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Some Spouses Shun Retirement Planning

Retirement is a joint project for married couples, but remarkably only 43 percent of couples plan for it together.

Are wives to blame?

Some husbands expressed frustration that their wives don’t engage in planning during a focus group conducted by Hearts & Wallets. One man reported that his wife “is not interested in investing,” and another said “all my wife cares about is if we’re going to have the money.”

A San Francisco man volunteered this worst-case scenario: “If I were to get hit by BART on the way home, she would be clueless about what to do with whatsoever there is or how to handle anything.”

Hearts & Wallets cofounder Laura Varas calls it the issue of the “uninvolved spouse.” In a new analysis of its 2013 survey data on 5,400 US households, the financial research firm found that 80 percent of these uninvolved spouses are wives among couples approaching retirement age. The good news is that younger wives are more engaged, Varas said. In early- and mid-career couples, fewer than 60 percent of uninvolved spouses were women.

Yet it’s hard to imagine how anyone can avoid this conversation, given the myriad issues to resolve: Will you stagger your retirement dates, especially if your ages are far apart? If saving and paying off the mortgage are twin retirement goals, are you both still contributing enough to your 401(k)s to ensure you get the full employer match? Have you coordinated your strategies for claiming Social Security? Will you be financially secure if your spouse dies first? …Learn More

Wanna Retire? Find a Purpose

In this video by KUTT-TV in Anchorage, Alaska, Fred Keller and Judy Foster show off their retirement project: they transformed a 1976 pickup truck into an oversized replica of a Radio Flyer wagon they can drive around town.

While a new red wagon isn’t for everyone, it illustrates an important point: retirees need to find ways to remain active. Older people warn that retirement shouldn’t be viewed exclusively as a time to “relax,” a well-deserved break.  People who enter retirement expecting nirvana often find they’re bored stiff, or even depressed, due to an abrupt drop in productivity after decades of working. Retirees also spend a lot of time alone or watching television.

This blog often promotes the benefits of financial health and mental health that come with working longer.  When making financial preparations for retirement, preparation should also include thinking about pursuits such as working on a long-neglected project or hobby, writing a family history, or finding a social group, part-time job, avocation, or volunteer work to add structure and purpose to one’s life.

It took Keller and Foster nearly a year to build their vehicle, KTUU reports. When they took it on the road, they discovered another benefit: talking to the people who invariably ask them about their Radio Flyer is a constant source of fun.Learn More

5 Reasons Workers’ Stable Wealth Is Bad

Americans build wealth as they age, and this pattern of accumulation has been similar over three decades of U.S. Survey of Consumer Finances data collected by the Federal Reserve.

In the chart below, net wealth is expressed in terms of annual incomes for ages 20 through 64; for example, someone with $150,000 in wealth and $50,000 in income has a wealth-to-income ratio of 3. Net wealth equals financial assets such as 401(k)s and housing, minus debt and mortgages; income includes employment earnings and investment gains.  This measure does not include Social Security or defined benefit (DB) pensions.

Chart: Ratio of Wealth to Income

The stability of this wealth-to-income ratio over 30 years may, at first glance, be comforting.  But it shouldn’t be – wealth should have increased during this time for five reasons.

1. Longer life spans than in the early 1980s require that Americans save more to fund more years in retirement.

2. Health care costs are rising, so people will need more wealth to cover their out-of-pocket costs. …Learn More

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The Pain of Paying Student Loans

Anger, frustration, confusion, and regret – high emotion permeates the nearly 8,500 complaints about student loans posted last year on the Consumer Financial Protection Bureau (CFPB) website.

A college education can pay dividends in the form of higher lifetime earnings and more opportunities, and millions of graduates repay their loans without incident. But many of the one in three borrowers facing extreme difficulty with repayment have legitimate reasons. The job market, while improving, is not robust for recent graduates. And interest rates on student loans are higher than mortgage rates, so the amount of debt accumulated – and the monthly payments – can be substantial.

Borrowers report that lenders and the firms hired by lenders to service customers are often unwilling to renegotiate monthly payments or devise ways to work down the principal. “I wish that with what I know now I never would have gotten these loans for college,” said one borrower’s online complaint.

The CFPB last month requested detailed information from lenders and servicing firms about customers’ options for modifying loans or negotiating more affordable loan payments. Customers receive “very little information or help when they get in trouble,” CFPB said.

Future borrowers beware. Here’s a sampling of the complaints about lenders:
• No flexibility.
• Refinancing may one day be possible – but not now.
• “Bureaucratic nightmare.”

Unfortunately, private lenders are not under the same obligations as the federal government to show flexibility in renegotiating federally funded loans; for example, the government forgives loans for some public workers or offers payment plans that take into account graduates’ incomes for those who don’t earn enough to meet their loan payments.

So before taking out student loans, consult the CFPB consumer guide, which recommends exhausting all federal loans before resorting to private loans.

The issues raised in the complaints detailed below sound similar to subprime borrowers’ experiences with loan servicing firms. …Learn More

Retirement Saving: Excuses and Regrets

U.S. workers have a long list of reasons, many of them legitimate, for why they can’t come up with the money for a retirement savings plan.

But here’s the rub: we live in a 401(k) world. Workers who aren’t convinced of the urgency of saving should listen to people who have already retired.  Even though many current retirees have defined-benefit pensions, they have become largely unavailable to most people still working today. And these retirees say they’ve learned the hard way that saving is key.

Excuses now and regrets later – these two takeaways came out of a nationally representative survey of workers and retirees by HSBC, a global financial institution.

Chart: Why It's Hard to Save

Saving for retirement is not a major priority for 81 percent of the workers surveyed. The chart shows that saving takes a back seat to myriad other financial concerns, topped by the impact of the global economic downturn and the U.S. job market.

Things are much clearer to retirees.  Nearly half of them, when asked for the latest age at which people should start preparing to retire, said before 30.  Many retirees – about two out of five – said “they did not realize that their preparation had fallen short until it was far too late.”

Whatever obstacles they face, the question facing workers is: what can they do to save or save more? …Learn More

snowy path

Winging It in Retirement?

Saving should be the centerpiece of any retirement plan today.  But a new survey indicates that many Americans on the cusp of retiring have given little thought to the other key issues they’ll face in retirement.

A majority of older Americans recently surveyed by the American College of Financial Services, an educational organization for financial professionals, said they have set a goal for how much money to save to “live comfortably” as retirees.  And, when asked to assess their own progress, they feel they’re doing a good job of it.  Granted, the survey was limited to a select group of about 1,000 people over age 60, all of whom have at least $100,000 in investable assets.

But the financial risks posed by the transition away from full-time work and a regular paycheck are complex and continual – and preparing for them goes well beyond contributing to a 401(k).

Only a minority of people planning their retirement take into account these important financial issues: …Learn More

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Many in Dark About Their College Debt

A recent Brookings Institution report confirms for the first time how severely uninformed many college freshman are about the impact of the debts they’re taking on to fund their education.

This isn’t entirely surprising. But with tuitions continually rising and students now often forced to borrow the equivalent of a house down payment by the time they graduate, the Brookings findings should serve as a wake-up call:

  • Half of the full-time freshmen surveyed “seriously underestimated” how much they were borrowing.
  • Among students known to have federal college loans, four out of 10 either said they didn’t have any federal loans or didn’t have any debt at all.

According to the report, “Students who do not have a good idea of their level of borrowing may make expensive mistakes that they will later come to regret.” …Learn More

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