From Anxious Child to Finance Star

An interesting psychology powers this video in which the youngest daughter of a low-income, single mother explains how she migrated into the financial services industry – and then became the company president.

Mellody Hobson’s fascination with finance took hold as she watched her mother struggle with evictions, repossessed cars, and empty gas tanks. She once spent all her money on her daughters’ Easter dresses but then couldn’t pay the phone bill, Hobson recalls in the video above.

“I do not think it’s an accident I work in the financial industry,” she explains, “because as a child I was desperate to understand money – desperate.  I hated the fact that I felt this insecurity around money.”

Hobson is a celebrity in her industry. In other videos, she talks about being black, being a successful career woman, being financially savvy, and the trouble with credit cards.  Perhaps she’s all over YouTube, because she’s worth listening to.Learn More

Photos of different jobs

How Many Years Can You Do Your Job?

Physical power, fast reactions, steady hands, a crisp memory, and mental dexterity – these physical and mental abilities, taken for granted in youth, break down slowly but persistently over the years.

A unique combination of physical and mental skills help to determine whether each worker’s continued employment is more or less susceptible to aging. To better understand who can work longer and who can’t, researchers at the Center for Retirement Research developed a Susceptibility Index to rank 954 U.S. occupations.

Using the skills required for each occupation in the federal O*Net database, they ranked the occupations from 0 to 100 based on the risk that age-related decline will affect a worker’s ability to perform that particular job. The risk reflects the number and importance of the age-vulnerable abilities.

Click here to see where your job ranks.

Of course, individual workers experience aging in different ways, and some learn to compensate for declining skills.  But there are dramatic differences between occupations with very high and very low Susceptibility Indexes.

As one might expect, physically demanding blue-collar work suffers the adverse effects of aging: rock splitter in a quarry (90.3 Susceptibility Index), floor sander (91.0), steelworker (94.4), commercial diver (94.0), truck driver (96.4), and oil rigger (98.5).

Occupations with very low indexes are primarily white-collar: interior designer (5.8), lawyer (6.3), aerospace engineer (8.9), loan counselor (12.4), and radio announcer (14.8).

Where things get interesting is in the middle rankings. Mixed in with somewhat physically demanding jobs – personal care aide (52.7), warehouse order filler (53.7), baker (54.7), postal service clerk (56.3), and food server (58.2) – are white-collar desk or hospital jobs. These include private detective (44.8), surgeon (51.2), architectural drafter (52.8), anesthesiologist’s assistant (53.1), computer network architect (54.8), and critical care nurse (55.7).

After ranking the 900-plus occupations, the researchers concluded that “the notion that all white-collar workers can work longer or that all blue-collar workers cannot is too simplistic.” …Learn More

Summer Suggestions

Some suggestions for late-summer fun include an independent movie about a woman earning a very good living on a not-so-friendly Wall Street. But first, here are two practical financial guides, one for grown-ups and one for kids.

  • Harris (Hershey) Rosen, who is 83, put serious thought into how to leave household financial information in good order for his wife should he die – and put his thoughts together in his homegrown “My Family Record Book.” This book “is not a money-making proposition,” he said. Rosen suggests husbands and wives make this important task a joint project.

    As the former owner of a candy company that made those lollipops packaged in strips of cellophane, Rosen learned to sweat details. His “Family Record Book” records the nuts and bolts of things like mapping where files are located in the house, planning the logistics of downsizing to a smaller home, and making lists for everything that’s important to you – doctors, the home-maintenance schedule, birth dates of friends and loved ones.

    “The purpose of the book is to motivate people to commit all the information in his or her head to writing,” he said.

  • Susan and Michael Beacham are pros when giving financial information and advice to children and young people. I just came across their award-winning “O.M.G. Official Money Guide for Teenagers,” published in 2014, which merges personal finance and colorful graphics, while finding ways to get inside teens’ heads.

    For example, it points out that “when you deposit a check, it may take several days” to clear and advises on how to handle “awkward money moments” with friends. A credit card is like a snowball, which “starts out fairly small” but “can get out of control.” If only they’d listen!

  • Movies about money – “The Big Short,” “The Wolf on Wall Street,” “The Smartest Guys in the Room,” “Glengarry Glen Ross,” “American Psycho,” “Bonfire of the Vanities,” “Trading Places,” and, of course, “Wall Street” – are about men. Until now. …Learn More

Medicare Advantage: Know the Pitfalls

Baby boomers on Medicare are streaming into Medicare Advantage plans, with nearly 18 million people currently enrolled in them.

But a new study identifies pitfalls that might not be obvious to those signing up.

Advantage plans are HMOs or PPOs that provide both basic Medicare Part B coverage and many of the benefits offered by supplementary Medigap insurance policies.  But Medicare beneficiaries’ premiums for an Advantage plan plus Medicare Part B coverage are roughly half, on average, of the premiums for a Medigap policy plus Part B.

