November 12, 2015
Mortgage Payoff? Freedom vs the Math
Financial planner Diahann Lassus views as misguided the “obsession” some baby boomers have with paying off their mortgage before they retire.
But Jane Rose, who has done just that with the loan on her home in Cherry Hill, New Jersey, has discovered how liberating it is. “I’m such a happy camper,” she said.
The math versus the emotion, the rational versus the irrational, head versus heart – that’s a simple way of framing a complex issue. Many boomers looking ahead to their retirement years are grappling with whether to pay off their mortgage before they retire or shovel any spare funds into their employer’s 401(k). Both arguments have merit for very different reasons.
First, the math. The alternative to paying off the mortgage – extra funds for the 401(k) – will provide more savings, more net wealth (assets minus debt), and more financial flexibility in retirement, according to many financial planners and an economist here at the Center for Retirement Research (CRR).
“There are few problems in life that aren’t mitigated by having a lot of money,” says Anthony Webb, CRR senior economist.
Indeed, directing extra contributions to a 401(k) is particularly attractive to well-heeled boomers in high tax brackets, who benefit the most from having both tax breaks: the federal mortgage interest deduction and the 401(k) tax deferral for contributions.
Other considerations, however, can tilt the balance toward paying more on the mortgage. …Learn More
November 5, 2015
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
October 20, 2015
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
July 30, 2015
College Funds Depend on Family Income
How much teenagers must borrow for college often depends on whether their parents can help foot the bill – and how much they can afford.
Fresh data from a survey by Sallie Mae, the private college lender, shed light on how low-, middle- and high-income families find the money to pay for a college education. The data break down how much of students’ total costs – tuition, plus books, room and board, fees, living expenses, and transportation – come from earnings, savings, borrowing, grants or other sources.
Here’s what stands out in the data, which are displayed in this chart:
- In low-income families, the students themselves take responsibility for saving, earning or borrowing money to cover 32 percent of their costs, and middle-income students pay 29 percent. Students from high-income families cover just 19 percent of their costs; they tend to pay more for their education, so their total dollar costs are higher, which somewhat narrows the dollar difference between what students in each income group pay. …
July 7, 2015
College Debt = Student Stress
It’s hardly surprising that debt causes stress, but this condition seems rampant among the college crowd.
A new study in the Journal of Financial Therapy finds that nearly three out of four students feel stressed about their personal finances, and student loans are a big reason.
In 2012, the average graduating senior owed $29,400. Student debt has already been shown to be a barrier to homeownership and a cause of bankruptcy among young adults. Paying back the loans is also very difficult when borrowers don’t graduate and earn less in their jobs. Add stress to the host of issues that accompany borrowing for college.
Students who have debt or expect to be in debt after college – whether college loans, credit cards, or car loans – are “significantly more likely to report financial stress” than students who did not have any debt, the study reported. …Learn More
July 2, 2015
Top Blog Topics: Financial Ed, Retirement
It’s customary every six months for Squared Away to round up our readers’ favorite blogs. The following were your top picks during the first six months of 2015, based on an analysis of online page views.
To stay current on blog posts in the future, click here to join a once-weekly mailing list featuring the week’s headlines on Squared Away.
Retirement is a perennial favorite among readers. But the top 10 list below also includes blogs about financial education and knowledge of the U.S. retirement system, longevity, and the hardships specifically faced by older workers: …Learn More
June 11, 2015
Get a Truly Free Credit Report
These federal government resources should be helpful to Squared Away readers ranging in age from 20 to 70:
Free credit report: Young adults in particular may not be aware they’re entitled to a free credit report from one of the major credit rating agencies. To ensure the report truly is free, click and follow the links to an outside source recommended by the Federal Trade Commission. To file a paper request or ask for a report by telephone, try the federal Consumer Financial Protection Bureau’s website.
New U.S. Social Security Administration blog: The agency started a new blog last month to provide important benefit information under various programs. Here’s a sample of three useful articles on the blog: