Clocks in sand

Parents’ Longevity Sways Plans to Retire

Penny DeFraties, a teacher, shared her reaction to a 2012 article that appeared on this blog:

The day I hit my minimum retirement age, I’m gone. I look forward to traveling, gardening, spending time with my grandkids, and volunteering at church, the American Red Cross and USO. My first husband died of a heart attack at 49-years-old, and my current husband lost his first wife to MS at 50-years-old.

The notion that life is short is a valid reason to retire – to travel or enjoy the grandchildren before it’s too late. And the academic literature clearly shows that the age at which people exit the labor force is related to how long they expect to live.

Building on this research, a new study nails down how we arrive at our personal estimates of our life expectancy and provides new insight into the critical retirement decision.

Using data for individuals between the ages of 50 and 61, economists Matt Rutledge and April Yanyuan Wu with the Center for Retirement Research (CRR) and Boston College doctoral candidate Mashfiqur Khan confirmed that individuals estimate their own life expectancy based in part on how long their parents lived. (Full disclosure: the CRR supports this blog.)

They went on to link this “subjective life expectancy” with when older workers plan to retire, as well as when they actually do retire. …Learn More

confidence

Confidence Key to Retirement Planning

Confidence can be dangerous. It has led investors into fraudulent deals and businessmen into over-borrowing.

But new research finds one circumstance in which confidence may be beneficial: retirement planning.

Saving and investing can be so overwhelming that workers, judging by the low balances in most 401(k)s, often avoid it. So Andrew Parker, a behavioral scientist in Pittsburgh for the non-profit RAND Corporation, wanted to get at the psychological factors motivating those who do dive in and plan for their future.

Parker and fellow researchers concluded that individuals’ tendency to engage in retirement planning and their self-confidence – how much they think they know – are “significantly and positively correlated with each other.” This was true even after their study accounted for how much people really did know.

“If I feel confident in my knowledge and abilities, I may be more likely to move forward” with retirement planning, Parker explained in an interview. “If I don’t, I may be more hesitant to engage in that process.” …Learn More

Shopping on an iPad

iPad Shoppers: More Likely to Buy?

A new study out of Boston College finds that e-shopping for products while grasping an iPad increases the feeling of ownership of that product – and may make you more likely to buy it.

The findings expand on a financial behavior issue explored in a popular Squared Away blog post about how the Internet has made it much easier to shop – and spend money. The new research distinguishes among the various technologies available to online shoppers and finds that the urge to buy may be even stronger when holding a touch screen device than when using a laptop or desktop computer.

The way this works is that the tactile experience of holding a product – whether taking it off the store rack or grasping the device that’s displaying it – imbues some sense of ownership, making it harder to give it up and resist buying it.

Here is an edited excerpt of an article explaining the research; the article appeared in Chronicle, a publication for Boston College faculty and staff. …Learn More

Focus of a camera lens

Investment Focus: Follow 5 Simple Rules

Vanguard Group Inc. founder John Bogle’s views about investing, not surprisingly, promote the indexed mutual funds that Vanguard offers.  But his views have solid support in the academic literature.

Here’s our translation of his five simple rules for investment success – sound advice for readers who want to work on their 401(k) portfolios:

  • Remember reversion to the mean. If a company’s stock or the overall market has had unusually strong performance, it’s unlikely to continue at that pace.
  • Forget the needle and buy the haystack. Invest in broadly diversified funds, such as index funds that track the market – not in individual company stocks or the money managers who try to find the best ones. …Learn More
New Year's Resolution: Save!

Resolve Amid the Financial Adversity

More than 60 percent of Americans who participate in their 401(k) retirement plans at work are adding more dollars to their debts than they’re socking away in those plans, according to HelloWallet’s analysis of recent federal data.

This shocking statistic suggests the need for some serious financial planning. Yet the vast majority of people in a recent survey said making a financial plan would not be among their 2014 resolutions.

Why not? Many said they “don’t make enough money to worry about” a financial plan, according to Allianz Life Insurance Company, which conducts the survey.

Okay. But if you feel unable or unwilling to write up a full-blown plan, perhaps you’ll consider one small step: …Learn More

Graphic: Top 10

Readers’ Favorite Stories in 2013

The blog posts that attracted the most readers this year provide a window into what’s on their minds. The 2013 articles shown below were the most popular, based on unique page views by Squared Away readers.

We’ll return Jan. 2 with more coverage of financial behavior. Please click here to begin receiving our once-per-week alerts with the week’s headlines – and happy holidays!

To find each article, links are provided at the end of the headlines:

An historical perspective on the U.S. money culture:

Oldest Americans are Lucky Generation

More Carrying Debt into Retirement

The financial challenges facing our youngest workers:

Retirement Tougher for Boomer Children

Student Loans = No House, No New Car

Help with your imminent retirement:

Reverse Mortgages Get No RespectLearn More

Spouses and Their Money: Getting in Sync

Money matters can get complicated for couples who may not see eye to eye. In a recent interview with Squared Away, Kathleen Burns Kingsbury, author of the new book, “How to Give Financial Advice to Couples,” shared her tips and insights for couples trying to meet in the middle.

Q: In a relationship, is money about more than just money?

Kingsbury: Money is often a reflection of our feelings about security, respect, love, power – it really symbolizes these things, whether we’re aware of it or not. So how a couple talks about money and manages their money is a reflection of how they relate to each other in other areas as well.

Q: Explain “money beliefs”?

Kingsbury: A money belief is a thought or attitude toward money that influences your savings, spending, investing and gifting every day. These beliefs tend to reside in our unconscious thought. Because we live in a society where money talk is taboo, we often don’t identify these attitudes. But money beliefs are formed between the ages of 5 and 15 by observing the financial behavior and attitudes of parents or people around us. And these money beliefs tend to be oversimplified, because they were formed in a child’s mind.

Q: Why is it important for husbands and wives to compare their beliefs?

Kingsbury: When couples are arguing about money, they may be arguing about which bills to pay or how to pay for a daughter’s college. But what’s really going on is they’re hitting up against their different money beliefs.

A: What’s an example? …Learn More