Produce shelves at grocery store

Lift SNAP’s Asset Test and People Save

When a low-wage worker has a dental emergency or the car breaks down, it can set off a chain reaction of financial problems. Losing a job due to that car problem is a catastrophe.  It’s not an exaggeration to say that having just a little money in a bank account is a lifesaver.

But low-income Americans are discouraged from saving due to the asset limits in joint federal-state assistance programs such as food stamps, Medicaid, and Temporary Assistance to Needy Families. These asset limits create a Catch-22: if the recipient builds up the savings crucial to their financial well-being, they lose their assistance, which is also critical to their well-being.

This illustrates just how difficult it is to design programs to help the poor and low-wage workers.  Without asset limits, a relatively well-off person who earns very little would qualify for food stamps.  But using asset limits to restrict who qualifies can harm our most financially fragile populations.

SNAP logoNew research looking into the impact of asset limits among recipients under the Supplemental Nutrition Assistance Program (SNAP) – once known as food stamps – confirms that asset limits inhibit saving.

“Having a policy where people don’t save or draw down their assets before they apply for benefits can really harm long-term economic success for these families,” said Caroline Ratcliffe, a senior fellow at the Urban Institute who conducted the study. …Learn More

Diamond ring

When a Diamond Isn’t Forever

While student loans are a painful, long-term expense, they are also an investment in one’s career and earnings prospects. But what does lavish spending on a wedding provide?

It can lead to divorce, according to a study by Emory University researchers Andrew Francis and Hugo Mialon. More interesting, they suggest that the stress that comes with wedding debt might be the underlying cause for the unhappy outcomes.

Weddings, which peak in early summer and surge again in the fall, have become more elaborate over the years. Engagement rings usually have diamonds – that wasn’t always the case. The average expense for a wedding and reception in this country is now $30,000.

But the researchers found that women who spend more than $20,000 on a wedding were nearly four times more likely to become divorced than women who spend under $10,000. In the case of men, buying a more expensive engagement ring was linked to a higher divorce rate.

They based these findings on data from their own random survey asking 3,151 adults about their wedding costs and current marital status.They controlled for education, household income, whether the person was employed and other things that play a role in whether a couple stays married.

Stress may be the undercurrent that explains their findings: couples who spend more money are also more likely to report being “stressed about wedding-related debt,” the researchers found.

The links between marriage and money are a perennial topic in academic literature. Other studies have shown that divorce creates financial problems, particularly for people closing in on retirement. It just might be that excessive spending on a wedding – usually a couple’s first major expenditure – gets a marriage off to a bad start.Learn More

Illustration of rocket launching

Parents’ Dilemma: Kids Who Don’t Launch

Karen James and John Kingrey remember very clearly breaking the news to their Millennial son that they would no longer support him.

After struggling through his first year in college, Michael was sitting on his parents’ bed tossing around whether or not he should join the U.S. Navy. “I said, ‘You don’t have to join the Navy, but you’re not living here. And winter’s coming,’ ” Karen James recalled.

And then she thought, but did not say, what many parents before her have thought about the offspring they love:  “You’re not living here doing nothing.”

Easing their son out the door in the run-up to the couple’s 2014 retirement “was one of the toughest things we ever did,” John Kingrey said. Their son’s story had a happy ending.

But more parents than ever are being torn between supporting adult children who haven’t yet launched and getting ready for their own fast-approaching retirement. Record numbers of 18- to 34-year-olds are living with their parents, a result of later marriages and a tough job market for that age group.

I am not a parent and am unqualified to write this blog from their perspective. But as a cold financial calculation, supporting a 20-something is problematic for older parents at a time that nearly half of U.S. baby boomers are at risk that their standard of living will decline after they retire.

With little time left to prepare, the most effective thing people in their 50s or early 60s can do is plan on delaying retirement, which sharply increases the size of a monthly Social Security check. But paying down a mortgage faster or putting more money into a 401(k) retirement plan is also a good idea.

