This was going to be a quick blog post about the new student loan repayment program rolled out by the federal government in January. But the differences between it and the seven plans that preceded it were too confusing to figure out on a tight deadline.
This isn’t just the view of one cranky blog writer. Craig Lemoine, a financial planning professor and student loan expert at the American College of Financial Services, which trains financial planners, also admits to being confused about the repayment options, which keep increasing in number.
If Lemoine were a student, he asked, “How on earth would I know which one to pick?”
His confusion pales in comparison with that of a lovely and loved young member of my family. She’s vague on the details of how her own student loans work. Here’s a rough approximation of our recent telephone conversation: …Learn More
Two out of three working Americans grade their retirement readiness at no better than a “C.”
So how about using the Social Security Statement that lands in their mailboxes, grabbing their attention, to spur them to action?
The statement is already valued by millions of Americans. A survey funded by the U.S. Social Security Administration (SSA) found that people who received statements were “dramatically” more knowledgeable about their basic pension benefits than people who had already retired when SSA started mailing them out in the mid-1990s.
Social Security is the nation’s most important source of retirement income, and the information in the statements is essential to most workers’ retirement planning. Mailed out before every fifth birthday – 25, 30, 35, etc. – and annually at age 60, the statement provides estimates of each worker’s future benefits at three different claiming ages: 62, when they have access to their smallest monthly benefit; the “full retirement age”; and 70, when workers receive their highest monthly benefit. It clearly lays out how much workers can increase their monthly retirement income by delaying when they start collecting their benefits. …Learn More
Sitting at her computer in the oversized studio apartment she shares with her boyfriend in Portland, Oregon, Melanie Lockert received confirmation on Dec. 10 that her ordeal was over: $81,000 in college and graduate school loans were finally paid off.
She had two reactions. The first was an existential panic. “Who am I without debt?” the 31-year-old asked herself. Then a grin spread across her face. “I started dancing and screaming in my apartment. It was such an amazing moment, and I felt incredibly happy to be done with this,” she said.
Recent college graduates might despair that their day of liberation is far away or might never come. But Lockert’s single-minded focus on demolishing her debt, particularly by accelerating her payments recently, provides a roadmap – and some hard lessons – for those facing a seemingly endless string of monthly payments.
Lockert’s path followed a zigzag pattern, which she documented in a Dear Debt blog that she started writing in 2013. Being debt-free was not her first priority when she packed up her undergraduate loans and moved from California to New York in 2010 to attend graduate school – a decision that would more than triple her total student debt. Paying off her loans required a lot of patience and sacrifice, some risk-taking, and brutal self-honesty. She concluded that she couldn’t accomplish her financial goal if she pursued a career in the field she had studied in college. … Learn More
Over the long Christmas holiday, I got a sneak preview of what retirement could be like. Frankly, it was a little boring.
I fully appreciate that most workers don’t have the perk provided by my employer, Boston College, which gives us generous time off between Christmas and New Year’s. By cashing in a few unused vacation days prior to Christmas, I was able to string together 16 glorious days off.
It felt like a lifetime.
After cleaning off my desk, running long-neglected errands, reading a book about the sinking of the Lusitania, wrapping gifts, stocking the pantry, going to a holiday party, exercising at the gym, seeing most of the 2015 Oscar contenders at local cinemas, and getting together with friends, I still struggled to fill my days. It’s even more challenging when the winter cold descends.
I’m developing a better understanding of why some people continue working well into their 60s, even 70s. Research covered in our prior blog posts shows that older workers are more likely to delay their retirement if they have more education. That’s because their jobs are often interesting. I’m a good example – blogging usually doesn’t feel like work. This is much different than trying to continue in increasingly difficult physical work, such as waitressing or working on an assembly line.
At age 58, my growing anxiety about retirement is in stark contrast to my husband’s anticipation that his rapidly approaching retirement – he’s 62 – will be nirvana. After three decades pouring his heart and soul into teaching high school biology in inner-city Boston, he relishes the prospect of a stress-free retirement collecting his pension. I’ve encouraged him to think about how he will be spending his winter days in retirement when activity becomes more important than the relaxation he craves in his time off now. …Learn More
Financial planner Diahann Lassus views as misguided the “obsession” some baby boomers have with paying off their mortgage before they retire.
But Jane Rose, who has done just that with the loan on her home in Cherry Hill, New Jersey, has discovered how liberating it is. “I’m such a happy camper,” she said.
The math versus the emotion, the rational versus the irrational, head versus heart – that’s a simple way of framing a complex issue. Many boomers looking ahead to their retirement years are grappling with whether to pay off their mortgage before they retire or shovel any spare funds into their employer’s 401(k). Both arguments have merit for very different reasons.
First, the math. The alternative to paying off the mortgage – extra funds for the 401(k) – will provide more savings, more net wealth (assets minus debt), and more financial flexibility in retirement, according to many financial planners and an economist here at the Center for Retirement Research (CRR).
“There are few problems in life that aren’t mitigated by having a lot of money,” says Anthony Webb, CRR senior economist.
Indeed, directing extra contributions to a 401(k) is particularly attractive to well-heeled boomers in high tax brackets, who benefit the most from having both tax breaks: the federal mortgage interest deduction and the 401(k) tax deferral for contributions.
Other considerations, however, can tilt the balance toward paying more on the mortgage. …Learn More
Older workers with jobs that give them a high degree of control and influence or a sense of achievement and independence tend to be healthier, new research finds.
The specific benefits of these “psychosocial” aspects of work include lower blood pressure, musculoskeletal agility, better cognitive functioning and improved mental health. They’re equivalent to the health benefits associated with vigorous exercise three times a week, the study found.
Researchers long ago established a strong connection between poor health and jobs requiring strenuous physical activity in harsh conditions. This new study looks at a wide array of psychosocial job characteristics increasingly relevant in the New Economy, as well as revisiting the grueling physical characteristics prevalent in the manufacturing-driven economy of the past.
Lauren Schmitz, a postdoctoral fellow at the University of Michigan, tracked 50- to 64-year-old men working full-time over an 18-year period. The researcher used the Occupational Information Network, which gauges some 970 occupations, to identify the current physical and cognitive demands of their jobs, as well as their physical environments. Controls included factors such as the workers’ childhood health, smoking, exercise, mid-career earnings, and their parents’ socioeconomic status.
The study revealed a strong association between the men’s health and the psychosocial characteristics of their employment. Further, workers who were required to make “high-stakes decisions” had better cognitive functioning. Interestingly, only weak links were found between declining health and the environmental hazards and strenuous physical demands that the workers faced late in their careers.
“Occupations that allow men to use their strongest abilities and give them a sense of achievement, independence, variety, authority, creativity, and status are associated with improved health at older ages,” Schmitz concluded.Learn More
The above video qualifies as Personal Finance 101 – one critic dismissed it as nothing more than “common sense.” But that’s appropriate for the audience and worth sharing with teenagers and young adults in your life who are just starting on a financial path.
The speaker, Alexa von Tobel (three years before she agreed to sell her online advisory company to a major insurance company for millions of dollars) provided common sense goals for people who get their money the old-fashioned way – one paycheck at a time.
She proposed these five financial priorities (with minor alterations by Squared Away):
Follow a budget.
Have an emergency savings account.
Strive to become debt-free. Pay credit cards in full.