Arm wrestling

Men Save More – Women Save Better

This will not surprise you: men have more money saved for retirement than women.

Savings rates chartMen averaged $123,262 in their defined contribution plans, compared with $79,572 for women, according to a new report by Vanguard based on its 2014 recordkeeping data.

But these figures hide a larger truth: women are actually better at saving for retirement.

“Overall, women are better at this but men earn more money so they have higher wealth accumulation,” says Vanguard researcher Jean Young, author of the new report, “Women versus Men in DC Plans.”

Young’s research found that women are 14 percent more likely to enroll in a voluntary workplace retirement savings plan. Women save 7 percent of pay, compared with 6.8 percent for men, controlling for wages, job tenure, and plan design. They also save at higher rates than men at every income level.

Her findings also refute the old wive’s tale that women don’t like risky investing. …Learn More

Older worker at meeting

Meaningful Work Improves Health

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

5 Financial Goals for Teens, Young Adults

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):

  1. Follow a budget.
  2. Have an emergency savings account.
  3. Strive to become debt-free. Pay credit cards in full.
  4. Negotiate your salary.
  5. Save for retirement to secure employer’s 401(k) match. …

Learn More

Fewer Boomers Get Social Security at 62

Grave that says "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

Piggy bank in vice

Health Insurance Costs Squeeze 401ks?

U.S. workers’ wages, adjusted for inflation, are stagnating, but their share of health care costs keeps going up.

“Something has got to give, right? That something could very well be the 401(k) or 403(b) plan,” said Mark Zoril, a personal financial planner and benefits adviser to small companies.

Six in 10 workers agreed: the rising cost of their health insurance “directly affects” how much they set aside in their retirement savings plan at work, according to a new survey gauging the “financial stress” of more than 2,000 full-time employees with health coverage. The random survey was conducted by LIMRA, a financial services research organization.

Despite a slowdown in medical inflation, employees are paying a growing share of the tab for their health care. Average total premiums for family coverage under U.S. employer health plans rose 61 percent between 2005 and 2015, for example, but the employee’s share of the premium increased 83 percent to $4,995, according to the Kaiser Family Foundation’s annual report. Two out of three individual workers today pay deductibles of at least $1,000, up from 16 percent a decade ago.

Anita Potter, LIMRA’s senior vice president of research, said workplace benefits face increasing competition for workers’ limited resources. …Learn More

Polishing the EITC on its 40th Birthday

The Earned Income Tax Credit is a critical lifeline that lifts some 9 million low-income Americans out of poverty – half of them children.

But the federal tax refund program isn’t perfect. The large refunds come just once a year, in the spring tax filing season. A cash crunch is a year-round problem for working families with low or erratic incomes who can’t always pay their bills.

A new study by the Center for Economic Progress identified additional financial benefits from the Earned Income Tax Credit (EITC) when participants in a Chicago pilot project received smaller, regular EITC payments throughout the year.

For example, workers who received the quarterly payments – in May, August, October, and December – were much less likely to have high-rate payday loans than people whose EITCs came all at once, helping program participants to avoid expensive late fees on payday loans. There was also evidence that workers in the EITC pilot accumulated less total debt, though the sample size was small.

Shirley Floyd

The participants surveyed overwhelmingly said they preferred the periodic payments, and they reported lower stress levels than the control group. Shirley Floyd explained why in a previous blog post:

When Floyd receives a one-time tax refund in February, “the entire thing is gone” by March. But each payment she received in the pilot program, she said, allowed her “to do what you need to do.”

The program was run by the Center for Economic Progress, which provides financial services to low-income families. David Marzahl, president, was disappointed that about one-third dropped out of the research pilot, leaving only 217 participants who saw it through to the end. Nevertheless, he feels the pilot confirmed the concept’s potential to help low-income working persons with children and would like to see it expanded into a nationwide program, administered by the IRS. …Learn More

Smooth sailing: woman on a yacht

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

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