May 2011

Over 50 and out of work logo.

Older Workers Behind the 8 Ball

Rudy Limas, a laid-off truck driver, resorted to applying for unskilled labor jobs – anything to get back to work and support his family.

“They look at your age and think, ‘He can’t handle it’ – even though I can,” the 61-year-old Oregon resident said. “They look at your age [and] they’re not going to hire you.””

Limas’ video interview, included in the online project, “Over 50 and Out of Work,” was selected by Squared Away for a series about the particular financial issues facing people approaching retirement age who lose their jobs.

Rudy Limas from Over Fifty and Out of Work on Vimeo.

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Retirees: Focus on the Monthly Check

To help retirees choose the best way to spend down the 401(k) savings they have built up over a lifetime, Nobel Prize laureate William Sharpe urged them to focus on a single outcome: the size of their monthly check.


This video was created by Professor William Sharpe of Stanford University.

Financial advisors should say to their clients, “Don’t worry about the strategy or model. Look at the outcomes that matter: what you can spend year by year in retirement,” he said.

Speaking at a conference this week at Boston University’s School of Management, which brought financial practitioners together with top minds in academic finance and Washington think tanks, Sharpe said advisors should present clients with various payout schedules and then explain the probability of success for each one they’re considering. Learn More

Two Steps Back for Financial Education

Consider these grim outcomes for financial educators:

  • One study found that the seniors who had the least financial knowledge were most confident about their knowledge;
  • The most successful educational tools – stock market games – send the message it’s okay to gamble;
  • When Illinois required consumers to attend a workshop for certain types of mortgages, homebuyers avoided those mortgages;
  • Scores for national financial literacy tests administered to high schools by the JumpStart program declined between 1997 and 2008;
  • Soldiers exhibited worse budgeting behaviors after taking a financial course than before.

In the past decade, foundations, governments, and non-profits have poured millions into financial literacy efforts in grade schools through college and among low-income neighborhoods and specialized groups, such as homebuyers and the military.Learn More

A cartoon child holding money standing below the title: I Got Bank! What my grandad taught me about money.

Kids’ Book Teaches Bankable Lessons

Young readers have given a thumbs-up to the new children’s book, “I Got Bank!”

The book is about 10-year-old Jazz Elliott, who follows the frugality lesson his late granddad taught him: he has saved $2,000 in a bank account.

class

Beverly Moss’ after-school reading of “I Got Bank!” The students, counter-clockwise, are: Jaida, Saba, Kevin, Ellen, Anthony, Yaovi, Jepherson, Carlos, and Kent.

On Friday afternoons in May, eight- to 12-year-olds take turns reading the book aloud during the after-school program at the Mission Park Apartments in Boston. It elicits all kinds of discussion.

One of the readers, Ellen, had a Eureka moment after librarian Beverly Moss explains how regular savings accounts work.

“Oh, that’s an interest rate!” Ellen said.

The book’s author, Teri Williams, is also president of a bank that is giving away free copies of “I Got Bank!” to grade schools and after-school programs. Williams, who grew up in a low-income housing project in Bridgeport, Connecticut, said she wrote the book to help children who have similar backgrounds start learning financial skills. …Learn More

Conference Will Guide Financial Advisors

At a dinner next Monday night, finance professor Zvi Bodie at Boston University and his co-hosts will kick off their third conference geared toward educating financial professionals about cutting-edge thinking in the field. “The Future of Life Cycle Saving and Investing” will focus on serving low-income individuals. However, Bodie said in this recent interview that the conference lessons apply to all financial consumers.

Zvi BodieSQUARED AWAY: Is this an annual conference?
BODIE: No. The first one was in 2006, the second in 2008. Truthfully, what inspired me to have these conferences, among other things, was the strong support of MIT economics professor Paul Samuelson. I decided I was sick of the baloney about personal investing that is served up on websites, brochures, etc. – all of which is designed for the benefit of the service providers rather than the customers. So much of it flatly contradicts what I teach. We’re dedicating the dinner to the memory of Paul Samuelson, who died last year.

SQUARED AWAY: What baloney?
BODIE: Say you’re a beginning investor. You go to any website – go to investor.gov. It’s a really nice looking website. This is the Securities and Exchange Commission, so you’d think, ‘Wow, I can trust this.’ But, actually, all this material was fed to the government by the investment industry. …
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A woman wearing a backpack sitting on a grassy hill.

College Debt’s Impact is Growing

Forty percent of college graduates today have difficulty repaying their student loans, but few realize how many options they have to get relief by renegotiating them.

The non-profit American Student Assistance (ASA) counsels students on how to deal with onerous loan payments. When students call ASA, repayment counselors tell them their options include extending the life of the loan, which reduces the monthly payments, or making graduated payments, which increase as their paycheck increases in future years.

Some borrowers may even be able to qualify for postponing payments or canceling some of their debts.

Borrowing on college campuses has reached crisis proportions, according to ASA. Total student loans outstanding have surpassed the $900 billion mark. Rising tuitions and stagnating household incomes due to the recession have only increased American families’ reliance on debt to fund college. …Learn More

Cartoon of five orange heads with microchip like lines extending from their brains.

High School Influences Life Knowledge

It’s been well-established that most people have low levels of financial literacy and struggle to manage and plan their personal finances. Now two Wisconsin researchers have taken the conversation to the next level by trying to explain why.

According to their study, featured in a webinar posted online today, the financial literacy of people entering retirement is significantly determined by high school IQ level or by whether the individual took high-level math classes in school.

University of Wisconsin professors Pamela Herd and Karen Holden arrived at this finding by analyzing 6,000 individuals from a unique longitudinal data set of people who graduated from Wisconsin high schools in 1957 – and were in their mid-60s at the time of the study. …Learn More

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