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What the Research Can Tell us about Retiring

It’s difficult to envision what life will look like on the other side of the consequential decision to retire.

But research can help demystify what lies ahead – about the decision itself, the financial challenges, and even the taxes. Readers understand this, as evidenced by the most popular blog posts in the first three months of the year.

Here are the highlights:

The retirement decision. The article, “Retirement Ages Geared to Life Expectancy,” attracted the most reader traffic. Myriad considerations go into a decision to retire. But a sense of whether one might live a long time – because of good health or simply seeing that parents or neighbors are living unusually long – is a compelling reason to postpone retirement either to remain active or to build up one’s finances to fund a longer retirement.

A recent study found that as men’s life spans have increased, they have responded by remaining in the labor force longer, especially in areas of the country with strong job markets and more opportunity. This is also true, though to a lesser extent, for working women.

The planning. The second most popular blog was, “Big Picture Helps with Retirement Finances.” It described the success researchers have had with an online tool they designed, which shows older workers the impact on their retirement income of various decisions. When participants in the experiment selected when to start Social Security or how to withdraw 401(k) funds, the tool estimated their total retirement income. If they changed their minds, the income estimate would change.

The tool isn’t sold commercially. But it’s encouraging that researchers are looking for real-world solutions to the financial planning problem, since the insights from experiments like these often make their way into the online tools that are available to everyone.

The taxes. It’s common for a worker’s income to drop after retiring. So the good news shouldn’t be surprising in a study highlighted in a recent blog, “How Much Will Your Retirement Taxes Be?” Four out of five retired households pay little or no federal and state income taxes, the researchers found. But taxes are an important consideration for retirees who have saved substantial sums. …Learn More

Video: Grandparents as Substitute Parents

In 2015, the journal Pediatrics estimated some 3 million children were living with grandparents – and the number is certainly higher today. Grandparents find themselves in a caregiving role in the aftermath of parents’ myriad personal traumas, including opioid addiction, suicide, incarceration, and now COVID-19.

In this excellent PBS NewsHour video, “Grandfamilies,” grandparents tell journalist Stephanie Sy about the financial and emotional toll of caring for children. Despite the challenges, they wouldn’t have it any other way.

But the financial strain is real. Some of the people Sy interviewed said their childcare duties have forced them to close businesses, and others are earning less due to the pandemic.

Lisa Banks stretches herself thin helping each of her three grandchildren with their remote learning. The new members of her household have also increased the electricity and food bills – her two grandsons are teenagers. “It’s like, I’m hungry, I’m hungry, I’m hungry. You hear it all day,” said Banks, who gets food assistance from a non-profit on Sundays.

COVID-19 adds another layer of worries. Kim Elia, who is standing in for her 11-year-old granddaughter’s parents, is recovering from the disease. “I was truly afraid to die because of what would happen to Brooklyn,” she said.

Raising children is a big job for young adults. A second go-around late in life seems even harder. …Learn More

Converting a Desire to Save into Saving

 

Save. Budget. Spend less on takeout.

“We know what we need to do,” financial behavior expert Wendy De La Rosa says. “The question is how to do it.”

Consider one of the pandemic’s lessons for workers: it’s important to build up an emergency fund for a potential financial catastrophe. But how to translate that into action?

De La Rosa, who founded the Common Cents Lab to help low-income workers manage their limited resources, has conducted research showing that people can overcome the psychological barriers to saving by changing the financial cues around them.

In this Ted video, she provides three practical tips, one of which she applied to her own life. After spending $2,000 in a single month on a ride-sharing app in Manhattan – “death by 1,000 cuts” – she vowed not to do it again. She did it again anyway.

So, she changed her financial cues. She deleted the credit card attached to her app and linked the app to a debit card with a $300 limit per month.

To change behavior, De La Rosa said, “change the decision-making environment.” …Learn More

Map of the United States

Where Will You Retire? This Might Help

The toughest part of Paul and Cathy Brustowicz’s decision to relocate from New Jersey to Summerville, South Carolina, was leaving behind their two grandchildren. The retirees also miss the theater and dinners in Manhattan.

A big advantage of South Carolina, though, is “more house for the money,” Paul Brustowicz said. The couple also had a few old friends who were already living there, and the warm weather is nice, though it, too, involves a tradeoff: high summer humidity and hurricane season. As for amenities, it’s a quick drive to Charleston for dinner, the airport, and the Medical University of South Carolina.

“Overall, it was the right move for us,” he said about the 2012 relocation.

South Carolina ranked a very respectable 14th in WalletHub’s 2021 report on the best and worst states to retire. New Jersey, on the other hand, is squarely in last place because of its steep cost of living.

