Fiona’s reaction to “the 401(k) talk” by a manager who pops into Fiona’s cubicle. This popular television dramedy, “Shameless,” is about the dysfunctional Gallagher family of Chicago, and oldest daughter Fiona (played by Emmy Rossum) does what she can to keep things together.  But how to cope with the 500-page 401(k) binder her manager drops on her desk with a thud? It’s been rare that 401(k)s are mentioned on television.  So, why have retirement savings accounts entered our popular culture?…