October 2016

Parent and child holding hands

Parents Pass (Bad) Money Habits to Kids

When people are asked why they are stressed, money – or the lack of it – is often at the top of the list.

Ask psychologists why this is so, and many would point to a deeper explanation: our parents.

How and whether our parents talked about money, as well as the emotional tenor of these conversations – or silences – are critical to how we manage money as adults.

Sonya Britt, a certified financial planner and associate professor at Kansas State University, explained how these family dynamics play out in a research summary written for financial planners, under a contract with the federal Consumer Financial Protection Bureau.

Britt describes a two-way street between parent and child.  Parents signal their attitudes about money, either through purposeful and explicit messages or in unconscious ways.  Meanwhile, children learn the behaviors that take them into adulthood by observing what parents do.  These observations can override financial knowledge in shaping behavior.

For example, college students who remember that their parents had healthy credit card practices, such as living within their means, are more successful at keeping their college debt under control.  Generally, parents are advised to talk about financial matters with their children – it’s known as parental financial socialization.  Avoiding such conversations has a negative effect that can “wreak havoc on children as they age.” In extreme cases, silence can lead some to hoard money as adults and others to be careless spenders.

Financial dependence in post-adolescence is an emerging issue as young adults extend the amount of time they live in their parents’ homes, often to cope with college debts and inadequate employment options.  Young adults whose parents provide financial help tend to develop dependency. In contrast, the offspring of people with fewer financial resources – who can’t help their children – learn more quickly to become financially independent. …
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Latino Labor Force’s Retirement Burden


As the U.S. Department of Labor video above makes clear, the population of Latino workers is exploding.

By 2024, nearly 33 million Latinos will be working in this country – they will have doubled their labor force share to 20 percent, from just 10 percent in 1995.

Despite their expanding presence in the labor market, Latino-Americans face significant retirement challenges.

Chief among them is that they don’t have the same access to traditional pensions and retirement savings plans that white Americans have, primarily because of where Latinos tend to work.  Two out of three Latino workers – many people prefer the term Hispanic – lack a 401(k)-style plan in their jobs, the U.S. Social Security Administration and other sources report.

The National Hispanic Council on Aging recently called the older Hispanic population “the least prepared for retirement of any ethnic group.”

One reason cited is that they are more likely to work for small businesses, which often don’t set up a plan.  Latinos are also disproportionately employed in low-paid cleaning, landscaping, and food services occupations, and a mere 12 percent of all low-income older individuals are saving for retirement. Median earnings for Latino-Americans, at $45,000 per year, are about one-third lower than median earnings for whites, according to the U.S. Census.

Things are rapidly changing, however: more Latino-Americans than ever are attending college and completing their degrees, which will improve financial security for this college-bound group and their families.

But while Latinos have, like past waves of immigrants, fully integrated into American society in recent decades, many have not yet integrated into the mainstream institutional structures that support retirement.   Until that happens, the lack of access will create greater financial challenges for the Latino community.Learn More

Guy in front of chalkboard with equations

Your Social Security: 35 Years of Work

This blog is for a part-time Macy’s saleswoman and immigrant whom I met in a hospital waiting room – she’d never heard of Social Security.

It is also for a 22-year-old contingent worker I know who lacks steady employment and isn’t regularly accruing credit toward the Social Security pension he will probably need when he retires.

And it is for a 62-year-old eager to claim his benefit right away, possibly short-changing his retirement.

A substantial share of retirees would fall into poverty were it not for the Social Security program passed during the Great Depression.  It’s especially important for two groups of people to understand how Social Security calculates their pension benefits: young adults making employment decisions that will impact them decades from now and older people figuring out when to retire.

Yet research shows that many people do not know the basic workings of a program that is crucial to their financial security.

Steve Richardson, a Social Security official in Boston, holds regular seminars to explain the pension program to the public. “The first thing I ask is – before I say my name – ‘How many people in this room know how many years Social Security looks at to determine your pension payment?’

“Not many of them know it’s your high 35 years of earnings.”

To qualify for a pension benefit at all, a person must work full- or part-time for 40 quarters – a total of 10 years. That’s not a difficult hurdle for most to clear during decades in the labor force. What’s central is the size of your future benefit check, which is determined by your highest 35 years of indexed earnings, Richardson said – and that brings us to the math thing. …Learn More

Prescription pills

Fewer, Clearer Medicare Part D Choices

medicare part d chartA decade ago, the nation’s Medicare enrollees had more than 1,800 different prescription drug plans to choose from. In the 2017 open enrollment that started on Oct. 15, that number dropped to just 746.

News of higher Part D drug plan premiums and out-of-pocket costs in 2017, estimated in a new report by the Henry J. Kaiser Family Foundation, will not be welcome by the nation’s older population.  But Squared Away also wanted to know whether fewer plan options are good or bad for consumers.

