Squared Away Blog

February 18, 2020

Electric Bills and Financial Survival

Timing is everything for low-income people who rely on federal benefits to survive.

For example, retirees who receive their Social Security checks early in the month and spend the money before the bills come in are more prone to fill the gap with high-cost payday loans than people who get their checks a few weeks later, a 2018 study found. New research in a similar vein shows that timing also matters for individuals who receive food aid under the federal Supplemental Nutrition Assistance Program, or SNAP.

When the electricity bill arrives on or within a day of the monthly SNAP benefit, the lowest-income customers in this study were much less likely to have a past due bill or to have their power cut off than customers whose bills arrive well after their benefits.

The timing is crucial, because SNAP supplies between 10 percent and 25 percent of household incomes up to 35 percent above the federal poverty level. When the government loads each month’s food benefit onto the card, it frees up money for high-priority bills coming due at the same time, including utilities.

This study took place in an unidentified New England state where recipients’ SNAP debit cards are refilled on the first day of every month.

After following the SNAP recipients for a full year, the researchers also found that the unpaid balances they had accumulated after 12 months were smaller if the bills coincided with the SNAP-card deposits. The advantages of a well-timed electricity bill were greatest in the poorest neighborhoods, the researchers said. …
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February 11, 2020

Most Older Americans Age in their Homes

Retirees are apparently unpersuaded that it’s a good idea to convert their substantial home equity into some retirement income.

One way to tap this home equity is through state programs that defer older homeowners’ property taxes. The programs are offered in many states, but very few people take advantage of them. Retirees are also skeptical about the benefits of converting their equity into income using a federally insured reverse mortgage: only about 50,000 older homeowners, on average, get them every year.

A big concern is that if they ever sell the house, the back taxes or the reverse mortgage must be paid back – with interest.

But a new study by the Center for Retirement Research finds that this is an unlikely scenario for the majority of retirees, because they rarely move or don’t move at all.

The researchers constructed a picture of how Americans’ living situations change between their 50s and the end of their lives by combining the data for two separate age groups. They matched the households in one group, who were between age 50 and 78, with similar but much older households in the second group and then followed the second group through most of their 90s.

The researchers found that 53 percent of this constructed sample of homeowners never moved out of the house they owned when they were in their early 50s.

Another 17 percent relocated around the time they were retiring and then generally stayed put. Although the households in this group tended to be more educated and better off financially than the people who never moved, both groups ended up with substantially more housing wealth than the people who moved frequently. …Learn More

January 2, 2020

States Give Financial Help to Caregivers

On Jan. 1, Arizona residents caring for elderly or disabled family members became eligible for up to a $1,000 reimbursement from the state for expenses incurred in their caregiving responsibilities.

This is a trial program and the legislature allocated very little money – $1 million over two years – in a state with an estimated 800,000 residents caring for a disabled adult over 18.

But it’s a start.

Caregivers “aren’t asking for everything. They’re asking for a little bit to make their lives better,” said Elaine Ryan, vice president of government affairs for AARP, which has been on the forefront of advocating for such policies at the state level. “That’s the least we can do.”

Arizona’s program would defray a portion of caregivers’ spending. For older family members, this would cover technologies to aid older family members, such as hearing aids or computer programs, or shower grab bars and wheelchair ramps.

Like Arizona, state governments around the country, as laboratories for policy experimentation, have passed a hodgepodge of programs to support caregivers. Other bills approved in recent years range from New Jersey’s tax credit for military families caring for wounded veterans to Oregon’s paid family leave program for workers taking care of aging spouses, parents and grandparents.

The programs are a tacit acknowledgment of the enormous financial strain caregivers face – a strain that is only expected to grow and, increasingly, to affect Millennials as their baby boomer parents age.

However, it’s not easy to pass bills that require states to approve financial assistance or tax credits, because the work done quietly by family caregivers is often invisible and under-appreciated by the general public and federal and state legislators. …Learn More

December 12, 2019

Caregiving Disrupts Work, Finances

What do groceries, GPS trackers, and prescription drug copayments have in common?

They are some of the myriad items caregivers may end up paying for to help out an ailing parent or other family member. And these are just the incidentals.

Three out of four caregivers have made changes to their jobs as a result of their caregiving responsibilities, whether going to flex time, working part-time, quitting altogether, or retiring early, according to a Transamerica Institute survey. To ease the financial toll, some caregivers dip into retirement savings or stop their 401(k) contributions. Not surprisingly, caregiving places the most strain on low-income families.

People choose to be caregivers because they feel it’s critically important to help a loved one, said Catherine Collinson, chief executive of the Transamerica Institute.

But, “There’s a cost associated with that and often people don’t think about it,” she said. “Caregiving is not only a huge commitment of time. It can also be a financial risk to the caregiver.”

The big message from Collinson and the other speakers at an MIT symposium last month was: employers and politicians need to acknowledge caregivers’ challenges and start finding effective ways to address them.

