The best place to invest, the coolest cash back rewards, the smartest or cheapest or lowest-rate mortgage – infinite spin ushers out of the financial world every day, and it’s all aimed at you.
That’s among the reasons the Center for Retirement Research at Boston College started this blog in May 2011. The blog’s focus is not financial products but financial behavior: what people do, why we do it, and how we can do it better. At its two-year anniversary, the Squared Away Blog hopes that it has become a reliable source of information for a growing number of readers of all ages who struggle every day to save and invest for their own or their children’s futures.
It’s important to explain to readers what “reliable” means for a blog housed at a university think tank. First, it’s about credibility. We are not selling anything. The blog is supported by a grant from the U.S. Social Security Administration, which has an interest in making sure Americans get good financial information.
Second, Squared Away routinely covers the latest research – our own or others – about financial behavior, or we use it to inform other articles you’ll read here. That’s because empirical research, which uses statistical analysis to figure out what’s really going on, is critical to understanding and tackling our personal finance challenges. …Learn More
In a webinar next Thursday, an official from the Social Security Administration will explain the fundamentals of calculating and claiming benefits.
Social Security represents the largest single financial resource for most baby boomers, so deciding when to file for benefits is their single biggest retirement decision.
The value today of that future stream of monthly checks – $287,200 for the typical household aged 55-64 – far exceeds the value of home equity or 401(k)s for most people, according to 2010 data from the Federal Reserve Board. And it often exceeds the value of their traditional defined benefit pension plan – if they even have one. The lower one’s income, the more Social Security matters too.
The webinar was organized by the National Retirement Planning Coalition for financial planners, who are not always familiar with all the rules for the program. But anyone can participate, according to the coalition leader, the Insured Retirement Institute. (Full disclosure: the Center for Retirement Research, which hosts this blog, is a coalition member). Space is limited and going fast for the webinar, which will also be available online a few days after the webinar on this website.
The Ontario Teachers’ Pension Plan has produced a terrific video that spells out how pension systems got into the trouble they’re in and proposes the outlines of what’s required to repair them.
The strength of this video is its broad sweep and perspective. It is worth watching for anyone interested in their children’s and grandchildren’s future financial security – as well as their own.
“Pension Plan Evolution” explains that U.S., Canadian, and other western retirement systems were built on the faulty assumptions that the future would keep producing enough younger workers to support retirees, 8 percent annual returns on investments, and economic growth that matched what the baby boom generation enjoyed in its prime.
Watch the entire video below. But if you only have time for the 1.5-minute trailer, click here.
To fix these systems’ finances will require shared sacrifices, the video concludes. The young should not pay for all of the mistakes of earlier generations who have resisted reforms to current pension systems – in other words, fairness matters. Solutions also require creativity in the design of systems that are able to adapt to future changes in the economy or circumstances.
At tax time, many Americans think, often fleetingly, about spending less and socking away more for retirement.
Until April 15, the IRS permits people who do not have a pension plan at work to deduct up to $6,000 for money placed in an IRA; taxpayers who do have an employer pension can also receive the IRA deduction if their earnings fall under the IRS’ income limits.
The tough question that trips people up is: How much will I need?
The easy way to think about this is in terms of the income necessary to maintain your current standard of living after the paychecks stop coming in. Click here for a tool that estimates both how much you’ll need and how much you’ll have if you continue on your current path.
The calculator, created by the Center for Retirement Research, which supports this blog, was designed for people over 50 and on the retirement runway. Younger people can also get a ballpark idea of how they’re doing using the calculator. Or click here for the percent of your wages to put into a tax-deferred retirement fund.
This is a beta website with a few kinks, and it works smoothly only on the Safari and Google Chrome browsers. But the results are sound and backed by academic research. Here’s how to read the results. …Learn More
“The average person has no idea” how much fees and expenses sap from their investments, said Ted Leber, a retiree who was a staffer with the Chief of Naval Operations and a financial adviser to service members.
The career Navy man said he was a failure after retiring to become an adviser, because he kept steering clients to low-fee mutual funds that replicate index returns, such as the S&P 500 or NASDAQ tech-stocks. The index funds helped his clients but not his firm’s profits.
Squared Away interviewed Leber after he emailed a nifty fee calculator, which was put online as a public service by AHC Advisors Inc.’s president, Craig Larsen, in St. Charles, Illinois.
Larsen and Leber join a growing number of academics, financial planners, and investors balking at the high fees middle-income investors pay for mutual funds that are actively managed by stock pickers. Fees are “costly for the average employee” and “can take a substantial toll on their retirement,” according to a study by the Center for Retirement Research at Boston College, which supports this blog.
Test the employee calculator yourself. First, look at the conservative assumptions Squared Away used to calculate fees on three portfolios, as shown in the above chart…Learn More
Leave it to high school kids to inject some much-needed perspective into our economic and policy debates.
In Tuesday’s election, the presidential election may come down to a few swing states. But the next president, whoever he is, faces tough challenges – topped by the massive destruction of roads and transit systems wreaked by Hurricane Sandy, a tepid economy, and the “fiscal cliff” that a divided Congress enacted to automatically cut the $1 trillion budget deficit.
This video, by students at the East Coweta High School in Sharpsburg, Georgia, was among the winners of a contest sponsored by the Council for Economic Education, a national financial literacy organization that also has state chapters.
Click here for winning videos submitted by high schools in New Jersey and Maryland.Learn More