Squared Away Blog

There’s a bright line between an impulse purchase and compulsive spending. When something new catches her eye, the impulsive buyer snaps it up and enjoys the splurge. There is no such enjoyment for the compulsive buyer. The act of buying temporarily alleviates her anxiety but she inevitably feels guilt or regret. A new study explores the childhood experiences that lie at the root of why some people – women more than men – develop these damaging spending problems, which can lead to enormous debts and derail plans to save for the future. The specific goal of the study, based on surveying 327 college students, was to shed light on the emotional pathways that can lead to compulsive buying, explained researcher…

There are now two reasons to postpone retirement. The financial reason has been covered repeatedly in this blog: working longer increases a retiree’s savings and monthly Social Security income, while shortening the number of retirement years that their savings will have to fund. If that doesn’t convince you, here’s the other reason: working longer may prevent dementia. That’s the conclusion of a study on nearly 430,000 French retirees. After analyzing their health and insurance records, the researcher determined that each additional year an older worker remained in the labor forced further reduced the risk of being diagnosed with various forms of dementia, including Alzheimer’s disease. ……

It’s common for people to begin collecting their Social Security benefits soon after they turn 62, ignoring the financial planners and retirement experts urging them to postpone and increase the size of their monthly checks. A new study has uncovered four powerful psychological traits that influence this decision: the individual’s expected longevity, his fear of loss, whether he perceives the Social Security system as fair, and patience. The study surveyed some 3,000 people, primarily in their 40s and 50s. This is a good age to ask about Social Security, because claiming the benefit is a few years away, “but they’re thinking more about it,” researcher Suzanne Shu said when presenting the findings at an August meeting of the Retirement Researc…

Traditionally, the picture-perfect retirement included a paid-off house. But the Me Generation isn’t sticking to the script. Snapshots of three generations of U.S. households on the cusp of retirement – people born in the Depression, at the beginning of World War II, and after the war – show that more of the most recent generation, the baby boomers, are still carrying mortgages as they head into their retirement years. About 40 percent of households who were between the ages of 56 and 61 in 1992 – the Depression-era parents of baby boomers – held mortgages at that age. This share had increased to 48 percent by 2008, as the front wave of baby boomers were reaching their late 50s and…

Nicole DeConinck. Photograph by Adele M. Pleatman. Having cashed her McDonald’s paycheck at a check cashing outlet in Boston’s South End neighborhood, Nicole DeConinck has completed one half of her Friday afternoon ritual. She will now walk to a nearby pharmacy to purchase a debit card, which she’ll use to make her purchases. More Americans like DeConinck say they have used non-traditional financial services, such as check cashing, or are getting loans from places like pawn shops, payday lenders, or firms that offer advances on IRS refunds. In 2011, 41 percent had, up from 36 percent in 2009, according to the Federal Deposit Insurance Corp., which insures U.S. commercial banks. One thing fueling this growth is that non-bank loans, whic…

There’s a growing concern that working people aren’t saving for the future, but the reality is that many of them can barely get by in the here and now. A sizable minority of Americans say they are spending more than they earn, have overdue medical bills, or pay only the minimum on their credit cards. These were among the findings in the 2012 National Financial Capability Study (NFCS) conducted by the FINRA Investor Education Foundation, its second survey to illuminate the day-to-day financial issues facing average working people. Pulling together $2,000 may seem like only a modest challenge for someone with good pay and benefits. But 40 percent of the people surveyed also indicated they would be hard-pressed to find…

Americans are known for being reluctant to spend their life savings after they retire. The burning question has always been why. New research comparing tight-fisted Americans with more free-spending Swedes found that U.S. retirees tend to hold on to their savings, because they face more risk of having to pay high out-of-pocket costs in the future for their medical and long-term care. U.S. households, by the time they’re in their late 80s, have tapped only about one-third of the net worth they held in their late 60s, according to the study. Swedish households in their late 80s have spent more than three-fourths. In preliminary findings presented at an August meeting of the Retirement Research Consortium in Washington, researcher Irina Telyukova…

Remaining on the job for a few more years may not appeal to many older Americans who long to retire. But in the above video, a compelling case for working longer is made by Steven Sass, an economist with the Center for Retirement, who also edits this blog. Sass explains that delaying retirement improves a retiree’s financial security in three critical ways: The worker can continue to save money for a few more years and will have more time to earn investment income on his savings. ……

Poor and working people’s continual worries about money cloud their thinking and make it more difficult to perform simple tasks, concludes new research in Science magazine. This finding came out of two very different experiments – one at a New Jersey shopping mall, the other in India’s sugar cane fields – by an international team of economists and psychologists. In the first experiment, wealthy and low-income shoppers – $70,000 in household income was the cutoff between high and low – were seated in front of computers and quizzed about a variety of financial scenarios designed to trigger thoughts of their own money concerns. For example, they might have been asked whether to pay for a car repair with a loan…

Financial planners say it happens all the time: couples who don’t see eye to eye on money matters often break up or divorce. One reason they run into trouble is that a financial mismatch makes it more difficult for them to achieve important goals, said financial adviser Bonnie Sewell of Leesburg, Virginia. “They’re working against the tide. People who pick like-minded partners get there faster,” said Sewell, who’s written a book about money and divorce. Her contention is backed up by the preliminary results of a study of more than 30,000 married and cohabiting couples between 1999 and 2012 by Federal Reserve Board researchers Jane Dokko and Geng Li. Their study compared the partners’ individual credit scores to gauge their…

Readers reacting to a recent blog post about reverse mortgages fiercely debated the financial product’s pros and cons, which they felt were missing from the article. The July 25 article noted that fewer than 55,000 older Americans in 2012 used the federally insured loans. The advantage of a reverse mortgage is that Americans age 62 or older can borrow against some of the equity in their homes to generate much-needed income or create a financial cushion. The principal and interest are repaid when the retiree or his children sell the house. Even though reverse mortgages are rare, the topic hit a nerve with readers, including lawyers, brokers, and people with elderly parents. A mortgage broker named D. Gardner, for example,…

No matter how you measure it, older Americans are falling deeper in debt. The number of people in their 60s who have debt has grown from just under half of that age group in 1998 to nearly two out of three in 2010. And their debt, as a share of their assets, has surged during that time from 10 percent to 18 percent. Debt is becoming increasingly common among older people, regardless of their level of income, according to Urban Institute researchers, who presented their findings at the August meeting of the Retirement Research Consortium. (The Center for Retirement Research at Boston College, which sponsors this blog, is a Consortium member.) Among individuals with incomes that place them in t…