Squared Away Blog

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…

Our subconscious often stands in the way of our conscious efforts to save for college, prepare for the future, or spend what we’ve saved once we retire. Some psychologists and financial planners believe these roadblocks are rooted in an individual’s “money script” – the story about money that we’ve told ourselves repeatedly since childhood. They’re typically passed down from our parents, extended family, or culture, and they are extremely difficult to change. Writing in the Journal of Financial Planning, two experts in financial psychology, Bradley Klontz and Sonya Britt, presented their research associating three specific money scripts to poor financial behavior. Their study was based on a survey of 422 individuals who were largely middle-aged, white, and highly educated. Click…

Click on each of the four photographs above to hear from the students, Kathleen Buckingham, Preston Davis, Michael McCormack, and Kelly McGowan. Nastasia Peteuil, who paid very little for her college education in France, was shocked by how much students in this country are borrowing and by the crushing financial pressures this creates. While taking graduate journalism courses at the University of Massachusetts in Amherst last spring, she persuaded four classmates to narrate their personal stories, which she documented on film in four short profiles. What makes Peteuil’s profiles so powerful is that they convey, in real time, how these young adults begin to realize what their debt will mean to their lives and career choices. Squared Away has written…

Medical expenses increase unpredictably with age, so the crystal ball gets very hazy when trying to foretell how much you’ll need in retirement. A new study helps clear things up: a single older American spends about $39,000 on average for medical care in the final five years of life, or about $7,800 a year. For couples in which one spouse has died, $51,000 was spent during that spouse’s final years, or about $10,000 annually. These out-of-pocket expenses, which were reported by surviving spouses and family members, are for health care not covered by Medicare: insurance premiums, hospital and physician copayments and deductibles, and expenses for medications, nursing homes, and in-home care. The data also show that the financial burden on…

Prior research has established that agents tend to sell the financial product that will pay them the highest commission. A new study on India’s life insurance market advances the ball by focusing on the quality of one high-commission product agents recommend and concludes that it’s wrong for the client. The researchers sent trained auditors into the field posing as customers seeking insurance and then analyzed the advice they received. The auditors’ meetings with agents revolved around life insurance, specifically two types of policies: term and whole life. In a term policy, the individual pays a premium to ensure a set dollar amount goes to a surviving wife or children if the customer dies. Like term policies, whole life policies also…