Determining how much money one will need in retirement is a mathematically and psychologically daunting task for many Americans. But new research has landed on a deceptively simple strategy for prodding workers to save.
Employees in an experiment at the University of Minnesota saved more for retirement after researchers provided them with a personalized chart with information similar to that shown below. Each employee’s chart translated a $100, $200, or $500 contribution, made every other week, into the amount of income each of these contributions would generate annually once they retired. If they saved more, they could see that it translated to more retirement income.
“We think people may have a hard time making that translation from an accumulation of wealth to an income flow,” said researcher Colleen Flaherty Manchester. “They’re used to the flow because that’s what they get every month or week in their paycheck.”
The income projections, she said, are “completing the circle for them to make it clear.” …Learn More
A U.S. Army requirement that newly enlisted men and women complete an ambitious personal finance course is having some impressive results.
At a time when financial education is increasingly being criticized as an ineffective way to raise Americans’ low saving rate, an 8-hour course held on 13 Army bases is significantly boosting how much military personnel are saving for their retirement – among both big and small savers. They also trimmed their debts.
The strong results, described in a new study by William Skimmyhorn, an assistant professor at the U.S. Military Academy at West Point, are also sending a ripple through the financial literacy community.
“The reason this study is so interesting is because it’s so unusual,” said Harvard University’s Brigitte Madrian, co-director of the household finance working group for the National Bureau of Economic Research. “There aren’t a lot of other scientific studies one can point to” that show empirically that financial education can improve an individual’s well-being, she said. …Learn More
What motivates women to get to work on their personal finances? Change.
Emotions are also important motivators. But “the most compelling factor” spurring most of the women interviewed in a focus group to take action was a significant life change, Utah State University researchers write in the Journal of Financial Counseling and Planning.
Since April is financial literacy month, Squared Away is again making an appeal to women, who continue to make strides professionally, yet lag men in understanding how to manage their money.
“Major life changes like a premature death of a spouse or divorce are often the wake-up call to people to reassess their lives,” said Utah State researcher Jean Lown, who also teaches a workshop, Financial Planning for Women.
This tendency isn’t necessarily a good thing for women. Rather than being “reactive,” she said, women need to learn to plan ahead and prepare for the future.
For Megan Rowley, who conducted the focus group, the women’s stories hit home. While Rowley pursued her master’s and worked full-time at Utah State, her husband left a part-time job to complete his MBA. After they graduated, he found employment at a pipeline company in Salt Lake City, and she became a stay-at-home mother, said Rowley, who wants to become a financial counselor when her three young children are older. …Learn More
As I sat in an orthopedist’s office last week watching the doctor poke and prod my mother’s legs – an irritated nerve may be causing her severe pain – this thought struck me: long-term care is often an unspoken topic but one of enormous magnitude.
I’ve always taken for granted that my active mother, who plays a killer game of bridge, wouldn’t need much medical attention for another 15 years. I have evidence of this, I’d convince myself: her mother lived to age 92 and some uncles lived even longer. The pain makes it difficult for my mother to walk her dog, though she gamely hobbles through her day and even insists on league bowling on Wednesdays.
It’s so much easier to shove aside worries about long-term care for the elderly – our own or our parents’ – than it is to contemplate the financial and deeply emotional issues required to care for an aging parent. The video below tells a true story about what happens when the requirements of care slam us hard, as they often do.
Violet Garcia is a single mother of Filipino descent living in Kodiak, Alaska, which is situated on an enormous island south of Anchorage. The public school worker cares for her elderly mother, who can’t be left alone. Garcia aspires to send her middle son away to college soon, but that will create a problem on Sundays, when he takes care of his grandmother so his mother can run errands. …
As delinquencies by college graduates have increased, so have their personal financial risks: 15.1 percent of loans originated in late 2010 are now delinquent, up from 12.4 percent of late-2005 loans, according to a January report by FICO, creator of the credit score. More students are also delaying their loan payments.
“This situation is simply unsustainable,” warned Andrew Jennings, head of FICO Labs. “When wage growth is slow and jobs are not as plentiful as they once were, it is impossible for individuals to continue taking out ever-larger student loans without greatly increasing the risk of default.”
American Student Assistance (ASA) is a non-profit that helps college graduates with the complex task ofmanagingtheir loans. Debtpreventionis the best course of action, and an increasingly urgent one for students. For those who are already in debt, clickherefor how to call an ASA counselor. Click “Learn More” to read a May 2011 article about ASA. …Learn More
The U.S. population is in the midst of a transition from predominantly white to one in which “minorities” will one day be the majority.
A Social Security Fact Sheet recently published by the Center on Budget and Policy Priorities in Washington throws a fresh perspective on the program, which provides the financial bedrock for most retirees. It shows that the program is even more important to African-Americans and Latinos than it is for white Americans.
Seventy-three years after Ida May Fuller became the first person to receive a Social Security check, on Jan. 31, 1940, Social Security provides more than half of the retirement income received by about two out of three elderly white Americans. But many more – about three out of four – African-American and Latino retirees rely on Social Security for more than half their income.
The obvious reason is that minorities earn lower incomes on average while they are working, according to Kathy Ruffing, a senior fellow at the Center, and that has “hampered their ability to save for retirement.”
Congress intended Social Security to be a progressive program that benefits lower-income individuals more. The Social Security Administration’s (SSA) formula for calculating the monthly check is designed to replace a larger share of the employment income of, say, a maintenance worker who has retired than it does for a retired corporate executive. …Learn More
During FAFSA season, remember this: getting the college loans is easier than managing them post-graduation.
Multiple telephone calls to Sallie Mae and the U.S. Department of Education (DOE) – and a reporter’s tenacity – were required to get to the bottom of what seemed a simple question: is my niece, a recent college graduate and special education teacher, eligible to have some of her loans forgiven?
Our maddening quest for an answer is one small example, but it raises serious concern about whether freshly minted graduates can navigate the student loan maze and figure out their best strategies for paying back their loans. Yet their success will be critical to ensuring they don’t pay more than they should and that they are able to take advantage of the federal government’s repayment and forgiveness programs.
Squared Away invites graduates and parents to share their experiences, as well as tips for managing loans, in the comments section at the end of this article.
Our saga began last summer, during an interview with a financial adviser who mentioned that the federal government offers a forgiveness program for special education teachers. I immediately thought of my niece, Rachael, who was hired last fall in a suburban Chicago district. Now I needed to confirm it.
The reason I had to make five calls is that the DOE and Sallie Mae —Rachael’s biggest single lender – repeatedly conflated my question with a loan forgiveness program for teachers in low-income school districts. Yes, I agreed each time, there is a program for teachers in low-income schools – but that’s not what I’m calling about. My question is whether special ed teachers qualify for forgiveness regardless of the income level of their school district.
My 26-year-old niece is a straight-A student and has a graduate degree and the determination learned from playing basketball in college. But when it comes to her loans, she admits, “I don’t know what to ask.” Once we entered the college-loan maze, I learned how confusing this process is – even for this veteran reporter who does know what to ask.
Here’s the chronology of calls – the first one led by my niece – between December 26 and January 2: …Learn More