May 22, 2012
New Financial Tools Backed by Research
The Center for Retirement Research at Boston College has created a prototype personal finance website with tools and information on topics ranging from how to reduce spending or refinance a mortgage to the best way to draw down savings during retirement.
The website offers a comprehensive set of tools backed by impartial academic research – not sales pitches. Individuals can use each calculator, “Learn More” lesson, or “How To” guide individually or as the building blocks for an overall financial plan, which they can construct in a step-by-step process that begins on the homepage.
The website, also called Squared Away, was created by the Financial Security Project (FSP), a financial education initiative of the Center. It was funded (also like this blog) by the Social Security Administration.
The Center plans to distribute the site through various organizations, such as credit counselors, financial planners, employers, credit unions, and non-profits involved in helping low-income people build up their savings.
The website is still in the “beta” phase and will be improved over the coming months. We invite readers to try out the tools and comment on them by clicking “Learn More” below. All comments – good and bad – are welcome.Learn More
May 8, 2012
Graduating in Era of Low Opportunity
Philip Seymour Hoffman playing the washed-up salesman, Willy Loman, in “Death of a Salesman,” is all the rage on Broadway. But when I saw the play recently, it was Biff who got me thinking about young adults today.
In the Arthur Miller classic, Willy anguishes over son Biff’s failure to hold down a job in the city. But the irony is that Biff, played by Andrew Garfield, probably did very well for himself after leaving Brooklyn for Texas. I imagine he became an oil baron or wound up owning substantial real estate in downtown Houston.
Young people graduating from high school or college today don’t have the virtually unlimited opportunity that existed in the 1940s when Miller wrote the play: the personal drive to find a job and establish a career is not enough anymore. Young graduates who sign up for unpaid internships and double up on college degrees are well aware of this.
Last year, 54 percent of adults ages 18 to 24 were employed – that was the lowest level since the government started tracking the data, in 1948 – according to a February report by the Pew Research Center. Despite an improving job market, it was only 55 percent in March. Job creation – 115,000 were added in April – is below the pace that will open up meaningful opportunity for young people. …Learn More
April 17, 2012
Fewer Claiming Social Security Right at 62
New research shows that the share of Americans who sign up to receive their Social Security pensions at age 62 has declined sharply over the past decade.
This trend is expected to continue despite a temporary spike in applications by 62-year-olds during the Great Recession, said Richard Johnson, a senior fellow who conducted this research at the Urban Institute, a Washington think tank. This is a major shift in retirement behavior, and it reflects sweeping cultural changes that range from more flexible employment options for older workers to the baby boomer health and fitness craze.
“Over the past 10 years, we saw the share of people claiming at 62 fall about 10 percent for men and 8 percent for women,” he said. “That’s a pretty big decline in 10 years’ time.”
Sixty-two year olds still constitute the largest single group of new applicants every year, regardless of age. That’s why the significant decline in their application rate is notable. Those who sign up for their Social Security checks when they first become eligible – within days or weeks of their 62nd birthday – are known as “early claimers.” People with physically demanding jobs are more likely to do so, because of health problems or unpleasant and exhausting work. …Learn More
December 13, 2011
Jobless Benefits Delay Disability Filings
Photo by John E. Allen, Inc. Source: Franklin D. Roosevelt Presidential Library and Museum.
In New York, prosecutors recently charged 11 people with illegally collecting disability checks – some were caught playing tennis or golf or shoveling snow.
Boston’s mayor called “disappointing” a jury acquittal last summer of a hulky firefighter who was filmed posing during bodybuilding competitions – while on city disability.
Sensational news stories add to the stigma around people who collect disability for legitimate health reasons. New research on the Social Security Disability Insurance program provides insight into what really motivates people to file. There are two opposing ways to interpret these interesting findings, but more about that later.
Matt Rutledge, my colleague at the Center for Retirement Research, specifically researched disability filings by people who are unemployed in a new study for the Retirement Research Consortium. His work is particularly relevant at a time when the duration of joblessness has soared. Applications for disability typically increase in economic downturns, but they reached record highs in response to the Great Recession. …Learn More
November 1, 2011
Job Risk Dictates Rainy Day Fund Size
Financial planners have scrapped the old rules for emergency funds as the time it takes to find work has skyrocketed.
The U.S. economy picked up a little bit of steam, growing at a 2.5 percent annual rate in the third quarter. But economists expect the unemployment rate to remain stuck around 9 percent for many months.
To protect against a potential job loss, financial planners until recently advised clients to set enough cash aside to cover their expenses for three to six months. Today, six months is their starting point. And the amount of financial cushion should be based on each individual’s job security – the more risk, the bigger the emergency fund. It’s similar to the argument that an entrepreneur, for example, should balance his or her job risk by investing conservatively.
“I ask a lot about their job,” said Rand Spero, president of Street Smart Financial near Boston. “I say you need to be in a savings mode and it needs to increase substantially.”
To calculate an emergency fund, every household needs to know two things: how much fat they can cut out of their budget and how much they can expect to receive in unemployment benefits. Benefits typically cover up to half of the state’s average weekly wage. It now takes 10 months, on average, to find a new job.
Using six months as the baseline, several planners outlined the risks for various life circumstances: …Learn More
July 7, 2011
Widows Have Social Security Options
Julie Taylor-Cooper, who worked for decades as an accounting manager, now scrapes by on her late husband’s Social Security checks and a $145-a-week job.
Many baby boomers like Taylor-Cooper may not realize there are various strategies for claiming full Social Security benefits that can have a dramatic impact on their retirement security.
“There are eight or nine options for retirees, spouses, and widows,” said Stephen Richardson, spokesman for the Social Security Administration. (Full disclosure: SSA funds this blog.)
Julie Taylor-Cooper from Over Fifty and Out of Work on Vimeo.
June 7, 2011
Forced into Retirement? Downsize
Laid off from his job as a software engineer, Ken Wadland did something smart: he downsized.
After losing his job in June 2009, it immediately became obvious to Wadland that he could not afford his large house in the Rhode Island countryside. He sold it and purchased a condominium to reduce his housing costs, which are the largest single expense for most households.
The financial-services industry barrages baby boomers with tips for saving and investing their retirement nest eggs. But little attention is paid to the strategy of downsizing, an effective way for baby boomers to improve their retirement security by cashing in on the large amounts of equity built up in their homes over decades.
“I’d rather not have the expense,” Wadland, who is 60, said in this video.
Ken Wadland from Over Fifty and Out of Work on Vimeo.
Wadland explained how he came around to his decision in the online video series, “Over 50 and Out of Work,” which is featured occasionally in Squared Away.
His most recent job was at a large company, which once awarded him for being an innovator. “My passion is solving puzzles,” said Wadland. …