“You shouldn’t be helping them if you want to put more money into your retirement,” says Minnesota financial planner Mark Zoril. But he’s quick to add that getting tough on offspring isn’t easy for parents – or their advisers. “It’s a pretty difficult [conversation] to have with your client.” …
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Photo of mother and daughter

Women Often Quit Work to Help Parents

Here’s just some of the evidence of the enormity of the challenge of caring for our elderly parents:

  • One in three baby boomer women cares for an elderly parent.
  • Even if they work, these caregivers devote anywhere from eight to 30 hours per week to that parent.
  • The estimated value of informal senior care provided by family members approaches $500 billion in this country – or double the amount spent on formal, paid care.

Caring for an elderly parent is usually done with love or out of a feeling of familial obligation. But there are real costs to taking on this responsibility, which most often lands squarely on a daughter’s shoulders. These costs could come in the form of lost wages and employer health insurance or in sacrifices of future pay raises or promotions. It’s also more difficult for older women to find a new job if they drop out of the labor force to help an ailing parent.

According to preliminary findings in a new study that used 20 years of data, taking care of a parent does significantly reduce the chances that women in their early 50s to early 60s are working.  Interestingly, the number of hours devoted to caring for a family member do not seem to affect women’s decisions about whether or not to work (though the researchers plan to revisit this finding).

But Sean Fahle of the State University of New York in Buffalo and Kathleen McGarry of UCLA said caregivers “may simply leave a job in order to provide care.”  Their paper was part of a series presented at the National Bureau of Economic Research this summer. …
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Photo of an older couple

Wives Pay Price to Retire with Husbands

Wives like to retire around the same time as their older husbands – so they can play. But what a difference the baby boom generation has made.

For boomer wives, as members of the first generation of women to enter the U.S. labor force en masse, there can be a steep cost to leaving the labor force at a relatively young age to retire with an older husband. New research by Nicole Maestas of the Harvard Medical School bears out this logic.

It’s obvious that working wives can increase their earnings from work by resisting the urge to retire at a relatively young age. And married women generally earn much more, relative to their husbands, than in the past.

But, more often than their mothers and grandmothers, boomer wives can increase their own Social Security benefits by continuing to work.

To understand how this works, compare boomers with their grandmothers. Their grandmothers were probably housewives for most of their lives and worked sporadically or part-time. As a result, their husbands’ earnings determined the size of the spousal retirement benefits they received from Social Security.

The situation is very different for boomer wives, who often have worked enough to earn their own benefits and wouldn’t qualify for a spousal benefit. Social Security calculates their benefits, as they do for all workers, using the average of her highest 35 years of earnings. But here’s the rub: many boomer mothers still haven’t accumulated 35 years of substantial earnings, because they took some time off or worked part-time to raise children. …
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Illustration of different family types

Finances Change with US Family Structure

  • One out of every 10 Generation X mothers is single – many more than in the generation born during World War II.
  • Nearly two-thirds of single older people are the survivors of divorce – far more than in the past.
  • About one in three couples has moved away from their hometowns and from both of their mothers – blame this geographic mobility on the growing share of U.S. workers who are college educated.

These are just a few of the dramatic changes in U.S. family structure and behavior that have developed over the past half century.  These changes have had enormous financial consequences for everyone, especially women.

Squared Away has documented some of the financial impacts in previous blogs. A Lucky 7 such blogs, most of them based on studies by the Retirement Research Consortium, are summarized below (with links to each one):

  • Women are having babies five years later, on average, increasing their earnings substantially over their lifetimes.
  • About half of Americans don’t live near their mothers, creating new pressures for caregivers. This video explains who they are.
  • In the aftermath of divorce, many women figured out how to rebound in the labor force and earn more.
  • But when it comes to retirement preparedness, a doubling in the divorce rate since 1990 has put more baby boomers at a financial disadvantage.
  • Stepchildren, divorced parents, blended families – the structure of the parent-child relationship has grown more complex, and so have the parents’ wills. …

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Seniors Find an Affordable Haven

Mary Roby

The stress of living with her son and daughter-in-law made Mary Roby’s blood sugar spike. But when she began her search for an independent senior housing community, affordable and nice never seemed to come in the same package.

Roby, who is 80, said she looked around quite a bit. A one-room place in the Boston area for $4,500 a month had no senior services, a limited kitchen, and was housed in a poorly maintained building. She also knew, through her son’s in-laws, about a high-end assisted living community with extensive services, but it charged more than $6,000.

Then she found Shillman House, which was both affordable and nice. “I love it here,” Roby said about the independent senior housing community in Framingham, Mass. …Learn More

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