April 27, 2017
Gay Marriage: Income Gains Quantified
The U.S. Social Security Administration states on its website that it “is no longer prohibited from recognizing same-sex marriages for the purpose of determining entitlement to or eligibility for benefits.”
Numerous disadvantages faced historically by the nation’s 800,000 same-sex partners are falling away in the wake of the 2015 Supreme Court decision legalizing marriage – access to Social Security’s benefits for a worker’s same-sex spouse or widow is just one. The financial gains from legalized marriage should also increase substantially over time, as more gays and lesbians are drawn out of cohabitation and into married relationships.
A new study, by Urban Institute researchers Karen E. Smith, Stephen Rose, and Damir Cosic, estimates that by 2065 same-sex couples 62 and older with low or mid-range earnings will have about $4,000 in additional net cash income every year. This includes earnings, Social Security and pension benefits, and investment income minus taxes, Medicare premiums and other government levies.
The $4,000 estimate per couple is based on the institute’s population model that simulates multiple financial impacts on U.S. households to arrive at the overall effect. It also takes into account that same-sex married couples will be better able to pool their resources in the future, share employer health benefits, buy a house, and withstand a spouse’s layoff.
A key benefit for older same-sex married couples is access to Social Security spousal and survivor benefits, which were unavailable before the law change. Social Security is especially significant if the spouses have sharply different earnings levels – just as they are to married heterosexual couples in which one spouse, usually the wife, has lower earnings and is eligible for a higher benefit based on her husband’s work history instead of her own. …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 4, 2017
Why Parents’ Home is the Millennial Crib
A couple years ago, Daniel Cooper noticed something at the commuter rail station near his home in suburban Boston. A lot of parents were dropping off their adult children every morning to catch the train into the city.
This fit with something he’d been thinking about as a Federal Reserve senior economist and policy adviser interested in macroeconomic issues like the housing market. Are millennials living with their parents longer than previous generations? And, if so, why?
His suspicion was confirmed in recent research with his colleague at the Boston Federal Reserve, María Luengo-Prado. They found that, on average, 16 percent of baby boomers born in the late 1950s and early 1960s lived with their parents when they were between 23 and 33 years old. That jumps to 23 percent of the millennial generation born in the 1980s. These young adults are also more likely to return home after living independently for a spell.
The economists landed on two primary explanations for the big shift. One is that young adults today earn less relative to rents in their area. Second, higher state unemployment rates impact millennials more. In short, young adults often live with their parents for the simple reason they can’t afford to live on their own. …Learn More
March 21, 2017
Students Get Curious About Retiring
“I thought I was going to live forever.”
“I would’ve probably put more money away for later years.”
“I was a stay-at-home mom for 17 years, and I didn’t realize that during those years I wasn’t working I wasn’t accruing Social Security.”
Millennials asked what it’s like to be retired, and seniors answered in this video produced by The New York Times.
The video’s point, it seems, is that it’s not natural for 20-somethings to think about old age at all. “Retirement wasn’t in my vocabulary,” as one senior recalled about being young.
That’s why young adults, as soon as they enter the work world, should force themselves to make friends with a concept far in their futures – and then act on it. And here’s why: saving is more important than it has ever been, because they will carry much more of the burden of financing their retirement than their parents and grandparents ever did.
Even young adults who are paying off student loans should, at minimum, contribute enough to their savings plan at work to qualify for their employer’s matching contribution. Those who don’t plan ahead face a reliance on Social Security’s eroding benefits when they’re in old age, benefits that are the absolute bedrock of our retirement system but not enough for most retirees to continue the standard of living they had while they were working.
If you need convincing, listen to these retirees talk about how difficult it is to live solely on Social Security in the video below produced by Squared Away in 2012: …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
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