October 29, 2015
Fewer Boomers Get Social Security at 62
The best way for most individuals to increase their retirement income is by delaying Social Security – each year they wait significantly boosts their monthly benefit check.
It seems that baby boomers are getting the message. The share of people who claim their Social Security benefits at age 62 – as soon as they’re eligible – is falling, and falling more rapidly than previously thought.
The share of 62-year-old men who claimed immediately dropped from 56 percent in 1996 to 36 percent in 2013, according to the Center for Retirement Research, which supports this blog. For women with the same birth years, the share of 62-year-old claimers declined from 63 percent to 40 percent.
The Center also confirmed that more people are waiting to sign up for their benefits until after their full retirement age under the program, which is 66 for most baby boomers. Waiting provides at least one-third more in their monthly Social Security checks than the 62-year-old claimers receive. …Learn More
October 20, 2015
Straightest Course to Riches – Parents
Some Boston University students cruise city streets in their BMWs or Lamborghinis. Three of Donald Trump’s five children have joined the family business so far. And the financial media are full of useful advice for parents who might want to buy a house for their adult offspring.
Nature versus nurture? Not surprisingly, nurture won out when researchers applied this question to who has more influence on the wealth of young adult Swedes who were adopted as children – their biological parents (nature) or their adoptive parents (nurture).
Wealth “is not due to the fact that children from wealthier families are innately more talented,” the international team of researchers concludes. “Instead, it appears that even in a relatively egalitarian society like Sweden, wealth begets wealth.”
While this might seem obvious, there had been surprisingly little research on the topic, which is gaining prominence here as U.S. wealth inequality widens. The study used an unusual Swedish data source that allowed the researchers to compare the wealth of adopted children with the wealth of both their adoptive and biological parents. The adoptees’ average age was 44. …Learn More
September 15, 2015
401(k) Catch-up: Help for the Few
Longer lives, eroding Social Security benefits, and rising health care costs – these are just some of the reasons older workers need to save more in their 401(k)s.
To encourage them, Congress in 2001 approved a “catch-up contribution” for workers over age 50. The size of this additional tax-deductible contribution started at $1,000 in 2002 and jumped to $4,000 by 2005 and $5,000 in 2006. (After 2006, it continued to increase, though only at the rate of inflation, and is currently $6,000.)
But the catch-up contribution has not turned into a broad-based solution to Americans’ retirement woes that some proponents had claimed at its passage. According to researchers at the Center for Retirement Research (which supports this blog), it helps only a select group of older workers: those who were already contributing at or near the tax-deductible maximum allowed on their regular 401(k) contributions. It’s a group with higher-than-average incomes and wealth than the typical older worker. …Learn More
September 10, 2015
Home Buying Not Tied to Student Debt
A popular assertion these days is that young adults paying off student loans can’t afford to buy a house. This might be the financial equivalent of Chicken Little.
Contrary to concerns that the sky is falling – or, rather, the first-time homebuyer market is falling due to student debt – a new study finds very little evidence to support this view.
The researchers tracked the home-buying behavior of more than 5,000 college-going young adults for a full decade through the National Longitudinal Survey of Youth. They confined the analysis to people who attended college – graduates and non-graduates alike – in contrast to previous research that compared the behavior of all young adults and found that borrowing got in the way of homeownership.
The new study actually found they were slightly more likely than non-borrowers to purchase a house. But this could be due to the fact that the borrowers tended to be the type of people who persist and complete their degrees, attend more expensive schools, and possess other socioeconomic advantages. This comparison of borrowers and non-borrowers still didn’t settle the question of whether the probability of owning a home actually decreases as the level of student debt rises.
When the researchers further narrowed the analysis only to individuals who held student loans, they found no relationship between the amount of money borrowed and the probability of homeownership. “If you have $30,000 in debt you’re no less likely to buy a home than if you have $3,000 in debt,” said one of researchers, Jason Houle, an assistant professor of sociology at Dartmouth College.
The findings, Houle said, “cast doubt on this idea that student loan debt is dragging down the housing market.” …Learn More
August 6, 2015
Retirement Researchers Convene Today
Why do older workers retire before they’d planned? How has the Affordable Care Act affected retirees in particular? And what’s known about U.S. immigrants’ wealth levels and Social Security contributions?
Researchers from around the country will present their findings on these and a range of other retirement topics during the 17th annual meeting of the Retirement Research Consortium, starting today at the National Press Club in Washington, D.C.
For the meeting agenda, click here.
The Consortium’s members are the Center for Retirement Research at Boston College (which supports this blog), the NBER Retirement Research Center, and the University of Michigan Retirement Research Center. The studies being presented are all funded by the U.S. Social Security Administration through the Consortium’s members.Learn More
July 16, 2015
Misconceptions About Social Security
It is the most important source of retirement income for most workers. Yet too many older Americans lack a basic understanding of certain aspects of Social Security benefits.
In fairness, many people got some key questions right in a survey that quizzed them about the program’s rules and incentives. But a significant minority, and sometimes a majority, revealed a poor understanding of several major features of the program. As the researchers note, misunderstanding Social Security benefits could lead to poor financial decisions about retirement.
They analyzed responses by more than 2,300 people – all between ages 50 and 70 – to a nationally representative survey administered online in 2008. The survey, which took about half an hour, started with basic demographic questions before moving to various questions about components of the Social Security program.
Brief explanations of some program features appear below, followed by the percentage of survey respondents who provided incorrect answers, according to the researcher’s analysis of the results:
- The U.S. Social Security Administration calculates pensions using a formula based on the average of a worker’s 35 highest years of earnings. This information is important, because each additional year of work could substitute current earnings for an early year of low earnings – or even zero earnings prior to the worker’s entry into the labor force.
68 percent were incorrect in their responses to a multiple choice question that included the correct calculation as one of four options.
- A married person who has never worked is eligible for a pension equal to half of her spouse’s “full retirement age” benefit if the non-working spouse claims at her own full retirement age, and a reduced benefit if she claims earlier. …
June 9, 2015
Student Debt Burdens Non-Grads More
The share of college students who must borrow to pay for their education has surged over the past decade. Average borrowing per student is also much higher than it was in 2004, though there’s evidence it might now be in decline.
Only now is serious research trickling in about the personal financial fallout from the nation’s $1 trillion-plus in student debt outstanding. But one new study reaches an interesting conclusion about the burden of student debt: it “is much greater among non-completers than among those who obtain a college degree.” One reason is that they can’t expect to earn the higher income that a degree confers on a graduate.
The study – part of an edited volume published by the W.E. Upjohn Institute for Employment Research, “Student Loans and the Dynamics of Debt” – gauged the debt’s impact on various measures of personal financial stability, including the likelihoods of filing for bankruptcy protection and buying a house.
The researchers first analyzed a broad sample of U.S. households over age 29, controlling for income and other demographic characteristics. They found some negative impact as student debt levels rise, but this effect was “not particularly strong.”
However, there was a large impact on the financial stability of a subgroup of borrowers who had not completed their degrees. The personal finances of these “non-completers,” as the study called them, are “particularly susceptible to being burdened by student debt.”…Learn More