May 2, 2017
Online Goblins Want Your Money
No longer simply a convenience for shoppers, the internet has come into its own: it is now an ingenious tool for squeezing money out of our wallets.
This realization first struck me last year while helping my brother and his wife in Chicago with a flight to visit our mom in Orlando. The reason I was on the case is that he’s a bit of a technophobe. But it turned out that his technical skills weren’t the issue – the airline’s website was the issue.
To flyers’ chagrin, most airlines are now a la carte operations, charging separate fees for everything from baggage to potato chips. This makes it difficult to compare fares online – one way we might wind up paying more. But things went wildly astray for my brother when he clicked on one airline’s website icon to pay his and his wife’s baggage fees a few days before flying.
He was hurled off to a webpage beseeching him to join some type of $200 promotional program that included “free” baggage. The same thing happened when I tried the next day. It took all of my online ingenuity to figure out how to avoid the promotion and pay only their $30 per bag fees. I wondered whether other flyers had been sucked into paying for this promotion.
These website diversions are different from what has become routine: advertisements popping up that try to get you to take the plunge and buy the consumer product you were researching online yesterday. It’s difficult to ascertain which diversions are cynical marketing ploys and which ones are innocent technical glitches. But all of them have the potential to be costly to unwary consumers.
During a brunch on Easter Sunday, two friends confirmed my concerns that this isn’t just an issue for older people – one of my friends who complained about online trickery is 95 years old but the other is a tech-savvy college freshman.
All web crawlers are familiar with offers of free subscription trials. These are also dangerous. …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
February 7, 2017
Wrong People Seek Financial Info, Help
Most of the 1,000 people who took the financial well-being quiz posted here last year felt content with their situations. Their well-being score averaged 16.4 out of 20 points possible on the quiz.
This happy response completely conflicts with a statistically more reliable survey showing that three out of four Americans report feeling “financially stressed.” Our quiz makes no claim of representing the adult U.S. population and was taken by a hodgepodge of regular readers, Twitter followers and Facebook friends.
So why are Squared Away loyalists so content with their finances?
The blog is “attracting people who are in the action phase. I’m guessing they’re motivated and ready to move,” said Brad Klontz, a financial psychologist in Hawaii – he is both a certified financial planner and trained psychologist.
But the flip side of this is that those who do not seek out financial information and advice – and don’t take blog quizzes – are often “in total denial, and you’re probably not going to catch them,” he said.
Indeed, Klontz’s research has identified avoiding dealing with difficult money issues as among the unconscious behaviors that ensnare people who are in poor financial health, measured by being overloaded with debt or not saving for retirement.
For the avoiders, the psychology is that they know their behavior hurts them but feel it’s due to a character defect – “lazy, crazy, or stupid” – he said. “Shame keeps you stuck. If I’m such a terrible person, why should I try? I’m not going to ask anyone for help.”
When people with money problems recognize the psychological underpinnings, he said, it can lead to changes that can end the pain.
The question for personal finance bloggers and financial advisers remains: how do we reach the people who can’t be reached? …Learn More
February 2, 2017
Managing Money with Cognitive Decline
Despite the normal cognitive challenges that people in their 70s and 80s inevitably face, most are sharp enough to be in charge of their financial affairs or oversee them.
But the significant minority of seniors who do have trouble is explored in a new summary of the research by Anek Belbase and Geoffrey Sanzenbacher at the Center for Retirement Research, which supports this blog.
One such group is people learning for the first time how to carry out financial tasks. Widows, not surprisingly, are often required to negotiate this financial learning curve, which gets steeper as a senior’s ability to process new information erodes. With guidance from a family member or professional, however, the novices can usually figure things out.
Seniors with mild cognitive impairment might also develop problems. Mild impairment becomes fairly common by the time people reach their 70s, affecting their financial judgment and potentially their ability to manage their affairs in ways that promote their best interests. Among those with mild impairment, 82 percent can independently handle the various financial tasks they face, such as paying bills, managing bank accounts, and maintaining good credit. This compares with 95 percent of unimpaired seniors.
Another danger facing seniors with mild cognitive impairment is their vulnerability to fraud. They are usually aware they’re slipping, yet they may remain confident about their ability to handle their financial affairs. …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
January 24, 2017
Can Work Enhance Seniors’ Social Lives?
Maintaining a network of family, friends, or even golfing buddies is critical to cognitive and physical health in old age, research has shown.
What wasn’t known is how work affects the social lives of older people. Does work foster social ties or limit the time one has to socialize?
A new study by Eleonora Patacchini at Cornell University and Gary Engelhardt at Syracuse University finds that those who continue to work have larger social networks.
They analyzed responses to the following question by more than 1,300 survey participants in the National Social Life, Health and Aging Project. The participants were ages 57 to 85 in 2005 and answered the following question then and again in 2010:
“Most people discuss things that are important to them with others. For example, these may include good or bad things that happen to you, problems you are having, or important concerns you may have. Looking back over the last 12 months, who are the people with whom you most often discussed things that were important to you?” …Learn More
December 20, 2016
Financial Misinformation Shared Online
My mother sent an anxious email that included the above picture, which one of her elderly friends had emailed to her as a warning about coming tax increases.
“Have you seen this?” my mother asked in her email.
I’m glad she inquired, because it took 15 seconds to learn on factcheck.org that this misleading information has made the rounds on the Internet for three years in a row, updated to the new year – 2017 this time.
There are nuggets of truth in the misinformation above. The Medicare tax already increased as part of the Affordable Care Act. However, it applies only to employed couples earning more than $250,000 and employed individuals earning more than $200,000. The retirees living in my mother’s very modest senior community – and most working Americans – are not affected. Yet “shocking” information like this rears its head over and over again on Facebook, Twitter and other social media.
At a time that misinformation is deliberately being fabricated, and one such lie coursing through the Internet even spurred gun violence at a Washington, D.C., family pizza joint, it’s time to bring attention to false financial information that, unwittingly, people may be sharing online. …Learn More