Squared Away Blog

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…

A new article in the Journal of Financial Planning lays out the unpleasant reality facing baby boomers who really want to retire but can’t afford it: working longer helps a lot. In the article, David Blanchett, who heads the retirement research group for Morningstar’s money management unit in Chicago, calculated the impact of delaying one’s retirement date and found that it can sharply improve a retiree’s odds of financial success. “There is not one silver bullet for success but if there were it would be delaying retirement,” he said in an interview. The same case has been made for years by the Center for Retirement Research at Boston College, which supports this blog. Working beyond age 62, when individuals ar…

First-time buyers are currently responsible for about 29 percent of all U.S. house sales, down from historical levels of 40 percent, according to the National Association of Realtors. The share of young adults who own a house has also declined sharply. There’s debate about whether buying a house is a good financial move. But the waning of this coming-of-age ritual is a significant change in behavior for young adults in this country. One culprit may be student debt, which is becoming more prevalent – 43 percent of young adults have some, compared with 25 percent a decade ago. The average borrower’s balance has also doubled in the past decade, to more than $20,000 in 2012. Researchers at the Federal Reserv…

The decades-long march of women into the nation’s workplaces may be the most enduring trend in the labor force – and a signature of American progress. But it is also one more reason that Social Security benefits today replace a smaller share of the lifetime earnings of married couples than they did in the past, when far fewer women worked for pay. Other reasons include the gradual increase in the age at which U.S. workers can claim their full retirement benefits, from age 65 for the oldest retirees to 67 for Generation X. Medicare premiums are also taking more out of the monthly Social Security check, and more retirees are being taxed on a portion of their benefits over tim…

Fran and Bob Ciaccia Bob and Fran Ciaccia could not be happier with their reverse mortgage, which unlocked some of the equity in the house they purchased in 1966 for $12,500. Reverse mortgages are federally insured loans available to U.S. homeowners over age 62. The loan is made against the equity in the house, and the principle, plus interest and some federal insurance fees, are not repaid until the homeowners or their children sell the house. “I cannot find a downside,” Fran Ciaccia, a retired high school cafeteria cook from Levittown, Pennsylvania, said in an interview. “We have told so many people about it.” Although the Ciaccias may be big fans, reverse mortgages are unpopular, despite historically low interest rates…

As we age, the things we forget are at first laughed off as “senior moments.” But when forgetting to send a birthday card becomes forgetting to pay the mortgage, the natural cognitive decline that accompanies aging becomes a serious financial issue. With Americans living longer and an estimated 10,000 baby boomers turning 65 every day, a spate of fresh research has examined how and whether older brains can handle the challenges of modern financial life. But what the researchers have found out so far about the aging mind and money is somewhat of a mixed bag. First, the bad news. Diminished cognition is an increasingly important concern in the financial arena, because the choices faced by retirees are getting ever…

One segment of the U.S. labor force sheds light on the continuing struggle to find work: part-time employees who want a full-time job but can’t find one. The U.S. unemployment rate has drifted down during the economic recovery. But the number of people the Department of Labor calls “involuntary part-time” roughly doubled during the recession to 8 million and still remains stuck at this much higher level. Millions of Americans work part-time because they want to, but this involuntary part-time workforce is one more gauge of the slack labor market and lingering pain three years after the Great Recession officially ended. The Labor Department counts part-timers as involuntary if they can’t find a full-time job or if they work part-tim…

Financial planner J. David Lewis can rattle off stories in his Tennessee drawl about trying to persuade clients to spend their retirement savings – now that they’re retired. One couple wouldn’t tap into a $100,000 account dedicated to the travel they always dreamed they’d do after they stopped working. It took another retired couple well into their 70s before they’d spend a bit of their ample savings on a car – their first new car ever, in fact. What are they afraid of? “That something is going to take it all away from you, or you’re going to run out,” said Lewis, president of Resource Advisory Services in Knoxville. Spending money “is a big bridge to cross” for retirees. But…

By the time people reach their mid-60s, two out of three have retired, either voluntarily or because they’re unable to keep or find a job. By age 75, nine out of ten are out of the labor force. But the minority who do continue working aren’t just survivors – they’re thrivers. Think novelist Toni Morrison, rocker Neil Young, or the older person who still comes into your office every day. The earnings of U.S. workers in their 60s and 70s are rising faster than earnings for people in their prime working years, according to a new study. Defying the stereotype that they’re marking time, today’s older workers are also just as productive as people in their prime working years. Driving…

Squared Away will return next Tuesday with a new blog post and more news and research on financial behavior and retirement…

A recent blog article, “Retirement Tougher for Boomer Children,” did not elicit much sympathy for Generation X. Many readers who commented expressed a sentiment something like this: Yes, things are tougher for young adults. So deal with it. Members of Generation X, as well as Millennials, are largely on their own with their 401(k)s, in contrast to their parents and grandparents who may’ve had a guaranteed pension at work. But the evidence indicates young adults are not preparing for retirement: well over half of 30- and 40-somethings are on financial path to a lower standard of living once they retire, according to an analysis cited in the article. They need to find “the discipline to save for retirement through a…

My father was never more in love with my mother than on the day he died in 2004, days before their 50th anniversary. But he made one bad financial decision that she lives with today: he started up his Social Security benefits at age 62. He felt he needed the money sooner than later. He had an inadequate pension from his first career, as an Air Force flyboy, and none from his Rust Belt business that went bust. But waiting to claim his Social Security would’ve increased the size of his check – and, after he died at 70, the money that’s still deposited into my mother’s bank account every month. This happens to a significant share of couples, becaus…