One reason is that Medigap policies typically cover more out-of-pocket costs. Another is that insurers offering Advantage plans assemble networks of hospitals and physicians to control their costs and reduce customers’ premiums.

But, the researchers point out, Advantage plans frequently limit “access to certain providers and increase the cost for care obtained out-of-network.”

Medicare chart

In nearly half of the 20 U.S. counties examined in a new study by the Kaiser Family Foundation, Advantage plans had limited networks of hospitals, potentially increasing consumers’ costs. Further, a large majority of Advantage plans did not include their county’s top-quality, high-cost cancer treatment center in the networks of approved health care providers.

And it can be very difficult to compare access to care and the future out-of-pocket medical costs that will result from a decision to go with an Advantage plan. Costs vary greatly among Advantage plan networks, with coverage often described in complex, incomplete, or confusing insurance plan documents, Kaiser said.

Consumers also face a dizzying array of choices.  One example: In Cook County, which includes Chicago, eight difference insurance companies are selling 19 Advantage plans with 10 different provider networks.

Many retirees learn the ins and outs of the network only after they try to access medical care under the plan.  The Kaiser report’s key findings provide a roadmap of things consumer should watch for: …
Learn More

Social Security Replaces Less for Couples

Source: U.S. Social Security Administration poster, 1954.

When Social Security was created in the 1930s, wives were mainly full-time homemakers, with their pension benefits based on their breadwinner husbands’ earnings.

But wives went to work in droves after Social Security’s passage. Today, women make up nearly half of the U.S. labor force.  Yet the program’s design remains the same, with the result being a steady decline in married couples’ replacement rates – the percentage of the combined earnings of two working spouses that Social Security replaces when both retire.

A study by the Center for Retirement Research found that the replacement rate for couples has declined from 50 percent for married couples born in the early 1930s to around 45 percent for the oldest baby boomer couples, and it will fall to just 39 percent for Generation X couples when they eventually retire.

A declining replacement rate is an important consideration for working couples as they plan for retirement.

The simple explanation for the declining replacement rate is that household earnings are much higher when both spouses are working, but their Social Security pension benefits do not increase proportionally. The reason is that even if a wife doesn’t work, she still receives a spousal benefit equal to half of her husband’s benefit.  The more a working wife earns, the lower the couple’s replacement rate. …Learn More

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Social Security Credits for Moms?

Dramatic changes in the U.S. family structure over several decades – more divorce, single motherhood, and unmarried couples – could have a big impact on the financial security of baby boomer women as they march into retirement – and on future retirees.

A review of studies on Social Security spousal and survivor benefits by the Center for Retirement Research, which sponsors this blog, examines the difficulty of providing retirement security for the growing ranks of women and mothers who do not fit the traditional family mold.

Social Security’s benefits were designed for the typical family when the pension program was enacted in the 1930s, a family portrayed at the time by Henry Barbour and his wife, Fanny, in the popular radio soap opera, “One Man’s Family.” A spouse, usually the wife, is guaranteed half of her husband’s full retirement age benefit under the program when she reaches her full retirement age – whether she works or not.  When her husband dies, her survivor benefit equals his pension benefit.

Figure: Rise of the Single Mother

But women who marry and become divorced within 10 years are not eligible for these benefits.  Nor, of course, are single working women, who receive benefits based solely on their own work histories.  Increasing numbers of women reaching retirement age today either were in short-term marriages or never married and won’t receive a spousal or survivor benefit. The problem is that most of these women are mothers. …Learn More

Rising Health Costs a Factor in Inequality

Chart: the Healthcare Bite

Inequality is frequently in the news. A new study puts an interesting spin on this now-familiar topic: rising health costs are a significant reason for wage inequality.

The cost of employer-provided health insurance is a larger share of lower-paid employees’ total compensation than it is for the people higher up in the organization. Since insurance costs have been increasing faster than total compensation, squeezing out pay raises, the nation’s lowest-paid workers feel it most.

For people with earnings at the 30th percentile of all U.S. workers, total compensation, including the cost of employer health insurance as well as actual earnings, increased by just 9 percent in inflation-adjusted dollars between 1992 and 2010, according to data in a new study by Mark Washawsky at George Mason University’s Mercatus Center. Total compensation for high-paid workers at the 95th percentile grew 19 percent.

However, the rapidly rising cost of employer-provided health insurance took a larger bite out of lower-paid workers’ earnings – and out of their take-home pay. Inflation-adjusted earnings at the bottom rose by just 3 percent over the 18-year period, compared with a 17-percent increase at the top.

Washawsky correctly notes that employer-provided health insurance is a form of compensation that is valuable to all workers, regardless of how much they earn. The problem for workers living paycheck to paycheck is that they pay their day-to-day bills out of what’s left in that paycheck. That’s where you’ll find the inequality from rising healthcare costs.

So how should policymakers tackle U.S. inequality?  Warshawsky argues that any prescription to reduce wage disparities should “focus on reducing the rate of increase in healthcare costs.”Learn More

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