February 20, 2014
Minimum Wage Workers: Who are They?
Whether or not you agree that the minimum wage should be raised, there are very real financial strains on the 5 percent of U.S. hourly workers who earn no more than $7.25 per hour, the current federal minimum wage.
This video, produced by Bloomberg TV, puts a human face on a few of these 3.5 million workers. Data from the U.S. Bureau of Labor Statistics provides more information about who they are:
- Nearly half are over age 25.
- Two-thirds are women, and one-third are men.
- About three-fifths of minimum-wage workers are in service occupations, such as food preparation and food service.
February 6, 2014
Lottery-like Prizes Spur Saving
Jessica Smith, mother of four, was never much of a saver. But a credit union that dispenses prizes has changed all that.
She now saves $150 every month out of her pay and bonus as a restaurant buffet manager. Each $25 deposited into her account gives her one more entry in a monthly drawing for cash prizes at the Communicating Arts Credit Union in Detroit.
Jessica Smith and her winnings.
By coincidence, she won three times last fall – a total of $100 in prizes. But in contrast to throwing money away on a lottery ticket with bad odds, she earns a little interest on her credit union account.
These so-called prize-linked accounts aren’t a new concept: one of the first appeared in 1694 in the United Kingdom to help people pay off war debts. Today in this country, nearly 18,000 individuals like Jessica participate in Save to Win programs. Launched in 2009, they’re offered at more than 60 credit unions in four states.
Michigan handed out $100,000 in prizes last year, including six $10,000 grand prizes; Nebraska, North Carolina, and Washington each gave out between $25,000 and $50,000 in a year. …Learn More
February 4, 2014
Retirement Tax Credit for Low Earners
The IRS effectively gives money away to low-income Americans who save for retirement.
Workers meeting the agency’s income requirements can receive a Saver’s Tax Credit equal to as much as half of their total deposits into a 401(k) or IRA. The lower one’s income, the bigger the credit.
The program, which was made permanent in 2006, gives a nice boost to the nation’s lowest-paid workers, who are also most vulnerable in retirement. And not taking advantage of the credit, said Jim Blankenship, a financial planner in New Berlin, Illinois, “is a lot like giving up an employer match for a 401(k).”
Low-income workers do just that, a previous study found: 40 percent decline to participate when their employer offers a 401(k). But the Savers Tax Credit may provide another avenue to this under-covered population.
The annual income requirements for the credits, shown in the following table, apply to calendar year 2013 tax filings due April 15. …
*Note: Credits are equal to 10 percent, 20 percent, or 50 percent of total contribution.
January 14, 2014
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
January 7, 2014
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
January 2, 2014
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
December 17, 2013
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