December 23, 2014
What Readers Liked in 2014
Since you are the best judges of what financial information is most useful, it’s a holiday tradition to feature readers’ favorite articles published during the year.
Please spread the word among family and friends about the most popular 2014 blogs, listed below, by “liking” Squared Away’s Facebook page. Readers can also sign up for emails of each week’s headlines.
The articles are ranked in the order of their total page views:
- Retirees Live on Less. People who’ve already retired say adjustments are required to live on a smaller income.
- Retirement Delayed to Pay the Mortgage. Paying off the house tilts many baby boomers’ decisions.
- Retirement: a Good State of Mind. New research tries to resolve the conflicting evidence about whether retirement is good for you.
- How Much For the 401(k)? Depends. Saving is critical in a 401(k) world. The sooner Millennial workers start, the less painful saving will be.
- Parents’ Longevity Sways Plans to Retire. If a parent dies suddenly, retirement becomes a higher priority. …
December 18, 2014
Hunger: Unspoken Among the Elderly
Retirees in one Orlando-area community sustain a lively conversation about every topic under the Florida sun, a conversation that threads through their rounds of horseshoes, dinner dances at the club house, and senior yoga.
But one subject must be handled with great discretion: hunger.
Judy Cipra knows this, because she and her late husband, Fran Cipra, started, and she continues to operate, Fran’s Pantry to collect money and buy groceries for 18 seniors who struggle financially in the Palm Valley retirement community, where my mother also lives.
“If you call me and you tell me that you need food, I don’t ask any questions,” Cipra said. “You just get it.”
Cipra said people reliant solely on Social Security are often embarrassed to be barely getting by. Some fill their food gaps with soda crackers and peanut butter, she said.
But hunger among seniors is not uncommon. About 15 percent of Americans age 60 and older were threatened with hunger in 2012, according to the National Foundation to End Senior Hunger. And as the baby boom population ages, the number of these “food insecure” seniors is continuing to rise, exposing growing numbers of retirees to health problems and depression stemming from not having enough to eat. …Learn More
December 16, 2014
Evaluating a Pension Buyout Offer
Like many baby boomers, I’ve received an offer from a former employer that’s meant to entice: “The Company is offering you a limited-time opportunity to receive this benefit now, rather than waiting until you otherwise become eligible to receive payments from the Plan.”
My 17-year employment as a Boston Globe reporter entitles me to a $1,762 monthly pension for life, starting at age 65. I’m 57 now. But a few weeks ago, the company put two alternatives on the table: take a smaller pension that starts now or trade my pension for a lump sum of $170,000 in cash. The deadline for accepting the new offer: the day after Christmas.
The New York Times Co., which used to own the Globe, has no doubt made this offer to employees for the same reason most companies do: to reduce burdensome pension liabilities and create financial certainty. But what’s in it for me? And how should other boomers think about similar offers coming over the transom?
My first thought was this: I’m working now and don’t want or need a pension right away. This money is for my retirement. I view my decision as choosing between the remaining two options: my original pension at 65 or the new lump sum offer.
A senior economist here at the Center for Retirement Research, Anthony Webb, helped me compare these two options: …Learn More
December 11, 2014
Widows Face More Financial Adversity
Two times more widows than widowers say their spouse’s death carried significant negative financial consequences during the first year after their loss.
This sharp contrast recurred in numerous financial questions recently posed to widows and widowers by New York Life. The contrast also seemed to persist across various income levels, in questions revolving around both essential needs and luxuries. Here’s a sampling of answers given by nearly 900 Americans whose spouses have died sometime in the past decade:
Their answers beg the question: Why the divergence?
One reason is certainly that two-thirds of the widows surveyed reported their income was under $35,000, while a majority of the widowers earned more than that. Adults over age 18 were canvassed, so working women’s lower earnings no doubt contributed to the income and lifestyle disparities.
Pension survivor policies also play a role, since two out of three of the people surveyed were over age 65. …Learn More
December 9, 2014
Fewer Still Paying Off Last Christmas
‘Tis the season to acknowledge progress!
The share of Americans who are still paying off credit card debts they ran up during the year-ago holiday has dropped for a second consecutive year.
According to an annual Consumer Reports survey, conducted during the first week in November,
7 percent of Americans still had unpaid Christmas bills left over from last year. That’s down from
10 percent in 2013 and 13 percent the year before.
One likely explanation is the drop in the U.S. unemployment rate, to 5.8 percent last month from
7 percent in November 2013. Plummeting gasoline prices have also left more cash in shoppers’ wallets. But did a lackluster Black Friday – retail sales were down a whopping 11 percent, despite the stronger job market and falling gas prices – mean something else? Are shoppers just delaying their purchases, or could this be a sign of restraint?
This holiday, the vast majority of people plan to spend the same or less than they did last year, says a poll by the Consumer Federation of America and the Credit Union National Association. And here’s a suggestion for the 2014 holidays that could also help: pay cash.Learn More
December 4, 2014
How to Think About Self-Control
“Self-control” is a catch-all label for resisting all sorts of temptations, including overspending. According to a new study, controlling overspending can be broken down into three distinct behaviors:
• Setting goals such as buying a house or saving money.
• Monitoring bank statements to systematically track where your money goes.
• Committing to the goal in the face of short-term temptations to spend.
Data for the study came from a nationally representative U.S. survey of households over age 50. The survey has extensive information about the households’ finances and about each individual’s resolve to set goals, track their finances, and carry out their commitments – whether financial or non-financial.
Households lacking self-control disproportionately have lower net worth – no surprise there. The largest effect is on their liquid financial assets, such as checking and savings accounts and IRAs. Impulsive consumption “is more likely to have an immediate impact on liquid holdings than on illiquid assets,” such as property, said the researchers, who are from Goethe University in Frankfurt.
More interesting is their analysis of the role played by self-control’s three individual components. The study found that the third ingredient – the ability to stick to commitments – draws the darkest line between success and failure in accumulating net worth.
But the researchers also divided net worth into “real wealth” – homes, other property, or vehicles – and financial wealth, which is more easily liquidated than property. Commitment again proved most important in determining whether people own property. But when it comes to accumulating financial wealth, monitoring one’s finances plays the largest role.
Everyone talks about self-control. This study clarifies what it is.
December 2, 2014
Curbing Debt: It’s Not What You Know
The biggest financial hurdle facing workers with low incomes is just that: inadequate income to meet their daily needs.
Low-income households are further tripped up by their greater tendency to borrow at high interest rates – rates they are the least able to afford in the first place.
Some academic research blames this on poor financial literacy. But a new study out of Northern Ireland examines two separate aspects of financial literacy and finds the problem is not a lack of knowledge but rather an absence of money management skills.
Among “financially vulnerable” people, the study concluded, “money management skills are important determinants of consumer debt behavior” and “numeracy has almost no role to play.”
The study involved researchers conducting one-hour, face-to-face interviews in low-income neighborhoods in Belfast. They interviewed 499 people whose average gross earnings were the equivalent of $567 per week or less. …Learn More