May 16, 2017
College Calculator Bridges Class Divide
A degree from a premier college can vault a teenager from a low-income family to the height of economic success as an adult.
To date, 15 colleges have signed on to work with Levine, who initially created the calculator for applicants to Wellesley College, where he is an economics professor.
But disadvantaged students face a multitude of barriers to attending the nation’s top colleges, from getting the grades required to withstand stiff competition for acceptance to the absence of a degreed family member who can steer a child, niece or grandson through the process.
Phillip Levine is breaking down one barrier: the well-founded fear among low-income and even middle-class families that an elite liberal arts college is out of the question.
Levine designed a calculator to estimate how much an individual applicant will actually pay, after plugging in his or her family’s unique financial data, such as income, house value, mortgage amount, etc. – and the calculator is way easier than filling out a FAFSA form. Argh.
What’s new about Levine’s cost estimates is that they come from crunching family financial stats into a program that contains an individual college’s unique information about its financial aid and work-study programs, as well as how much current students pay based on their parents’ financial information [these data are supplied anonymously to Levine]. …Learn More
April 13, 2017
Hispanic Retirees: Low Saving, Long Life
Just one in three native-born and immigrant Hispanics working in this country has a retirement plan through their employers. If they do have one, three out of four save money in their plans, which is somewhat less than their coworkers.
One reason for the first abysmal statistic is that many Hispanics and Latinos, recent immigrants in particular, hold down part-time restaurant or hotel jobs at very low wages. But even among Hispanics working full-time, access to an employer savings plan is still much lower (44 percent) than it is for their white and black counterparts (more than 60 percent).
Low rates of saving are compounded by the fact that elderly Hispanics and Latinos will need more money over their longer-than-average retirements. A 65-year-old Hispanic man can expect to live 16 months longer than a white, non-Hispanic man in this country, and Hispanic women live 11 months longer. [One theory is that less healthy immigrants are more likely to return to their home countries, so the U.S. immigrant population that remains is healthier.]
“Longevity is a big issue, but there is little awareness of this” in the Hispanic population, said retirement consultant Manuel Carvallo, a Chilean immigrant to the United States. …Learn More
March 30, 2017
Older Workers’ Job Changes a Step Down
When older workers change occupations, many of them move into a lower-status version of the work they’ve done for years, according to a new study by University of Michigan researchers who tracked the workers’ movements among some 200 different occupations.
Aging computer scientists were likely to become programmers or computer support staff. And veteran high school teachers started tutoring, financial managers transitioned to bookkeepers, and office supervisors became secretaries.
Late-career transitions need to be put into some context: a majority of Americans who were still working in their 60s were in the same occupations they held at age 55, the study found. And these occupations ran the gamut from clergy to life scientists to cooks.
Interestingly, while teachers, thanks to their defined benefit pensions, often retire relatively young, primary and high school teachers were also at the top of the list of older workers who have remained in one occupation into their 60s, along with radiology technicians and bus drivers.
But about 40 percent of Americans who were still working when they turned 62 had moved to a new occupation sometime after age 55, according to the researchers, who tracked individual workers’ employment changes using the federal government’s coding system. …Learn More
March 23, 2017
The Benefits of Late-career Job Changes
Finding a new job in one’s 50s is not that easy to pull off, and it’s risky if the new employer doesn’t work out. But there’s a silver lining for people who can make the change to a job they feel is better: they work longer than those who don’t make a move.
A new study by the Center for Retirement Research, which supports this blog, finds the probability that older workers remain in the labor force until they’re 65 increases considerably – by 9 percentage points – if they voluntarily made a job change sometime during their 50s.
This lends credence to other research showing that when older workers voluntarily find a new employer, they often experience more job satisfaction and less on-the-job stress, which makes it easier to resist retiring.
The benefits from changing jobs are both psychic and practical. …Learn More
March 9, 2017
Get Dental Work Before You Retire
Caps, gum surgeries, implants, dental exotica – all kinds of things can and do go wrong in retirees’ mouths.
But dental coverage also drops sharply for older Americans, because when people retire, they give up their employer’s dental insurance. Without it, retirees needing dental work can face an unexpected, mini financial crisis.