Liz O’Donnell was the poster child for disrupted work. As her family’s sole breadwinner, she cobbled together vacation days to care for her mother and father after they were diagnosed with terminal illnesses – ovarian cancer and Alzheimer’s disease – on the same day, July 1, 2014.

Her high-level job gave her the flexibility to work outside the office. But work suffered as she ran from place to place dealing with one urgent medical issue after another. She made business calls from the garden at a hospice, worked while she was at the hospital, and learned to tilt the camera for video conferences so coworkers wouldn’t know she was in her car.

“I felt so alone that summer,” said O’Donnell, who wrote a book about her experience. “We’ve got to do better, and I know we can do better.” …Learn More

December 5, 2019

College Graduates Cope with Money

College upperclassmen and recent graduates have a lot on their minds. One thing they don’t always like to think too hard about is money.

But Maggie Germano, a financial coach, encourages them to get things out in the open and talk about it. At a recent personal finance session here at Boston College, she answered students’ questions about their credit ratings, student loans, and how to avoid spending money they do not have.

Here are the five best tips from Germano, a 2009 graduate of the State University of New York in Fredonia. She now lives in Washington D.C.

Pay attention. The first step to getting control of one’s finances is to pay attention to them, she said. Not dealing with credit card bills and student loan statements doesn’t make the problems go away. “The opposite is true: the more you pay attention, the more in control you’ll be,” she said.

Get a credit rating – or fix it. The key is to have a credit card but use it judiciously. Germano advises young adults to get what’s known as a secured credit card with a low spending limit – say $500. Secured credit cards typically require users to put up a cash deposit. To slowly establish a sound credit history, spend no more than 30 percent of the card’s limit and pay it off at the end of each month.

Student loans are hard work. Germano said that, after she graduated, her rent and student loan payments equaled all of her income. She signed up for the federal government’s income-based repayment program. In this program, the government reduces the payments to reflect the low incomes many recent graduates are earning at the start of their careers. Germano said she paid off her $26,000 loan balance off about four years ago.

The secret to not overspending. She learned this trick from a client. Set up two separate checking accounts. One account is for paying monthly bills – rent, Netflix, electricity – and the payments are deducted automatically. For all other spending, use a second account with a debit card and “don’t touch” the money in the first account. Using a debit card for discretionary expenses makes it easy to keep track of how much is left to spend each month – maybe it’s better to walk than take another Uber.

“It’s very human to want new things, be social, and spend money you’ve never had before,” she said. So put “systems into place that will prevent [that] from getting out of control.” …Learn More

November 26, 2019

The Art of Persuasion and Social Security

Retirees could get substantially more in their Social Security check if they would just wait longer – up to age 70 – to sign up.

But only a tiny fraction of workers make it to 70, and more than a third get the minimum monthly benefits because they start them as soon as the program allows, at 62. A Bocconi University professor and three UCLA professors have set about trying to change minds by testing 13 ways of encouraging older workers to hold off and lock in a larger Social Security check.

The techniques, which they tried on various groups of workers between ages 40 and 61, ranged widely in approach. But two of the most successful tests had one thing in common: participants were asked to engage in a little reflection about the personal impact of choosing when to start receiving their Social Security. This approach departed from the more common strategy of trying to influence people by feeding them financial or other information.

Everyone began the same way: they saw a table showing how much more they would receive from Social Security for each year after 62 that they delayed. One of the most effective tests was an exercise in self-reflection. The participants were asked to list “their own reasons” for how delaying would help them personally. Only after this step did they list the reasons to start their benefits at a younger age.

The order of these requests was intentional and intended to counteract the tendency by most people to focus on their short-term desires. This group reported that they intended to sign up 10 months later than the control group, which wasn’t exposed to the test, according to the study conducted for the Retirement Research Consortium. …Learn More

October 17, 2019

What if Medicare Paid Your Dentist?

Two out of three U.S. retirees do not have dental insurance. Their basic choice is paying their dentist bills directly or, if they can’t afford it, forgoing care.

A new report analyzes the pros and cons of one potential solution to this pervasive problem: adding dental coverage to Medicare. Several bills that have circulated in Congress, including the Seniors Have Eyes, Ears, and Teeth Act of 2019, would do just that.

This approach recognizes that teeth and gums have everything to do with one’s health, said Meredith Freed, a policy analyst for the Kaiser Family Foundation’s Medicare policy program. Elderly people with loose or missing teeth have difficulty eating nutritious but hard-to-chew foods. Gum disease, left untreated, increases the risk of cardiovascular disease, and diabetes, which is increasingly prevalent, makes people far more prone to gum disease.

Oral health care “has a significant impact on people’s happiness and financial well-being,” Freed said. Dental coverage under Medicare would “improve their quality of life.”

But a proposal to do this would face an uphill climb in Congress. Medicare is already under-funded. Dental care would only add to the program’s rising costs. Retirees do have another option: about two-thirds of the Medicare Advantage plans sold by insurance companies offer dental benefits. …Learn More