January 2014

TV’s “Shameless” Takes on 401(k)s

In this video clip from “Shameless,” young adults may relate to Fiona’s reaction to “the 401(k) talk” by a manager who pops into Fiona’s cubicle.

This popular television dramedy, “Shameless,” is about the dysfunctional Gallagher family of Chicago, and oldest daughter Fiona (played by Emmy Rossum) does what she can to keep things together.  But how to cope with the 500-page 401(k) binder her manager drops on her desk with a thud?

It’s been rare that 401(k)s are mentioned on television.  So, why have retirement savings accounts entered our popular culture?Learn More

balance

Gen-X Retiree Income Inequality to Widen

There’s a growing awareness of the chasm between average working Americans and those at the top of the earnings scale.

What isn’t widely recognized is that this broad economic trend is spilling over into retirement incomes, which depend on how much people earn and save while they’re still working.

“The increasing wage inequality we see during the working years plays out over the life course and will result in more unequal incomes at older ages,” said Richard Johnson, an economist with the Urban Institute in Washington.

Johnson recently compared the incomes of today’s retirees with his income projections for the youngest members of Generation X who will enter retirement in about 30 years.  He found that the imbalance between those at the top and bottom is expected to be wider for Gen-X.

In his study, retiree income includes Social Security benefits, pensions from traditional defined benefit plans, and employment earnings.  Johnson also assumes that people spend down their 401(k)s, but he does not include equity in one’s home, which retirees can also convert to income. …Learn More

debt climber

Retirement Delayed to Pay the Mortgage

Older Americans who are in debt are choosing to delay their retirement, researchers conclude in a new working paper.

In earlier findings released last summer, the researchers, Barbara Butrica and Nadia Karamcheva of the Urban Institute, documented the growing prevalence of borrowing since the late 1990s among adults ages 62 through 69. Median debt levels among those who owe also surged from $19,000 to $32,100, adjusted for inflation – and debts as a share of their assets increased.

Now comes the rest of the story. When the researchers controlled for health, financial assets, home values, and other forms of wealth, as well as spouses’ earnings and other factors that play into decisions about retiring, they found that individuals with debt, especially mortgages, behave differently than those who are debt-free.

Here are their main findings:

  • Nearly half of all people in their 60s with debts continue to work, compared with only one-third of those who have no debt. …

Learn More

HHS Website Decodes Long-Term Care


Every day, some 10,000 Americans are turning 65, and every day, more of them start thinking about their long-term care.

For help, try the U.S. Department of Health and Human Services’ recently redesigned website, Longtermcare.gov. It’s very easy to navigate and is packed with reliable information to help visitors:

  • Search for specific types of services in your area, by zip code.
  • Learn whether your home and location are compatible with aging in place.
  • Analyze long-term care costs, by type of service and state.

Learn More

Clocks in sand

Parents’ Longevity Sways Plans to Retire

Penny DeFraties, a teacher, shared her reaction to a 2012 article that appeared on this blog:

The day I hit my minimum retirement age, I’m gone. I look forward to traveling, gardening, spending time with my grandkids, and volunteering at church, the American Red Cross and USO. My first husband died of a heart attack at 49-years-old, and my current husband lost his first wife to MS at 50-years-old.

The notion that life is short is a valid reason to retire – to travel or enjoy the grandchildren before it’s too late. And the academic literature clearly shows that the age at which people exit the labor force is related to how long they expect to live.

Building on this research, a new study nails down how we arrive at our personal estimates of our life expectancy and provides new insight into the critical retirement decision.

Using data for individuals between the ages of 50 and 61, economists Matt Rutledge and April Yanyuan Wu with the Center for Retirement Research (CRR) and Boston College doctoral candidate Mashfiqur Khan confirmed that individuals estimate their own life expectancy based in part on how long their parents lived. (Full disclosure: the CRR supports this blog.)

They went on to link this “subjective life expectancy” with when older workers plan to retire, as well as when they actually do retire. …Learn More

confidence

Confidence Key to Retirement Planning

Confidence can be dangerous. It has led investors into fraudulent deals and businessmen into over-borrowing.

But new research finds one circumstance in which confidence may be beneficial: retirement planning.

Saving and investing can be so overwhelming that workers, judging by the low balances in most 401(k)s, often avoid it. So Andrew Parker, a behavioral scientist in Pittsburgh for the non-profit RAND Corporation, wanted to get at the psychological factors motivating those who do dive in and plan for their future.

Parker and fellow researchers concluded that individuals’ tendency to engage in retirement planning and their self-confidence – how much they think they know – are “significantly and positively correlated with each other.” This was true even after their study accounted for how much people really did know.

“If I feel confident in my knowledge and abilities, I may be more likely to move forward” with retirement planning, Parker explained in an interview. “If I don’t, I may be more hesitant to engage in that process.” …Learn More

Shopping on an iPad

iPad Shoppers: More Likely to Buy?

A new study out of Boston College finds that e-shopping for products while grasping an iPad increases the feeling of ownership of that product – and may make you more likely to buy it.

The findings expand on a financial behavior issue explored in a popular Squared Away blog post about how the Internet has made it much easier to shop – and spend money. The new research distinguishes among the various technologies available to online shoppers and finds that the urge to buy may be even stronger when holding a touch screen device than when using a laptop or desktop computer.

The way this works is that the tactile experience of holding a product – whether taking it off the store rack or grasping the device that’s displaying it – imbues some sense of ownership, making it harder to give it up and resist buying it.

Here is an edited excerpt of an article explaining the research; the article appeared in Chronicle, a publication for Boston College faculty and staff. …Learn More

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