June 26, 2018
1 in 4 Can’t Afford a Summer Vacation
What a drag. One in four Americans said they can’t afford to take a vacation this summer.
The 3.8 percent unemployment rate is at its lowest since 2000, when the high-technology industry was going gangbusters. Despite the economy’s current strength, the cost of a vacation puts it out of reach for millions of people.
The average family of four spends about $4,000 on vacation, Bankrate said. Air fares don’t seem to be the issue – they are lower now than they were five years ago. But families living on a limited budget are more likely to drive, and the price of gasoline has shot up 25 percent over the past year, to around $2.90 per gallon.
Many people are shortchanging themselves on vacations, because they are “living paycheck to paycheck,” analyst Greg McBride said in a recent Bankrate blog.
Indeed, workers paid on an hourly basis can’t seem to get ahead. Their wage increases, adjusted for inflation, have been flat over the past year. Further, one in four U.S. households couldn’t come up with $2,000 even in an emergency, according to one widely cited study a few years ago. A summer vacation is probably out of the question for them.
Everyone needs a little time off to decompress and relax. Yes, it would be great to go on a deluxe fishing trip to Canada or cycle around Tuscany for two weeks, but there are more affordable ways to enjoy a few days off. A “staycation” is better than nothing. And the cost of a trip can be kept under $500 – one in four people do it, Bankrate said.
But cost isn’t the only reason people skip their vacation – family and work obligations also get in the way. A majority of workers, according to Bankrate, aren’t even using all of their paid vacation days.Learn More
June 12, 2018
Luck – or a Deliberate Path to Wealth
It’s usually not talent or street smarts or brains that make people wealthy and comfortable. It’s the luck of having rich parents.
But there is another way to get there, one that is within reach: becoming the first generation in the family to earn a college degree.
A new study by the Federal Reserve Bank of St. Louis, using the latest federal data on household finances, measures the impact of having that degree – or not having one – on wealth and income.
Although the ranks of college-educated Americans have grown over the past quarter century, people lacking a degree still make up a substantial majority – two out of three Americans. …Learn More
June 7, 2018
Be Optimistic. You Might Live Longer!
People who have a college education are known to live longer. But could a sunny disposition also help?
Yes, say two researchers, who found that the most optimistic people – levels 4 and 5 on a 5-point optimism scale – live longer than the pessimists.
But this effect works both ways. The biggest declines in optimism have occurred among older generations of Americans who didn’t complete high school at a time when this was far more common. It’s no coincidence, their study concluded, that the white Americans in this less-educated group in particular are also “driving premature mortality trends today.”
The finding adds new perspective to a 2015 study that rocked the economics profession. Two Princeton professors found that, despite improving life expectancy for the nation as a whole, death rates increased for a roughly similar group: white, middle-aged Americans – ages 45-54 – with no more than a high school degree. They suggest that addiction and suicide play some role, both of which have something to do with the deterioration in the manufacturing industry that once provided a good living, especially for white men.
To make the link between mortality and optimism, Kelsey O’Connor at STATEC Research in Luxembourg and Carol Graham at the Brookings Institution examined whether heads of households surveyed back in 1968 through 1975 were still alive four to five decades later. They controlled for demographic characteristics and socioeconomic factors, such as education, which also affect longevity. …Learn More
May 17, 2018
Target Date Funds are on a Roll
For the sheer simplicity they bring to 401(k) investment decisions, retirement experts have been big fans of target date funds for years.
Now, their popularity is soaring with the people who really count: employees.
Last year, 401(k) participants poured a record $70 billion into target date funds (TDFs), an investment option that automatically shifts the asset allocation in the portfolio to reduce risk as employees approach a designated retirement date. TDFs have become the first choice for people who, rather than go it alone and pick their own mutual funds, like having their employer’s mutual fund manager do it.
According to a new report by Morningstar, the Chicago research firm, the new money flowing in has averaged $66 billion annually over the past three years, a 28 percent increase over the prior three-year period. The inflows exclude new money from investment returns.
The surge in new invested money has been more about the intensity of baby boomers’ efforts to save for an impending retirement, Morningstar said, than the fact that strong returns usually pull investors into the stock and bond markets.
