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Retirement Research Sessions: Aug. 7, 8

Which idiosyncrasies affect the decision to retire? What’s driving the widening longevity gap between high- and low-income Americans? Are workers’ retirement savings really falling short, and is working longer good for your well-being?

These are among the research topics that will be presented two weeks from today at the 16th annual meeting in Washington D.C. of the Retirement Research Consortium, which receives support from the U.S. Social Security Administration. The agenda and details about the Aug. 7 and 8 meeting can be found here. Register to attend in person – it’s free – or view the meeting online in real time.

The consortium’s members are the Center for Retirement Research at Boston College (which supports this blog), the University of Michigan Retirement Research Center, and the NBER Retirement Research Center.

In coming weeks, the Squared Away Blog will cover some of the studies presented at the meeting. …Learn More

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Summer Reading: Retirement

For those who want to use these lazy summer days to catch up on their reading about retirement, Squared Away has compiled some of the blog’s most popular articles this year.

The articles, which are listed below, were among readers’ top 20 from January through June, based on an analysis of Squared Away’s Internet traffic.  Many of the articles were about research sponsored by the Retirement Research Consortium, which includes the Center for Retirement Research at Boston College, a sponsor of this blog.

A link to each article is provided at the end of the following headlines:

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College 529 Plans: a Video Primer

In this video, the president of a Boston-area community bank explains the fundamentals of 529 college savings plans, which most state governments offer.

Bob Mahoney recently put both of his daughters through college with money he’d saved in 529 plans. While it can be difficult for many parents to scrape together the money, he said 529 plans provide some hedge in the future against the ever-rising cost of a college education.

Mahoney suggested starting small and contributing, say, $1,000 or $5,000 each year and also asking grandparents to put money into the 529, in lieu of giving toys and other gifts.

As he explains in the video, the advantage is that 529 plans are free of federal and often state taxes on the investment returns earned while the future student is growing up.

One disadvantage is that they require parents to make difficult decisions about how to invest the money they’re saving. Mahoney’s advice is to avoid high-flying stocks and to approach 529s as one would approach 401(k) investing. And, like 401(k)s, low-fee funds also make sense for 529 plans. …Learn More

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Target Date Funds Keep Growing

The number of employers offering target date funds as an option in their 401(k) plans, and the number of workers using these funds, continue to increase.

In 2013, 86 percent of all employer plans offered target date funds (TDFs) – double the share of plans offering them in 2006 – according to Vanguard’s annual report on defined-contribution plans, “How America Saves 2014,” released in June.

Vanguard data also support TDFs’ growing popularity among employees: more than half of plan participants now have some or all of their retirement accounts in TDFs, compared with just one in 10 in 2006.

TDFs eliminate the need for employees to wade in and make complex investment decisions about choosing and updating their asset allocations. A TDF initially invests largely in stocks, but the portfolio becomes more conservative and the allocation to stocks declines as the individual approaches the targeted retirement date he selected. …Learn More

In-Home Senior Care – a Lot to Learn

The first baby boomers will turn 80 in 2026. Arranging in-home care by nurses, home health aides, physical and occupational therapists, or social workers will become a pressing concern for growing numbers of Americans. To sketch out the home care landscape, Squared Away interviewed Carol Levine, director of the families and health care project at the United Hospital Fund, a New York non-profit. She’s written widely on long term care, from academic articles to her new book, “Planning for Long-Term Care for Dummies.”

Is it logical that baby boomers will try to avoid nursing or assisted living facilities and will view home care as the way to go – at least for as long as possible?

You’re right. Most people, regardless of age, want to stay in their own homes. They think, “I don’t want to be in a nursing home. Therefore I’ll have home care” – as if they’ll both provide the same level of support or assistance. Home care may be even more complicated than nursing home care or assisted living, because it takes place in your own home, and because there are so many varieties.

Describe the two main types of care: skilled and personal.

The kind of care you need depends on your health condition and your abilities to manage your household – to get around, cook, shop. A medical condition that requires a nurse visit is one level of care. A lot of home care that is paid for by insurance comes after a health problem that lands you in the hospital. If you’re on Medicare, your doctor will have to document your need for skilled care, which means at least a nurse visit a few times a week. You may get a home health aide as well. If you just need someone to help out and monitor what’s going on, make lunch, do the laundry or do tasks like bathing, it’s called personal care. …Learn More

Millennials and Money: Women Trail Men

Millennial women may have higher expectations about their financial prospects than their baby-boomer mothers.

But Millennial women, just like their mothers, are earning less than their male counterparts and saving less for retirement.

The vast majority of single and married men and women, ages 22 through 33, said they recognize the need to save, whether as a defense against economic uncertainty or in response to the onus on each U.S. worker to prepare for his or her own retirement.

A major reason cited for not saving is “not having enough money to save right now.”  This is especially germane for women: for example, the median annual income for Millennial women is $45,000, while their male counterparts earn $61,000.

Women, on the other hand, would make wiser choices about what they’d do with a $5,000 windfall: they’d be less likely than men to spend the windfall and more likely to save it or use it to pay down debt.

Harris Poll conducted the nationally representative online survey of 1,600 Millennial households for Wells Fargo. In addition to single Millennials, married and single mothers were also surveyed, and child-rearing responsibilities likely reduced the incomes reported by women.

Nevertheless, Millennial women trail their male peers in five financial benchmarks shown below:

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Financial Savvy Means More 401k Returns

Financial knowledge is critical to one’s retirement security, finds a new study showing that 401(k) plan participants who scored higher on a test of their financial knowledge earned an additional 1.3 percentage points of investment returns annually on their retirement accounts.

Over a 30-year working life, that higher rate of return would add 25 percent to total savings at retirement.

Readers can take the quiz by clicking here; answers appear at the end of this blog post. …Learn More