optimism

Be Optimistic. You Might Live Longer!

People who have a college education are known to live longer. But could a sunny disposition also help?

Yes, say two researchers, who found that the most optimistic people – levels 4 and 5 on a 5-point optimism scale – live longer than the pessimists.

But this effect works both ways. The biggest declines in optimism have occurred among older generations of Americans who didn’t complete high school at a time when this was far more common. It’s no coincidence, their study concluded, that the white Americans in this less-educated group in particular are also “driving premature mortality trends today.”

The finding adds new perspective to a 2015 study that rocked the economics profession. Two Princeton professors found that, despite improving life expectancy for the nation as a whole, death rates increased for a roughly similar group: white, middle-aged Americans – ages 45-54 – with no more than a high school degree. They suggest that addiction and suicide play some role, both of which have something to do with the deterioration in the manufacturing industry that once provided a good living, especially for white men.

To make the link between mortality and optimism, Kelsey O’Connor at STATEC Research in Luxembourg and Carol Graham at the Brookings Institution examined whether heads of households surveyed back in 1968 through 1975 were still alive four to five decades later. They controlled for demographic characteristics and socioeconomic factors, such as education, which also affect longevity. …Learn More

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Target Date Funds are on a Roll

For the sheer simplicity they bring to 401(k) investment decisions, retirement experts have been big fans of target date funds for years.

Now, their popularity is soaring with the people who really count: employees.

Last year, 401(k) participants poured a record $70 billion into target date funds (TDFs), an investment option that automatically shifts the asset allocation in the portfolio to reduce risk as employees approach a designated retirement date. TDFs have become the first choice for people who, rather than go it alone and pick their own mutual funds, like having their employer’s mutual fund manager do it.

According to a new report by Morningstar, the Chicago research firm, the new money flowing in has averaged $66 billion annually over the past three years, a 28 percent increase over the prior three-year period. The inflows exclude new money from investment returns.

The surge in new invested money has been more about the intensity of baby boomers’ efforts to save for an impending retirement, Morningstar said, than the fact that strong returns usually pull investors into the stock and bond markets.

In another major development, TDFs invested in passive index funds are now investors’ predominate choice. This is a full reversal from a decade ago, when most TDFs were invested by stock pickers.  (Although more money is now flowing into passively invested TDFs, actively managed TDFs still hold more in total assets.) …
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Tiny House Fixes Millennial’s Money Woes

Sky-high city rent, college loan payments, and the low-paying days of an early career are a bad combination for today’s Millennial.

Liz Patterson

Liz Patterson has solved all that.  The carpenter built herself a 96-square-foot house on top of a flatbed truck for less than $7,000 in Manitou Springs, Colorado, a hip neighborhood near Colorado Springs.

The house “represents my monetary freedom – it’s the whole reason I did it,” the 27-year-old said.

Tiny houses, which average 500 square feet, are only about 1 percent of U.S. home sales. But builders say that sales continue to grow as Generation-X buys them as Airbnb rental properties, and baby boomers park their “granny pods” in an adult child’s backyard.

Patterson’s house before

Tiny houses actually make the most sense for 20-somethings in rebellion, given their financial constraints and a distaste for all the junk their parents accumulated over a lifetime, said Shawna Lytle, a spokeswoman for Tumbleweed Tiny Homes Company in Colorado Springs, which built its first tiny house in 1999. The national tiny house price is $23,000.

Five years earlier, the tiny house movement had started in Tokyo. Recently, a handful of U.S. communities, including Spur, Texas, and Berkeley, California, have modified their zoning rules or building codes to accommodate them. The laws are a patchwork: houses on wheels must sometimes be classified as RVs, and some cities set size minimums for houses with foundations. …Learn More

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Can Caregivers Help Seniors with Money?

When once-simple financial tasks become difficult or confusing, it can be the canary in the coal mine signaling that an elderly person is developing dementia.

Financial problems will soon follow once people with cognitive impairment start miscalculating and missing payments, forgetting and misplacing accounts, or falling victim to fraud.

But some good news has come out of a new study of Medicare recipients: the vast majority of the 5.5 million people over 65 with established dementia – usually, though not, always Alzheimer’s disease – are receiving help from family and other caregivers with balancing their checkbooks, depositing and withdrawing money, and conducting transactions.

