Today’s Savings Rate Half of 1970s Rate

In the 1970s, Americans saved about 12 percent of their after-tax income.  Today, that’s plummeted to less than 6 percent.

Yet saving is in everyone’s interest.

A new video produced by The Atlantic magazine, “Why Americans Are So Bad at Saving Money,” blames our savings apathy on three factors: math (the lower one’s income, the less people save); psychology (spending money is more fun); and envy (keeping up with the Joneses).

The video doesn’t fully explain why this is an American problem.  But it’s accessible and thought-provoking. For example, the narrator notes that much of the national conversation is about wealth – taxing it, measuring its disparities, winning it in the stock market.

We don’t expend a lot of energy talking about what builds wealth – saving – or how to encourage it.Learn More

Sorting Out Medicare Enrollment Dates

Failing to meet one of Medicare’s many enrollment deadlines can be costly to new or imminent 65 year olds.

The Journal of Financial Planning helps aging baby boomers start out on the right foot with a clear run-down of at least five different enrollment windows for various parts of Medicare.

Getting these dates right is “very tricky,” and people often make mistakes that lead to higher out-of-pocket medical costs and gaps in their coverage, said Katy Votava, president of the consulting firm, Goodcare.com, and author of “Making the Most of Medicare: A Guide for Baby Boomers.”

“They often receive well-meaning but mistaken advice, and then they’re really in a pickle,” she said. “They aren’t eligible to apply when they want to or face penalties down the road. Coverage gaps can be a tremendous financial burden.”

Medicare enrollment chart

The image displayed was extracted from the Journal’s enrollment timeline, and the entire graphic and a Journal article by Votava can be viewed here.   The graphic is worth 1,000 words but here are some important don’t-miss dates: …Learn More

Stark Differences in U.S. Cost of Living

The Squared Away Blog’s focus is on how informed financial decisions can improve one’s personal finances or retirement prospects.  But much that impacts our standard of living is not in our control.

One example is the cost of consumer goods, healthcare, and renting or buying a home, which vary widely from one city or region to another.  To highlight this variation, the Tax Foundation in Washington, D.C., used recent data from the U.S. Bureau of Economic Analysis to create the cool interactive map below, which shows locations with the highest cost of living (bright orange) and the lowest (bright turquoise).

Running a cursor over the map displays metropolitan and rural areas and their comparative living costs, measured in terms of what $100 will purchase.  In the Manhattan-New Jersey area, for example, $100 buys the equivalent of about $82 worth of goods, healthcare and housing, while it will buy $119 worth of the same stuff in central Kansas.


Source: The Tax Foundation.

The least expensive city is Danville, Illinois, where $100 buys $126 in consumer goods, followed by Jefferson City, Missouri; Jackson, Tenn.; Jonesboro, Arkansas; and Rome, Georgia. The most expensive metropolitan areas are the usual suspects, in this order: Honolulu, Manhattan, Silicon Valley, the Bridgeport-Stamford, Connecticut, area outside Manhattan, and Santa Cruz, California, which is south of Silicon Valley.[A second map compares states.] …Learn More

A Financial Plan for Alzheimer’s

First, the facts from the Alzheimer’s Association. At age 65, one in nine individuals has Alzheimer’s disease.  At 85, the risk exceeds one in three.  Its victims are more often women.

In the Ted video above, the global health consultant and writer Alanna Shaikh disclosed that her professor-father had Alzheimer’s. Since it can be hereditary, she’s preparing to possibly share his fate, by keeping her mind active and by learning to do things with her hands, such as knitting.

Shaikh doesn’t discuss financial preparations. But experts have some suggestions, chief among them getting one’s will, health care directive, and perhaps a power of attorney in order.  Paramount in this process is finding trustworthy people to handle your affairs. You can also arrange for a lawyer or outside mediator if family members disagree about your care.

The Alzheimer’s Association recommends putting a financial plan in place as soon as there is a diagnosis. “Financial planning often gets pushed aside because of the stress and fear the topic evokes,” the association said in this new booklet. “The sooner planning begins, the more the person with dementia may be able to participate in decision making.” …Learn More

Drawing of houses

Wanna Be a Homeowner? Take a Class

In case anyone has forgotten, buying a home can be damaging to your financial health.

But prospective first-time homeowners may want to take advantage of still-low mortgage interest rates and the recent, slower increases in house prices.  Homebuyer classes can provide an excellent crash course in the mysteries of mortgages, maintenance, taxes, and risks – information that can help preclude the kind of mistakes made during the subprime mortgage crisis.

There’s a tool on the website of the federal government’s Consumer Financial Protection Bureau (CFPB) to search for first-time homebuyer classes and housing counselors. Enter your desired zip code here to find classes and counselors nearby.

The agencies listed appear to be mostly non-profits and were approved by the U.S. Department of Housing and Urban Development.  It’s wise to do some research on a specific agency to find out where the non-profit’s underlying funding comes from and what services it offers.

So, is now a good time to buy a house?  Conventional wisdom says this depends on how long the buyer intends to live in the house – the longer the better to cover the high upfront costs of buying and moving and to ride out price fluctuations in the housing market. …Learn More

Retirees Live on Less

Many recent U.S. retirees in a new survey receive less than two-thirds of what they earned during their working years, and they’ve made significant adjustments along the way.

That finding for baby boomers who’ve retired in the past five years is contained in a larger national survey conducted by T. Rowe Price, the Baltimore mutual fund company. The full survey covered some 2,500 working and retired individuals, age 50 and over. All of them have at least some savings in a 401(k) account.

The majority of the recent retirees reported their annual income is between $25,000 and $100,000. Social Security is the largest single source of that income, and smaller but equal shares come from defined benefit pensions and from retirement savings plans.

Many of the retirees report their households are managing to get by on less than the 70 percent to 80 percent of their pre-retirement income that most financial planners and retirement experts estimate they need.  And four out of 10 are living on 60 percent or less.

The retirees surveyed said they’ve had to lower their living standards, and four out of 10 described their situation as adjusting “a great deal.” …Learn More

South Has Highest Debt Collection Rate

It’s old news that working people in the South earn less than residents of thriving communities in California, the Northeast, the Upper Midwest and elsewhere.

What’s troubling is how many Southerners apparently can’t pay their bills.

West Virginia, North Carolina, Alabama, Kentucky, Texas – they’re among 13 states where more than four in 10 state residents’ credit card or other debts have been sent to collection agencies, according to a July report by the Urban Institute.

The report, based on data from the credit reporting firm TransUnion, provides insight into how many Americans continue to experience financial stress even though the recession is technically over.   The Urban Institute’s analysis doesn’t focus on mortgage debt, since delinquent home loans generally go into foreclosure and rarely to collections. Yet many of the Southern states were also hit harder by the housing market collapse than the nation as a whole. …Learn More

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