Posts Tagged "finance"

Documentary: Navigating a 401k World

Early in this new documentary, the director’s message seems to be that retirement finances are messy, elusive, and too complicated for mere mortals to understand. He’s right on all counts.

Filmmaker Doug Orchard reminds us in “The Baby Boomer Dilemma: An Exposé on America’s Retirement Experiment” that there are no easy solutions for Social Security, which economists predict will deplete its trust fund reserves around 2034. Closing the shortfall will probably require some combination of benefit cuts and revenue increases.

Social Security is “one of the most important problems we face as a nation,” The Wharton School’s Olivia Mitchell says in the documentary.

Our other primary program – a 401(k)-style retirement savings plan – seems great when the stock market is going up, as it has until recently. Viewers are reminded of the 2008 stock market crash, which panicked older workers who realized they might not have time to make up their losses before retiring. The stock market rises over long periods of time, increasing the money in retirement accounts, but it entails risks that can be unnerving for workers and force them into making bad decisions about their investments.

Finally, the filmmaker presents a real-world example – in Florida – of the difficult decisions workers grapple with in a U.S. retirement system that has largely transitioned from defined benefit pensions, which provide regular monthly income, to 401(k) and other defined contribution plans, which accumulate a pot of savings that retirees have to figure out how to manage.

“Baby boomers are sort of the guinea pig, and we’ve said, ‘Okay you figure it out guys,’ ” says David Babbel at Wharton. …Learn More

First, Money Woes. 6 Years Later, Dementia

Gayle Blanton

Gayle Blanton, the blogger’s mother

My 85-year-old mother is on top of her bills. She pays several of them online, which is impressive enough, and she knows which bill is due when.

So, we should both take some comfort in the fact that she is not having difficulty managing her money, which is an early sign of dementia.

The connection between poor money management and declining cognitive capacity was established in research years ago. An obvious next question – when does this early warning system kick in? – is answered in The Journal of the American Medical Association.

The researchers followed more than 81,000 men on Medicare for more than a decade and linked their medical records to their Equifax credit reports. The men who would eventually be diagnosed with Alzheimer’s disease or dementia started missing the due dates on their bills about six years before the diagnosis.

There are many reasons for the gap between signs of trouble and an actual diagnosis. If family don’t detect a decline in cognitive ability, they won’t ask a doctor to administer a dementia test. Family might confuse early-stage dementia with memory loss, which is a natural part of aging. One financial manager said some of her clients try to hide that they’re having trouble handling their finances – or “do not want to admit the problem to themselves.”

If dementia goes undiagnosed, the financial problems get worse. A second finding in the study was that about 2½ years prior to a dementia diagnosis, retirees’ credit scores were much more likely to slip to subprime levels, or below 620 points. …Learn More