August 4, 2016
Social Security Credits for Moms?
Dramatic changes in the U.S. family structure over several decades – more divorce, single motherhood, and unmarried couples – could have a big impact on the financial security of baby boomer women as they march into retirement – and on future retirees.
A review of studies on Social Security spousal and survivor benefits by the Center for Retirement Research, which sponsors this blog, examines the difficulty of providing retirement security for the growing ranks of women and mothers who do not fit the traditional family mold.
Social Security’s benefits were designed for the typical family when the pension program was enacted in the 1930s, a family portrayed at the time by Henry Barbour and his wife, Fanny, in the popular radio soap opera, “One Man’s Family.” A spouse, usually the wife, is guaranteed half of her husband’s full retirement age benefit under the program when she reaches her full retirement age – whether she works or not. When her husband dies, her survivor benefit equals his pension benefit.
But women who marry and become divorced within 10 years are not eligible for these benefits. Nor, of course, are single working women, who receive benefits based solely on their own work histories. Increasing numbers of women reaching retirement age today either were in short-term marriages or never married and won’t receive a spousal or survivor benefit. The problem is that most of these women are mothers. …Learn More
July 21, 2016
Inner-City Teen Interns Are Better Off
High school students who participated in Boston’s summer jobs program in 2015 work on a public beautification and landscaping project.
It’s a spring rite in Boston. The mayor’s office and private and non-profit employers hustle to get ready for a program employing more than 10,000 inner-city teens for the summer.
A new study of the summer 2015 participants shows that the high school students made remarkable strides, compared with the kids who applied but were not accepted for the limited number of slots available in the program. New York and Chicago have similar, large programs.
The Boston teens, who are mostly either black or Hispanic and from low-income neighborhoods, improved their job readiness, from showing up on time to developing their resume-writing skills, and also boosted their confidence and sense of identity. Perhaps most important, the program increased aspirations, particularly among black males.
Two out of three participants have single parents, and one in three is from immigrant families who do not speak English. While college-bound children of wealthy parents may choose summer camp over a summer job, being idle in the summer can be a big disadvantage for inner-city kids.
“These kids just have less opportunities to develop [job] skills just by growing up in the neighborhoods they do,” said Alicia Modestino, the Federal Reserve Bank of Boston researcher who studied the program. “Fewer people in their lives have a job. They’re living in a neighborhood with fewer job opportunities.” Further, single parents in low-income households often work nights or have multiple jobs and are too pressed for time to help their children develop these skills.
The jobs in Boston’s program are primarily either with private-sector employers – some of the top-tier internships are with major corporations – or with non-profit organizations such as local YMCAs, Sociedad Latina, the Boys and Girls Clubs of Dorchester, and the New England Aquarium. A requirement of the summer program – one of the nation’s oldest – is that each high school student attends sessions in which they learn to write resumes, practice job interviews, and answer questions properly on online applications.
Modestino was surprised that the strongest results in the study came in the category of “social engagement.” For example, her study found a sharp increase in the share of participants reporting they felt they “had a lot to contribute.” …
July 5, 2016
Parents, Start Student Loan Homework!
Here’s a reminder that parents should start their homework this summer to minimize college loan repayments over the long haul. A few basic decisions can add or subtract thousands of dollars.
A little help came last week, when the interest rates on all federal student loans were reduced. Despite the declines, the rates for the PLUS loans available to parents remain much higher than the loans available to their offspring – taking out a PLUS loan will nearly double the interest paid on $50,000 over 20 years, compared with an undergraduate Stafford loan.
This is an argument for having prospective students take out the loans, rather than the parents. As for paying them back, financial advisers tend to agree that young adults with decades of work ahead of them can share in that responsibility at a time their parents are facing retirement. This complex family decision depends on myriad factors, including how much income the graduate can expect to earn after college and how comfortable the parents are.
There are one-time, upfront fees on federal student loans, and they are also much higher for parent PLUS loans: 4.272 percent of the loan’s principal amount versus 1.068 percent for Stafford loans for undergraduates – these fees will go up for loans disbursed after Oct. 1.
The Institute for College Access & Success has put together an excellent cheat sheet explaining the federal loan options, who qualifies for various types of loans, and the costs of each. To see this sheet, click here.
Below is the institute’s summary of the new loan rates, effective July 1: …Learn More
May 24, 2016
Find Best Job Market with Online Tool
This online tool for exploring urban job markets is very cool.
