Photo: Man standing in front of maze

Dementia Prevention

There are now two reasons to postpone retirement.

The financial reason has been covered repeatedly in this blog: working longer increases a retiree’s savings and monthly Social Security income, while shortening the number of retirement years that their savings will have to fund.

If that doesn’t convince you, here’s the other reason: working longer may prevent dementia.

That’s the conclusion of a study on nearly 430,000 French retirees. After analyzing their health and insurance records, the researcher determined that each additional year an older worker remained in the labor forced further reduced the risk of being diagnosed with various forms of dementia, including Alzheimer’s disease. …Learn More

Workers Struggle Day to Day

There’s a growing concern that working people aren’t saving for the future, but the reality is that many of them can barely get by in the here and now.

A sizable minority of Americans say they are spending more than they earn, have overdue medical bills, or pay only the minimum on their credit cards. These were among the findings in the 2012 National Financial Capability Study (NFCS) conducted by the FINRA Investor Education Foundation, its second survey to illuminate the day-to-day financial issues facing average working people.

Pulling together $2,000 may seem like only a modest challenge for someone with good pay and benefits. But 40 percent of the people surveyed also indicated they would be hard-pressed to find that much money if they needed it, according to a September report on the NFCS survey.

FINRA identified indicators of what it called the “financial fragility” of the average American:

• More than half of those surveyed were in a poor position to save: 19 percent spend more than they earn, and 36 percent just break even.

• More than half have no rainy day fund and live paycheck-to-paycheck. …Learn More

What’s Your ‘Money Script’?

Our subconscious often stands in the way of our conscious efforts to save for college, prepare for the future, or spend what we’ve saved once we retire.

Some psychologists and financial planners believe these roadblocks are rooted in an individual’s “money script” – the story about money that we’ve told ourselves repeatedly since childhood. They’re typically passed down from our parents, extended family, or culture, and they are extremely difficult to change.

Writing in the Journal of Financial Planning, two experts in financial psychology, Bradley Klontz and Sonya Britt, presented their research associating three specific money scripts to poor financial behavior. Their study was based on a survey of 422 individuals who were largely middle-aged, white, and highly educated.

Click on a money script in one of the boxes below to read their descriptions of each one, excerpted from the November JFP article, to see if any apply and to learn how they affect the way we relate to money.

The researchers found that one person can hold multiple scripts, and these scripts can even contradict each other. …Learn More

Students Tell Their Tales of Debt

Kathleen BuckinghamPreston DavisMichael McCormakKelly Mcgowa

Click on each of the four photographs above to hear from the students, Kathleen Buckingham, Preston Davis, Michael McCormack, and Kelly McGowan.

Nastasia Peteuil, who paid very little for her college education in France, was shocked by how much students in this country are borrowing and by the crushing financial pressures this creates.

While taking graduate journalism courses at the University of Massachusetts in Amherst last spring, she persuaded four classmates to narrate their personal stories, which she documented on film in four short profiles.

What makes Peteuil’s profiles so powerful is that they convey, in real time, how these young adults begin to realize what their debt will mean to their lives and career choices.

Squared Away has written about the financial consequences of college loans after graduation – on buying one’s first house, on retirement, and even on graduates’ love lives.

But, as Peteuil has dramatized, the consequences begin prior to graduation day.Learn More

Photo: Workers in office orange

Desperate to Retire? Don’t.

A new article in the Journal of Financial Planning lays out the unpleasant reality facing baby boomers who really want to retire but can’t afford it: working longer helps a lot.

In the article, David Blanchett, who heads the retirement research group for Morningstar’s money management unit in Chicago, calculated the impact of delaying one’s retirement date and found that it can sharply improve a retiree’s odds of financial success.

“There is not one silver bullet for success but if there were it would be delaying retirement,” he said in an interview.

The same case has been made for years by the Center for Retirement Research at Boston College, which supports this blog. Working beyond age 62, when individuals are first eligible to receive Social Security benefits, helps in three important ways: …Learn More

Photo of house header

Student Debt May Slow Home Buying

First-time buyers are currently responsible for about 29 percent of all U.S. house sales, down from historical levels of 40 percent, according to the National Association of Realtors. The share of young adults who own a house has also declined sharply.

There’s debate about whether buying a house is a good financial move. But the waning of this coming-of-age ritual is a significant change in behavior for young adults in this country.

One culprit may be student debt, which is becoming more prevalent – 43 percent of young adults have some, compared with 25 percent a decade ago. The average borrower’s balance has also doubled in the past decade, to more than $20,000 in 2012.

Researchers at the Federal Reserve Bank of New York believe these unprecedented student debt levels may be dampening house purchases by first-time buyers. Student loans cause individuals to do poorly under two of the primary tests by Freddie Mac and Fannie Mae that lenders use to approve standard home loans. …Learn More

Reverse Mortgages Get No Respect

Fran and Bob Ciaccia.

Fran and Bob Ciaccia

Bob and Fran Ciaccia could not be happier with their reverse mortgage, which unlocked some of the equity in the house they purchased in 1966 for $12,500.

Reverse mortgages are federally insured loans available to U.S. homeowners over age 62. The loan is made against the equity in the house, and the principle, plus interest and some federal insurance fees, are not repaid until the homeowners or their children sell the house.

“I cannot find a downside,” Fran Ciaccia, a retired high school cafeteria cook from Levittown, Pennsylvania, said in an interview. “We have told so many people about it.”

Although the Ciaccias may be big fans, reverse mortgages are unpopular, despite historically low interest rates that make them a good deal for retirees right now. AARP has estimated that only 1 percent of older Americans use them.

In 2012, the average loan size was $158,228, and 54,676 Americans got one. That is less than half the loans made in the peak year, 2009, according to the U.S. Department of Housing and Urban Development, which insures and sets standards for reverse mortgages. …Learn More

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