April 18, 2017
The Picture of Investment Diversity
Most people see multicolored chaos in the chart below, which is a visual representation of the returns each year to various types of investments.
Morningstar Inc.’s director of quantitative research, Timothy Strauts, sees something else: the need for a diverse portfolio.
Strauts, like most investment professionals, knows the Callan Periodic Table of Investment Returns. It has been around for 20 years and was just updated with 2016’s returns. Here’s how to read it. A colored square is assigned to each type of stock- and bond-market index. For example, the Bloomberg Barclay’s Aggregate (Agg) bond index is bright green, and the Standard & Poor’s 500 stock index is khaki green – the boxes also give each index’s return for each year. …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
April 11, 2017
Blood for Student Loans
Illustration by: Kjell Reigstad
Interest in the student loan problem from the media and politicians seems to be ebbing.
The issue does not go away for Joshua Roiland. Every day, money worries grind him down – him and millions of other young adults working through the emotional fallout and shattered relationships caused by debt.
Roiland owes $200,000-plus and earns only $52,000 as a newly minted University of Maine journalism professor. He begins his article on Longreads by describing a 340-mile round-trip drive to a clinic in Lewiston, Maine, that pays him $50 for a pint of his youthful blood. …Learn More
April 6, 2017
Retirees Don’t Touch Home Equity
Remarkably, middle-class Americans have at least as much money tied up in their homes as they have in all their retirement plans, bank accounts, and other financial assets combined.
A hefty share of older U.S. homeowners are even better off: 41 percent between ages 65-74, and 63 percent over 74, have paid off their mortgages and own their homes free and clear.
But only one in five retirees would be willing to use their home equity to generate income in a new survey by the National Council on Aging (NCOA). This reluctance seems to be on a collision course with financial reality for working baby boomers, when so many are at risk that they won’t be able to maintain their living standards when they retire.
Retirees can get at their home equity to improve their finances a couple of ways. One is to sell, say, the three-bedroom family home on Long Island for a pretty penny and buy a condo on Long Island or a cheaper house in Florida. Yet only a tiny sliver of older Americans actually downsize to reduce their living expenses, according to a new report by the Center for Retirement Research at Boston College, “Is Home Equity an Underutilized Retirement Asset?”
Another avenue is available to people over 62 who don’t want to move: a reverse mortgage. While these loans against home equity are not for everybody, they’re one option if retirees want to pay off the original mortgage or withdraw funds when they’re needed. But only about 58,000 homeowners took out federally insured Home Equity Conversation Mortgage (HECMs) in 2015, according to the U.S. Department of Housing and Urban Development.
The NCOA’s survey, which was funded by Reverse Mortgage Funding, a lender, uncovered one reason for the lack of interest: retirees are not clear about how reverse mortgages work and how they differ from a standard home equity line of credit. …Learn More
March 16, 2017
A Modest Victory in Financial Education
With so many Americans in the dark about how to prepare for retirement, educating them about why it’s critical to save seems an obvious way to tackle this problem. But very few solid studies prove that financial education actually works.
This field research should be counted as a positive result for a modest, low-cost financial education program.
Carly Urban at Montana State found that tellers and other low-level employees working at 45 randomly selected credit unions around the country clearly made progress after spending just 10 hours in an online financial education program. The information-based program required the workers to do some reading and walked them through specific examples and scenarios they might face.
Their improvements weren’t limited to increasing their knowledge of finances and retirement saving either. They also saved more, Urban said while presenting her findings at a webinar sponsored by the Center for Financial Security at the University of Wisconsin.
In the fall of 2009, the credit union employees completed the online education on the basics of everything from financial planning and investment risk to saving for college and working with a financial adviser. They were allowed to choose how much time to spend on each of 10 modules, and their employers let them take the courses at work – rather than use up valuable free time. …Learn More
March 14, 2017
1 in 3 Can Barely Afford Medical Care
More Americans have health insurance, but they’ve also become increasingly worried over the past two years about how to pay for every aspect of their medical care.
While the majority of insured adults still can afford their health care, the minority who say it’s “difficult” to pay their monthly premiums, doctor and prescription copayments, and deductibles is growing.
Potential explanations for these concerns, revealed in a new Henry J. Kaiser Family Foundation poll, include rapidly rising prescription drug costs and the fact that employer-provided health insurance plans with high deductibles are far more common than they used to be.
To be sure, the Affordable Care Act (ACA) has expanded Americans’ access to health insurance, and federal subsidies have made the premiums more affordable for millions of previously uninsured workers, who now purchase coverage through the ACA’s state health exchanges. But the program hasn’t eliminated concerns about cost. …Learn More
March 2, 2017
Retirement, Saving and Your Taxes
Just one in four of the low-income workers eligible for the federal tax credit for retirement saving are even aware that it exists.
The IRS, as I said in a previous blog, practically “gives money away” through its Saver’s Tax Credit, which returns as much as half of the amount saved to the tax filer. The credit was designed to encourage the nation’s lowest-paid workers, who largely don’t save.
Yet a survey last year by the Transamerica Center for Retirement Studies found that people who are not eligible for the credit know more about it than people who are eligible. There was a pervasive lack of awareness in three groups in particular: workers earning under $50,000, women, and people with no more than a high school education.
We’re getting into the thick of the tax season, so we’ve assembled a list of our previous tax-oriented blogs – the first article explains the saver’s credit. The blogs, listed below, explore a variety of issues to consider when you’re doing your taxes: …Learn More