Medicare does not cover routine dental procedures, a fact that a majority of working baby boomers are unaware of. But most seniors also aren’t covered through a spouse or under, say, a union dental insurance plan for retirees. The private dental insurance market is their only option for care, and very few purchase it.
Uninsured older Americans shell out $1,126 annually, on average, for dental work, which is $400 more than people with coverage spend. Out-of-pocket costs can be much higher in a year when extensive work is required. …Learn More
February 28, 2017
In the Dark about Retirement?
There’s new evidence to remind us that nothing much changes: we are still baffled by our DIY retirement system.
And no wonder!
First, saving must start at a young age, when retirement is an abstraction. Saving is further stymied by two big questions: how much to save and how to invest it? It’s also smart to anticipate how one’s compensation arc might affect Social Security – taking into account, for example, that women withdraw temporarily from the labor force to have children and that earnings can decline when workers hit their 50s. As we fly past middle age and retirement appears on the horizon, it’s a little late to figure this retirement thing out. And there’s no plan for long-term care when we’re very old.
The evidence: Start with Merrill Lynch’s new survey in which 81 percent of Americans do not know how much money they’ll need in retirement. This makes it very difficult to know how much to deduct from one’s paycheck for retirement savings. Employers, frankly, could do more to help us figure this out. (Some answers appear at the end of this blog.)
Being in the dark now about how much to save is a cousin of being afraid of running out of money later, in retirement. More than 70 percent of accountants say this fear of running out is their clients’ top concern – followed by whether they can maintain their current lifestyle and afford medical care in retirement – according to the American Institute of Certified Public Accountants.
Our inclination to avoid difficult issues does not go away with age. Yes, we’ve gotten wiser, but advanced old age means death, and who wants to think about that?
The upshot: seven in 10 adults have not planned for their own long-term care needs in the future, Northwestern Mutual reports. Even among a smaller group who anticipate having to take care of an elderly parent, one in three of them “have taken no steps to plan” for their own care.
“You would think that would prompt them to action,” said Kamilah Williams-Kemp, Northwestern’s vice president of long-term care. And while the constant barrage of news and statistics is making Americans more aware of their rising longevity, Williams-Kemp said, caregivers are often more interested in talking about their emotional and physical challenges and the rewards of caregiving than about its substantial financial toll.
There is a “disconnect between general awareness and prompting people to take action,” she said.
The potential for dementia or diminished capacity late in life isn’t on our radar either, the survey of CPAs found: the vast majority of people either choose to ignore the issue, wait and react to it, or are confused.
Squared Away exists in part to educate people about retirement essentials, based on facts and high-quality research. The following blogs might help you:
How Much for the 401(k)? Depends. …Learn More
January 24, 2017
The Late-1950s Boomers: Hit by Divorce
It’s old news that the many baby boomers who did not get married and stay married are worse off financially than those who did. Unfortunately, the financial damage to one segment of this generation has broken new ground.
Only 44 percent of “middle boomers” – those born in the late 1950s – have remained married to their original spouses, down from 52 percent of their parents’ generation. Middle boomers are also far more likely to have lived with partners without marrying, remained single all their lives, or even to have divorced twice.
The heart of a study is determining which of middle boomers’ choices were most likely to have led to financial distress when they reached their pre-retirement years.
About 11 percent of middle boomers had negative net worth by the time they were in their early 50s – more than double the share for the generation born during the Great Depression when they reached this age. Negative net worth means that middle boomers’ mortgages and other debts exceed the value of their assets; in this study, assets included everything from retirement plans and taxable bank accounts to primary and vacation homes.
To understand why, the researchers culled marital histories from a survey of older Americans. They found that four lifestyles are most strongly linked to middle boomers’ negative net worth: never marrying, going through one divorce and becoming single again, separating from a second marriage, and divorcing from a second marriage.
In all of these situations, the individuals were about three times more likely to have negative net worth than were the continually married middle boomers. The study controlled for age, gender, race, education, health, household income, and the number of offspring.
Middle boomers are the “least prepared for retirement” out of four groups studied, the researchers concluded, and their choices around marriage have been important contributing factors.Learn More