Even better, they are actually benefitting from it. The seniors who receive assistance are more likely to be able to pay for their essential expenses like rent, food, prescriptions and utilities, according to researchers at the Center for Retirement Research, which also sponsors this blog.

There was bad news in the report too: a nontrivial share of the older Americans with established dementia – that is, dementia for at least three years – aren’t getting any help. This problem is expected to grow in future generations. One major reason is longer and longer life spans, which exponentially increase the risk of dementia. Nearly one in three people over 85 are in some stage of dementia. Compounding this is the fact that today’s older workers have fewer children and have divorced more, which shrank the pool of who would be willing to pitch in and help them.

Having a caregiver helping with money management wouldn’t necessarily make an elderly person better off financially. Suppose a daughter is unfamiliar with her mother’s finances or a husband isn’t good at managing his own money. In extreme cases, caregivers sometimes steal from the trusting seniors in their care. Even so, it turns out that it’s better to receive help than not. …Learn More

aging parent

An Ever-Expanding Sandwich Generation

Two new “sandwich generations” are getting into the thick of things: Generation X and Millennials.

Baby boomers first latched onto this label as they juggled caring for their parents and children simultaneously.  With lifespans continuing to increase, the squeeze from parental caregiving is tightening among Gen-X and Millennials.

As baby boomers and their parents get older, all three generations are feeling the financial strain of this familial obligation, which people take on either because “it is what family has always done” or “there was no other option,” according to caregivers’ responses to Northwestern Mutual’s new annual survey of adults between the ages of 18 and 64.

A separate 2017 report, by the Center for Retirement Research, estimated that one in five people will, at some point in their lives, care for their elderly or ailing parents. They spend an average 77 hours per month assisting elderly parents with everything from simple activities like getting out of bed and taking medications to frequently driving them to doctors’ offices.

The largest group in Northwestern’s survey are adult children caring for parents. The other caregivers identified in the survey care for adults under 65 or children who are either ill or have special needs or disabilities – there were no questions in the survey about routine childrearing.

The major findings indicate that parental care has significant financial and lifestyle implications, which disproportionately affect women: …Learn More

Rewriting Retirement Header Illustration

Boomers Do Retirement their Way

In the two years since starting a series of blogs, “Boomers: Rewriting Retirement,” I’ve profiled five willing baby boomers in various phases of retirement as they grapple with a variety of issues.

The individual profiles are again posted here, in the event one of them might be helpful to a reader who missed it the first time.

And we’re always looking for more guinea pigs, if anyone has an interesting story to tell!

Click on the links at the end of each headline:

  • “A Familiar Dilemma: to Work or Retire.”
  • “Finally retired. Now What?”
  • “Caring for her elderly parents 24/7.”
  • A Californian’s Retirement is Part-time.”
  • “The Ultimate in Travel: Retiring Abroad.”

Learn More

human arrow

Creating Paths to Latino-owned Business

Rank-and-file workers’ wages have barely gone up since the 2008-09 recession, despite a U.S. job market firing on all cylinders for several years.

Latinos struggle more than most. Take restaurant workers. They are overrepresented in an industry that expanded rapidly post-recession, putting hundreds of thousands of cooks, waiters, and busboys to work. But “those are some of the worst jobs” says Carmen Rojas, who heads The Workers Lab in Oakland, which supports small entrepreneurs.

Food-service and other low-paying jobs not only lack benefits and security but typically don’t invest heavily in training and don’t provide upward mobility, “proving what it means to debase the promise of work away from opportunity and toward survival,” said Marie Mora of the University of Texas in the Rio Grande Valley.

She and Rojas were panelists at a recent Aspen Institute event to discuss Latino economic challenges and solutions. The focus was on new avenues to increasing their presence among small businesses, which are a good fit for their particular interests, needs, and culture.

There are, of course, extraordinary models of success in the Latino community. Maria Rios emigrated from El Salvador as a teenager and has the gumption of a character in a 19th century Horatio Alger novel. In the early years of her multi-million-dollar recycling and waste company in Houston, she drummed up commercial clients by showing up and pointing out their overflowing dumpsters.  “When I see trash, I see opportunity!” she says on Nation Waste Inc.’s website.

“I feel that if I did it, anybody can do it,” she told the other panelists and audience. …Learn More

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