Squared Away Blog

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…

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…