Squared Away Blog

Here’s what Will Flannigan, 26, would rather do with the $401.58 he pays on his student loans every month. • Save. • Buy a house: the mortgage payment on a house he looked at was the same as his rent, but renovating or fixing anything would be unaffordable. • Replace his 2006 Ford Focus – it’s red but he calls it a “lemon.” • Buy new clothes – thrift shops are standard. • Eat dinner out at someplace other than a fast food restaurant. Flannigan is getting married in August – to a woman who pays about $250 per month for her college loans. Three out of four people now paying off student debt – whether graduates or their parents…

Only 13 percent of older workers take advantage of the “catch-up” contributions to their retirement accounts permitted by the IRS for anyone over 50, according to new data provided by Fidelity Investments. This is hardly surprising, since prior research has estimated that only about 10 percent of all workers are contributing the maximum $17,500 per year that everyone, regardless of age, is allowed to contribute under IRS guidelines for 2013. Since the vast majority never reach that cap, the “catch-up” 401(k) contribution enacted to encourage people to save more when they hit their 50th birthday – an additional $5,500 per year – is largely irrelevant to them. But the catch-up contribution data, which Fidelity culled from its 401(k) client databas…

The best place to invest, the coolest cash back rewards, the smartest or cheapest or lowest-rate mortgage – infinite spin ushers out of the financial world every day, and it’s all aimed at you. That’s among the reasons the Center for Retirement Research at Boston College started this blog in May 2011. The blog’s focus is not financial products but financial behavior: what people do, why we do it, and how we can do it better. At its two-year anniversary, the Squared Away Blog hopes that it has become a reliable source of information for a growing number of readers of all ages who struggle every day to save and invest for their own or their children’s futures. It’s important…

You can’t always get what you want. But if you try sometimes you just might find you get what you need. Rolling Stones, 1969. There is nothing better that most people can do to get what they’ll need in retirement than delaying when they start collecting Social Security. The recent PBS documentary, “The Retirement Gamble,” sounded the alarm for many viewers who may be ill-prepared for the financial challenge of a long life – and not much retirement savings in the bank. To address this growing issue, financial advisers often emphasize retirement-survival strategies to their baby boomer clients. These strategies revolve around the complexities of figuring out how much to save, how to invest, or the best way to spend…

When Sanofi froze its defined benefit pension plan last year, the top brass wanted to make sure its 401(k) was seen as a worthy replacement by the company’s 24,000 U.S. employees and retirees. Sanofi has succeeded, judging by Plan Sponsor magazine’s designation of the U.S. division of the French pharmaceutical giant as 2013 “Plan Sponsor of the Year.” In corporate America, 401(k) plans are now the norm: in 2012, only 11 of Fortune magazine’s 100 largest companies still offered a traditional defined benefit pension, according to the consulting firm Towers Watson. But Sanofi U.S. had strong motivation for designing a 401(k) that is generous compared with typical 401(k)s. The company has “highly technical, highly specialized, highly skilled [employees] that w…

Sheila Taymore could not afford the $2,200 mortgage and home equity loan payments, the enormous heating bills, and the repairs – so many repairs – on the home she’d owned for decades. Sheila Taymore, 60, of Salem, Mass. But selling it was emotional: she and her first husband had raised two sons in that house in the seaside town of Swampscott, north of Boston. Her decision to move was triggered by a recent divorce and came about two years after the death of her mother. “I walked around and cried and said, ‘Who cares about this house?’ I make all this money, and all my money was going towards my house,” said Taymore, a Comcast Cable salesperson – last year…

Getting or keeping health insurance is central to many of the major decisions that working Americans make. Canadian and European governments provide universal health care to their citizens, but this country has relied heavily on employers for health insurance, and only about two-thirds of them provide it. It’ll be fascinating to see how health care reform changes our decisions about work, starting a business, college, and individual finances when more Americans have access to coverage in 2014. Research years ago established the influence of employer health insurance on the workplace. When employees are covered at work, job turnover is lower – workers know health care is a big thing to give up. There’s also newer evidence that people on t…

Determining how much money one will need in retirement is a mathematically and psychologically daunting task for many Americans. But new research has landed on a deceptively simple strategy for prodding workers to save. Employees in an experiment at the University of Minnesota saved more for retirement after researchers provided them with a personalized chart with information similar to that shown below. Each employee’s chart translated a $100, $200, or $500 contribution, made every other week, into the amount of income each of these contributions would generate annually once they retired. If they saved more, they could see that it translated to more retirement income. “We think people may have a hard time making that translation from an accumulation of…

This recent Huffington Post headline captured the march of shocking data about our growing societal burden: “12 Student Loan Debt Numbers That Will Blow Your Mind.” Here’s a sample: The student debt balance has hit $1 trillion and is still rising –  it is now exceeded only by mortgage balances, according to the Federal Reserve Bank of New York; Student debt is held by 26 percent of households headed by someone between the ages of 35 and 44, and 44 percent of under-35 households, and it’s concentrated in poorer households, according to the Pew Research Center; 80 percent of bankruptcy lawyers said student loans were driving more clients through their doors for relief. It remains unclear where this era of student…

A U.S. Army requirement that newly enlisted men and women complete an ambitious personal finance course is having some impressive results. At a time when financial education is increasingly being criticized as an ineffective way to raise Americans’ low saving rate, an 8-hour course held on 13 Army bases is significantly boosting how much military personnel are saving for their retirement – among both big and small savers. They also trimmed their debts. The strong results, described in a new study by William Skimmyhorn, an assistant professor at the U.S. Military Academy at West Point, are also sending a ripple through the financial literacy community. “The reason this study is so interesting is because it’s so unusual,” said Harvard University’s…

U.S. dollars go a long way in Indonesia. Adam Shepard estimates that it cost him $19,420.68 to circumnavigate the globe from October 2011 through September 2012. It was a budget tour filled with simple pleasures and wild adventures for the failed professional basketball player and successful book author. He helped poor children in Honduras, hugged a koala in Perth, rode an elephant in Thailand, bungee jumped in Slovakia, and hung out in lots of places with Ivana, whom he met while traveling and later married (she brought only $12,000, so he paid for the food). If he’d kept his bartending job in Raleigh, North Carolina, his car, and apartment, he estimates he would’ve easily spent more than $20,000 during that…

What motivates women to get to work on their personal finances? Change. Emotions are also important motivators. But “the most compelling factor” spurring most of the women interviewed in a focus group to take action was a significant life change, Utah State University researchers write in the Journal of Financial Counseling and Planning. Since April is financial literacy month, Squared Away is again making an appeal to women, who continue to make strides professionally, yet lag men in understanding how to manage their money. “Major life changes like a premature death of a spouse or divorce are often the wake-up call to people to reassess their lives,” said Utah State researcher Jean Lown, who also teaches a workshop, Financial Planning…