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
October 24, 2013
Oldest Americans Are Lucky Generation
Americans in their 70s and 80s have earned more and are wealthier than the baby boom generation – for the simple reason they were born at the right moment in history.
It was easier for members of this older generation to get ahead, because they came of age in the aftermath of World War II, when economic and demographic trends were strongly working in their favor, contends new research by William Emmons and Bryan Noeth of the Federal Reserve Bank of St. Louis. The emergence of a modern social safety net and the rise of unions may’ve also contributed to their relative prosperity, they said.
Baby boomers born after about 1950 do not seem to have the same income and wealth over their working and retired lives that their parents have enjoyed, even after the research takes into account numerous things that determine an individual’s prosperity, such as their level of education. If the current trend continues, these younger boomers just won’t be as lucky.
Birth year “comes up as a significant variable in terms of influencing income and wealth,” Emmons, a senior policy adviser, said about the study, which analyzed decades of U.S. data on household finances. …Learn More
September 17, 2013
Workers Struggle Day to Day
There’s a growing concern that working people aren’t saving for the future, but the reality is that many of them can barely get by in the here and now.
A sizable minority of Americans say they are spending more than they earn, have overdue medical bills, or pay only the minimum on their credit cards. These were among the findings in the 2012 National Financial Capability Study (NFCS) conducted by the FINRA Investor Education Foundation, its second survey to illuminate the day-to-day financial issues facing average working people.
Pulling together $2,000 may seem like only a modest challenge for someone with good pay and benefits. But 40 percent of the people surveyed also indicated they would be hard-pressed to find that much money if they needed it, according to a September report on the NFCS survey.
FINRA identified indicators of what it called the “financial fragility” of the average American:
• More than half of those surveyed were in a poor position to save: 19 percent spend more than they earn, and 36 percent just break even.
• More than half have no rainy day fund and live paycheck-to-paycheck. …Learn More
August 29, 2013
Financially Mismatched Couples at Risk
Financial planners say it happens all the time: couples who don’t see eye to eye on money matters often break up or divorce.
One reason they run into trouble is that a financial mismatch makes it more difficult for them to achieve important goals, said financial adviser Bonnie Sewell of Leesburg, Virginia.
“They’re working against the tide. People who pick like-minded partners get there faster,” said Sewell, who’s written a book about money and divorce.
Her contention is backed up by the preliminary results of a study of more than 30,000 married and cohabiting couples between 1999 and 2012 by Federal Reserve Board researchers Jane Dokko and Geng Li. Their study compared the partners’ individual credit scores to gauge their financial compatibility and found that the larger the disparity between the two of them, the higher the incidence of break-ups.
The authors said credit scores are a proxy for financial behavior and also can measure trustworthiness. The link between poor financial matches and household dissolution, they wrote in their paper, was “quite strong.”
To prevent unhappy endings, Sewell, the financial planner, has three suggestions for new couples: …Learn More
August 13, 2013
End-of-Life Medical Costs Vary Widely
Medical expenses increase unpredictably with age, so the crystal ball gets very hazy when trying to foretell how much you’ll need in retirement.
A new study helps clear things up: a single older American spends about $39,000 on average for medical care in the final five years of life, or about $7,800 a year. For couples in which one spouse has died, $51,000 was spent during that spouse’s final years, or about $10,000 annually.
These out-of-pocket expenses, which were reported by surviving spouses and family members, are for health care not covered by Medicare: insurance premiums, hospital and physician copayments and deductibles, and expenses for medications, nursing homes, and in-home care.
The data also show that the financial burden on older people varies greatly, not just depending on marital status but also income. High earners spend more than $100,000 in their last five years, reflecting the large amounts paid out by those who need – and can afford – long-term care.
The authors conclude that end-of-life medical expenses subject a significant minority of older Americans to “considerable financial risk.” Their evidence: for 43 percent of the people they studied, the medical bills accumulated during their last years exceeded the value of their financial assets, excluding home equity. …Learn More
July 2, 2013
Readers Call Gen-X to Action
A recent blog article, “Retirement Tougher for Boomer Children,” did not elicit much sympathy for Generation X.
Many readers who commented expressed a sentiment something like this: Yes, things are tougher for young adults. So deal with it.
Members of Generation X, as well as Millennials, are largely on their own with their 401(k)s, in contrast to their parents and grandparents who may’ve had a guaranteed pension at work. But the evidence indicates young adults are not preparing for retirement: well over half of 30- and 40-somethings are on financial path to a lower standard of living once they retire, according to an analysis cited in the article.
They need to find “the discipline to save for retirement through all the means available,” said a Squared Away reader named Paul. …Learn More
June 13, 2013
Retirement Tougher for Boomer Children
The financial media (including this blog) inundate baby boomers with articles cajoling, coddling, and counseling them about their every retirement concern.
But members of the Me Generation might want to focus on their children: retirement is likely to be an even greater financial challenge for Generation X, now in their 30s and 40s.
Economists at the Center for Retirement Research, which supports this blog, recently produced this striking prediction: three out of five Americans in their 30s and well over half of those in their 40s are at risk of experiencing a decline in their standard of living after they retire.
This compares with 44 percent of baby boomers.
The reasons for Generation X’s poorer prospects are due to long-term trends like the rise of 401(k)s and less generous Social Security benefits for future generations. …Learn More