In another major development, TDFs invested in passive index funds are now investors’ predominate choice. This is a full reversal from a decade ago, when most TDFs were invested by stock pickers. (Although more money is now flowing into passively invested TDFs, actively managed TDFs still hold more in total assets.) …
May 10, 2018
Tiny House Fixes Millennial’s Money Woes
Sky-high city rent, college loan payments, and the low-paying days of an early career are a bad combination for today’s Millennial.
Liz Patterson has solved all that. The carpenter built herself a 96-square-foot house on top of a flatbed truck for less than $7,000 in Manitou Springs, Colorado, a hip neighborhood near Colorado Springs.
The house “represents my monetary freedom – it’s the whole reason I did it,” the 27-year-old said.
Tiny houses, which average 500 square feet, are only about 1 percent of U.S. home sales. But builders say that sales continue to grow as Generation-X buys them as Airbnb rental properties, and baby boomers park their “granny pods” in an adult child’s backyard.
Patterson’s house before
Tiny houses actually make the most sense for 20-somethings in rebellion, given their financial constraints and a distaste for all the junk their parents accumulated over a lifetime, said Shawna Lytle, a spokeswoman for Tumbleweed Tiny Homes Company in Colorado Springs, which built its first tiny house in 1999. The national tiny house price is $23,000.
Five years earlier, the tiny house movement had started in Tokyo. Recently, a handful of U.S. communities, including Spur, Texas, and Berkeley, California, have modified their zoning rules or building codes to accommodate them. The laws are a patchwork: houses on wheels must sometimes be classified as RVs, and some cities set size minimums for houses with foundations. …Learn More
April 26, 2018
Can Caregivers Help Seniors with Money?
When once-simple financial tasks become difficult or confusing, it can be the canary in the coal mine signaling that an elderly person is developing dementia.
Financial problems will soon follow once people with cognitive impairment start miscalculating and missing payments, forgetting and misplacing accounts, or falling victim to fraud.
But some good news has come out of a new study of Medicare recipients: the vast majority of the 5.5 million people over 65 with established dementia – usually, though not, always Alzheimer’s disease – are receiving help from family and other caregivers with balancing their checkbooks, depositing and withdrawing money, and conducting transactions.
Even better, they are actually benefitting from it. The seniors who receive assistance are more likely to be able to pay for their essential expenses like rent, food, prescriptions and utilities, according to researchers at the Center for Retirement Research, which also sponsors this blog.
There was bad news in the report too: a nontrivial share of the older Americans with established dementia – that is, dementia for at least three years – aren’t getting any help. This problem is expected to grow in future generations. One major reason is longer and longer life spans, which exponentially increase the risk of dementia. Nearly one in three people over 85 are in some stage of dementia. Compounding this is the fact that today’s older workers have fewer children and have divorced more, which shrank the pool of who would be willing to pitch in and help them.
Having a caregiver helping with money management wouldn’t necessarily make an elderly person better off financially. Suppose a daughter is unfamiliar with her mother’s finances or a husband isn’t good at managing his own money. In extreme cases, caregivers sometimes steal from the trusting seniors in their care. Even so, it turns out that it’s better to receive help than not. …Learn More
April 5, 2018
An Ever-Expanding Sandwich Generation
Two new “sandwich generations” are getting into the thick of things: Generation X and Millennials.
Baby boomers first latched onto this label as they juggled caring for their parents and children simultaneously. With lifespans continuing to increase, the squeeze from parental caregiving is tightening among Gen-X and Millennials.
As baby boomers and their parents get older, all three generations are feeling the financial strain of this familial obligation, which people take on either because “it is what family has always done” or “there was no other option,” according to caregivers’ responses to Northwestern Mutual’s new annual survey of adults between the ages of 18 and 64.
A separate 2017 report, by the Center for Retirement Research, estimated that one in five people will, at some point in their lives, care for their elderly or ailing parents. They spend an average 77 hours per month assisting elderly parents with everything from simple activities like getting out of bed and taking medications to frequently driving them to doctors’ offices.
The largest group in Northwestern’s survey are adult children caring for parents. The other caregivers identified in the survey care for adults under 65 or children who are either ill or have special needs or disabilities – there were no questions in the survey about routine childrearing.
The major findings indicate that parental care has significant financial and lifestyle implications, which disproportionately affect women: …Learn More