It could be a big help for high school and college graduates looking for work, especially those willing to migrate to a new city and trying to figure where to go. What’s unique about it is that it ranks the nation’s large, mid-sized, and small cities based on the user’s personal preferences.
To use the tool, created by the American Institute for Economic Research (AIER), the job hunter decides how high to rank the importance – from 5 (most important) to 1 (not important) – of nine different aspects of the job market and lifestyle in their ideal city: low unemployment, high average earnings, high labor force participation, public transportation, highly educated peers, low rent, high diversity, plentiful bars and restaurants, and many arts and entertainment options.
To test it, I selected a 5 for low unemployment and high labor force participation and a 1 for everything else (the bar scene, public transit, diversity etc.). Cities like Minneapolis, Denver, Salt Lake City, and Austin came up as the best cities, when these two job-market criteria were most important.
AIER also compares different cities in a report, which is available here.
Of course, other things are important when relocating. But the tool forces job hunters to balance their priorities – a strong job market or a good bar scene? To play around with AIER’s gadget, click here.Learn More
May 19, 2016
Quiz: Financial Well-being or Unease?
What does it mean to have a sense of financial well-being? Or what does it mean to have its opposite, financial uneasiness?
Based on in-depth interviews with dozens of people in focus groups, the federal Consumer Financial Protection Bureau has developed a financial well-being quiz. The quiz is the agency’s attempt to quantify a very subjective concept so that researchers can measure it and integrate this measure into their research, said Genevieve Melford, a senior research analyst for the CFPB.
“It’s about creating a tool that allows meaningful research and effective interventions that might help people,” she said.
We think regular people can also gain personal insight by taking a short version of the CFPB’s quiz on this blog. After taking the quiz, write down your score, and return to the blog to learn what it means.
May 10, 2016
5 Ways Millennials Mess Up With Money
The harsh reality is that you aren’t earning as much money as you think you are, and you don’t have as much to spend as you think you do – so it’s easy to let spending get out of control.
Andrea Woroch, only 34 years old herself, delivers some tough love to those who’ve already developed poor spending habits. A personal finance expert for the Millennial generation, Woroch said a perilous time is between the cash-strapped period right after college and the time when the steady, but modest, paychecks start flowing.
Early on, she explained, the attitude was “Okay, let me go to happy hour on this day because I can get $1 tacos and a beer. Now it’s okay to spend $20 for dinner. But that adds up, and they end up spending even more.”
Millennials polled by Gallup said they prefer saving to spending. But Woroch, in an interview, provided five harsh observations about the obstacles to saving that she’s observed among young adults – including her husband, when they started dating:
- You eat out all the time. Rightly, socializing is a big part of life. Eating out is also part of a larger trend: in March, consumer spending on dining out surpassed grocery store sales for the first time. Woroch advises that “spending money at the grocery store will help you spend less on food and leave room in your budget to put towards your savings goals.” …
April 26, 2016
Delaying Motherhood Boosts Earnings
Economists have landed on two primary reasons for why women working full-time earn less than their male co-workers. First, their research detects an element of discrimination.
The second reason stems from motherhood, which can make it extremely difficult to simultaneously complete an education or get a firm footing in a career.
But America is changing. Over the past half-century, the typical age at which women have their first baby has risen markedly, from 20 to 25.
This societal shift toward later motherhood has, in turn, dramatically improved women’s financial prospects, concluded a study featured in a book about the financial impact of changing employment, family and health trends.
University of Virginia economist Amalia Miller found that each one-year delay in when women start a family has increased their lifetime earnings by 3 percent. Since first motherhood now comes five years later, she estimates that translates to a 14 percent increase since the 1960s in the typical woman’s lifetime earnings.
Women who wait to become mothers also accumulate more wealth: each one-year delay increases their wealth at age 50 by between $12,000 and $20,000 – or potentially $100,000 more for waiting five years.
Although women who earn more money spend more, “their consumption does not increase proportionately, leaving them with greater accumulated wealth at older ages,” Miller said. “The effects of motherhood timing especially are substantial and significant for decades after the age at first birth and well into retirement years.”
Education plays a large role in the improvement in women’s ability to build up their financial resources. For example, there was a much smaller increase in women’s incomes due to delay when Miller controlled for education.
There is another way to think about her findings: it’s becoming clear to many young women that there are fairly large financial rewards from delaying their first child. …Learn More