In this video, a senior fellow at the Brookings Institution talks about his latest book and offers a clear-sighted explanation for complex macro-economic forces that shape all Americans’ saving habits and financial security.
Starting in the early 1980s, stock markets boomed and housing prices increased year after year, and Americans “thought they were getting rich,” explains economist Barry Bosworth. “So they thought, ‘Let’s spend a little bit of it.’ “
Billions of dollars of wealth vanished in the 2008 financial market collapse, marking what may be the end of a golden era of wealth formation and undermining plans laid by workers and retirees, he said. Bosworth’s book was released last month: “A Decline in Saving: A Threat to America’s Prosperity.”
Full disclosure: The book incorporates research funded by the U.S. Social Security Administration (SSA) through the Retirement Research Consortium, which also funds this blog. The opinions and conclusions expressed are solely those of the blog’s author and do not represent the opinions or policy of SSA or any agency of the federal government.
A breakthrough experiment determined that some low-income tax filers are willing to save part of their IRS refund after all.
What separates savers from non-savers is each individual’s own “mental accounting.” What specifically influences them is whether their refunds exceeded their anticipation.
The research found that 7 percent of all low-income filers saved part of their refunds. But 12 percent of people who got more than they’d anticipated agreed to save – they did so by opening a savings account or buying a US savings bond or certificate of deposit. Only 4.5 percent of those who got the same as, or less than, anticipated, saved part of it.
“At tax sites, most people don’t save,” said Michael Collins, director of the Center for Financial Security at the University of Wisconsin, Madison. “But if you target the right people you might find some savers.” His research controlled for income, demographics and the refund amount. …Learn More
In the second of two videos, retirees from the Savin Hill Apartments in Boston’s Dorchester neighborhood spoke honestly about the decisions they made during their working lives that have affected their financial security in retirement. The residents come from all walks of life and from home towns ranging from Dabrowa Tarnowska, Poland, and Thomasville, Alabama, to around the corner in East Boston.
Before retiring, James Gomes said he often wasted his regular paychecks from General Electric. Arlene Starr wishes she’d saved – like her sister did. And immigrant Trung Quang Pham’s low income made it tough to set money aside.
They are residents of the Savin Hill Apartments in Boston, most of whom are “pretty much on fixed incomes,” said apartment manager Sandra Baker of CMJ Management Co.
They are not alone either. Millions of retirees rely on Social Security’s fixed monthly pensions, which average $1,181. The federal pension program provides the vast majority of retirement income for nearly one in four retired couples and nearly half of the elderly living alone. And new research for the first time determined that a large swath of the elderly leave this world with little or no assets left in savings and personal retirement accounts.
In the first of two videos, retirees in the Savin Hill Apartments generously agreed to discuss the issues they face for Squared Away. The second video – about their financial decisions and regrets over a lifetime – appears Thursday. …Learn More
About half of the elderly living alone and one-third of elderly couples have less than $10,000 left in their savings and investment accounts just before they leave this world.
These grim statistics may be a more accurate gauge of retirement survival than the balances Americans have accumulated as they enter retirement, a pursuit that pre-retirees and the financial-services industry tend to focus on.
To determine where retirees wind up financially, economists James Poterba at the Massachusetts Institute of Technology, Steven Venti at Dartmouth College, and David Wise at Harvard University crunched a mass of data. Tracking a nationally representative sample of middle-aged and older Americans, they tabulated the financial assets held by elderly couples and the elderly living alone as they approached retirement, retired and aged, and when they were last observed in the sample.
“What we take away from this is that a significant number of households have a very small cushion if they encounter any kind of financial need,” Poterba said in a telephone interview last week, referring to a new working paper, “Were They Prepared for Retirement? Financial Status at Advanced Ages in the HRS and AHEAD Cohorts.”
The following is a small slice of what the researchers found in the last years before the elderly died…Learn More
You’ve heard of impulse purchases. But how about impulse saving?
It’s purely an idea at this stage, and it may not work. But a New York City check-cashing firm plans to start a program that will allow customers to throw $20, $10, even $1 into savings – on impulse – when they’re cashing a check or flush with cash.
“I know my customers,” said Joseph Coleman, president of RiteCheck Cashing Inc., which has 12 stores open 24/7 in Harlem and the Bronx. “If they could put $5 away or $20 away for a television they wanted, to buy a car, or for Christmas, they would do it.”
Key to making the program work is simplicity, operating on the theory that barriers and red tape thwart savings deposit; if a customer wants to open a savings account, RiteCheck will print an application that’s already filled out and needs only a signature. RiteCheck teamed up with long-time business partner Bethex Federal Credit Union to open and manage the accounts.
“People have intensions to save” but “get derailed by the lack of a clear, easy path to start saving,” said Innovations for Poverty Action’s (IPA) Jonathan Zinman, a Dartmouth College economist who worked with Coleman to create the product. The non-profit IPA granted $15,000 this month to set up RiteCheck’s program…Learn More
The single-married divide is dramatic: single adults between the ages of 22 and 35 are far less likely to have retirement savings accounts than are married people their age.
This difference, which is most pronounced for women but also true for men, highlights a conflict between two mega-trends. The number of single Americans has surged to nearly 100 million – 43 percent of the adult population. Yet they are less likely to save at a time that all young Americans face greater responsibility for funding their own retirement than any prior generation.
About 22 percent of single women have employer-sponsored retirement accounts, compared with 44 percent of married women. For single men, only 28 percent have employer accounts, while 44 percent of married men do, according to a February paper in the Journal of Marriage and Family by researchers at the Social Security Administration (SSA).
“By highlighting the link between marriage and retirement savings in young adulthood, our analysis identifies an often-overlooked economic outcome related to marriage,” SSA researchers Melissa Knoll, Christopher Tamborini, and Kevin Whitman write. Data for their sample of 3,894 people came from the Federal Reserve’s Survey of Consumer Finances in 2001, 2004, and 2007.Learn More