“It’s good in the sense [federal] efforts are bearing fruit in giving people options that are more distinct from each other than in the past,” said Juliette Cubanski, Kaiser’s associate director of Medicare policy. At the same, she said, retirees “still have a lot of choice in this marketplace.”

The number of plans has shrunk steadily for a variety of reasons since the 2006 inception of the prescription component of Medicare, known as Part D. In the early years of the program, plans started disappearing amid consolidation among insurers and pharmacy benefits managers, she said. More recently, a few Part D plan providers have pulled out of the market.

But Cubanski said recent reductions in the number of plans were primarily by federal design. In 2011, the Centers for Medicare and Medicaid (CMS) stepped in and began requiring insurers that offered more than one Part D plan in a region to make sure the differences among their plans were clear and distinct to Medicare beneficiaries. …Learn More

Medicare Enrollment Help is Plentiful

Medicare posterOpen enrollment starts Oct. 15 for people who’ve signed up for Medicare and must buy into or change their supplemental Advantage or Part D prescription drug plans.

The Medicare Rights Center in New York tells me that you can “make as many changes as you need during this period” and that “only your last coverage choice will take effect Jan. 1.”

A long list of resources appears at the end of this blog to help Medicare beneficiaries through the enrollment process. But there’s a lot of hoopla around the Oct. 15-Dec. 7 enrollment period, so it’s important to know what Oct. 15 is not about.

One’s birthday – and not a date on the calendar – determines when people should initially enroll in the Medicare program. Most people turning 65 who are not covered by their own or their spouse’s employer health insurance at work are required to enroll in Medicare Parts A and B during a seven-month period that starts three months prior to their 65th birthday. During this seven-month window, new Medicare participants must also sign up for their Part D drug plans – or risk paying a lifelong penalty. Oct. 15 is not the trigger date for selecting Medigap plans either.

Here’s what the Medicare open enrollment that starts Oct. 15 is about: figuring out the right Advantage or Part D drug plan to buy or switch to. This is a complex process that involves multiple choices, anticipating your future health care needs and expenses, and a lot of research into the plans available.

It’s an implicit recognition of Medicare’s complexity that so many resources are available to help with this process, from private and government-funded consultants to YouTube videos and detailed web pages on the Medicare website. The following resources and blogs can help answer your questions: …Learn More

Financial Product Legalese – it’s on You

Road sign

The Center for Plain Language had this to say about the legal fine print that overran one advertisement for an investment product:

“Once again a financial institution that expects me to trust them with my money makes it impossible for me to know what they are going to do with my money.”

The Center had singled out a Charles Schwab & Co. ad for a Wondermark “award” for unintelligible writing. But the center might have been referring to any of the hundreds of financial institutions that inundate us daily with online and television ads or the credit card offers that come in the mail.

Consumers are often faulted for making poor financial decisions, but surely much blame falls on financial companies that present consumers with terms of use agreements chock full of legalese or with disclosures that are difficult to read and understand.

Financial minefields pervade all aspects of our lives too. The 2016 Wondermark awards went to Victoria’s Secret for the “mumbo-jumbo” in its lengthy credit card agreement and to a Phoenix healthcare company that offers discounts to low-income customers – but first, they must decipher the confusing chart that explains who qualifies.

The person who nominated the healthcare company for an award said its discount information “seems like a classic case of the 0.2% who understand this chart will receive 85% of the Medical Financial Assistance, but they are clearly 400% above the average American who just got out of the hospital and has 0% of a clue as to what they’re talking about.” [Oddly, this chart seems to indicate that customers with higher incomes get larger discounts.] …Learn More

college kids

Starting the College Conversation Early

Parents have finished the summer college tours with their teenagers.  Now comes the hard part: figuring out how to pay for college. But Judith Ward, a senior financial planner for T. Rowe Price in Baltimore, urges parents to prepare for this moment well before their child’s high school graduation to help minimize college costs when the time comes.

Squared Away interviewed Ward, whose advice comes from a combination of her professional experience and putting her own two kids through college. They are now 23 and 27, employed, and paying back modest student loan balances.  

Your company’s 2016 survey of parents and children between ages 8 and 14 about paying for college points to a disconnect between what young kids are expecting in terms of paying for college and what their parents are planning on.

Yes, we found in our survey that 62 percent of kids expect their parents to cover most of whatever college they want, but 65 percent of parents say they’ll only be able to contribute some to their college. There’s definitely a disconnect. But it’s easy to rectify – just start talking to your kids about college.

Question: Can parents really talk to their kids about college at 8, 9 or 10? And what do they talk about?

In fairness to the kids who answer these survey questions, they have no idea what the cost of college is. It’s not the enormous number it is to their parents. But start when they’re young by having conversations that are not necessarily about the cost of college. Just start making college part of the conversation and sharing your own stories. That will have them thinking about college and thinking, “I’m going to be expected to go to college.” …Learn More

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