Also at the bottom of the ranking are New York – another very high-cost state – and Mississippi, which is ranked as having a subpar health care system.

Wallet Hub’s 50-state rankings are based on three categories: affordability, quality of life, and health care. A chart displays each state’s ranking overall and in each category.

Florida, with its year-round sun, golf, and very large retiree community, came out on top. Housing is a relative bargain there, and taxes are low. The tradeoff is the state’s mediocre health care system.

After Florida comes Colorado, which gets high marks all around, and Delaware, which is an affordable retirement spot. …Learn More

2021 art

Our Popular Blogs in the Year of COVID

2020 was a year like no other.

But despite the pandemic, most baby boomers’ finances emerged unscathed. The stock market rebounded smartly from its March nosedive. And the economy has improved, though it remains on shaky ground.

Our readers, having largely ridden out last spring’s disruptions, returned to a perennial issue of interest to them: retirement planning.

One of their favorite articles last year was “Unexpected Retirement Costs Can be Big.” So was “Changing Social Security: Who’s Affected,” which was about the toll that increasing the program’s earliest retirement age could take on blue-collar workers in physical jobs who don’t have the luxury of delaying retirement.

COVID-19 in the nation’s nursing homes has caused incomprehensible tragedy. A nursing home advocate explained how this happened in “How COVID-19 Spreads in Nursing Homes.” And the mounting death toll in nursing homes surely confirmed a longstanding preference among baby boomers – as documented in “Most Older Americans Age in their Homes.”

Despite the economy’s halting recovery, layoffs due to COVID-19 still “may be contributing to the jump in boomer retirements,” the Pew Research Center said. Pew estimates that 3.2 million more boomers retired last year than in 2019, far outpacing the increases in recent years.

The layoffs have no doubt forced some boomers to start their Social Security earlier than planned, as explained in “Social Security: Tapped more in Downturn” and “A Laid-off Boomer’s Retirement Plan 2.0.” But unemployed older workers who are still too young for retirement benefits might apply for disability insurance, according to a study described in “Disability Applications Spike in Recession.”

Baby boomers hoping to ease into retirement on their own terms liked a pair of articles about ongoing research by Harvard Business School professor Teresa Amabile: “Mapping Out a Fulfilling Retirement” and “Retirement is Liberating – and Hard Work.”

Other 2020 articles popular with our readers included: …Learn More

Covid vaccine ornament

A Splendid Holiday Gift: a Vaccine

Rather than look back on a bizarre and painful 2020, let’s look ahead to the bright side: a vaccine.

It is truly remarkable that top-notch scientists have been able to create several vaccines in record time. Producing and delivering them will be another hurdle, and questions remain about side effects and how long a vaccine will protect us. Many Americans’ reluctance to strictly adhere to public health standards will unfortunately slow our ability to put the virus completely behind us.

But scientists and public health officials seem confident the vaccines can eventually snuff out this once-in-a-lifetime pandemic.

Only then can we get back to our normal activities, such as traveling, eating at restaurants, and shopping – in person, rather than online. More important, increasing our consumer spending will give a shot in the arm to the economy and help put many Americans back to work after months of unemployment.

Have a joyful but subdued holiday – and enjoy the anticipation of a happier 2021!

Squared Away will return on Jan. 5 with a round-up of our readers’ favorite blogs in 2020.

Read our blog posts in our ongoing coverage of COVID-19.Learn More

Video Documents Nursing Home Tragedy

When COVID-19 started spreading through nursing homes last spring, the United States had no first-hand experience battling a coronavirus.

That’s a fair point but an inadequate explanation for a tragedy in which more than 100,000 nursing home residents and staff to date have died of COVID-related causes.

There is plenty of blame to go around. Governments either wouldn’t or couldn’t provide enough personal protective equipment, forcing the certified nursing assistants to don garbage bags and recycle masks. A shortage of tests limited the ability to detect asymptomatic cases and contain outbreaks. The Centers for Disease Control, prior to the pandemic, had documented poor infection control practices. This made nursing homes a petri dish for spreading the virus. Acute staffing shortages compounded the dangers.

This video by AARP is a chronology of what went wrong. It’s a horror story of panic, chaos, and blunders. It’s also a start on understanding how we can do better in the future to protect our most vulnerable population – the elderly.

“We need to continue to raise alarms and demand action to prevent anything like this from happening again,” said Bill Sweeney, a senior vice president of AARP.  AARP is a corporate partner of the Center for Retirement Research, which sponsors this blog.

Read our blog posts in our ongoing coverage of COVID-19.Learn More