Posts Tagged "retirement"

Getting by on Social Security

Retirement: Getting by on Social Security from Squared Away on Vimeo.

Before retiring, James Gomes said he often wasted his regular paychecks from General Electric. Arlene Starr wishes she’d saved – like her sister did. And immigrant Trung Quang Pham’s low income made it tough to set money aside.

They are residents of the Savin Hill Apartments in Boston, most of whom are “pretty much on fixed incomes,” said apartment manager Sandra Baker of CMJ Management Co.

They are not alone either. Millions of retirees rely on Social Security’s fixed monthly pensions, which average $1,181. The federal pension program provides the vast majority of retirement income for nearly one in four retired couples and nearly half of the elderly living alone. And new research for the first time determined that a large swath of the elderly leave this world with little or no assets left in savings and personal retirement accounts.

In the first of two videos, retirees in the Savin Hill Apartments generously agreed to discuss the issues they face for Squared Away. The second video – about their financial decisions and regrets over a lifetime – appears Thursday. …Learn More

For Many Elderly, Little Left as Life Ends

About half of the elderly living alone and one-third of elderly couples have less than $10,000  left in their savings and investment accounts just before they leave this world.

These grim statistics may be a more accurate gauge of retirement survival than the balances Americans have accumulated as they enter retirement, a pursuit that pre-retirees and the financial-services industry tend to focus on.

To determine where retirees wind up financially, economists James Poterba at the Massachusetts Institute of Technology, Steven Venti at Dartmouth College, and David Wise at Harvard University crunched a mass of data.  Tracking a nationally representative sample of middle-aged and older Americans, they tabulated the financial assets held by elderly couples and the elderly living alone as they approached retirement, retired and aged, and when they were last observed in the sample.

“What we take away from this is that a significant number of households have a very small cushion if they encounter any kind of financial need,” Poterba said in a telephone interview last week, referring to a new working paper, “Were They Prepared for Retirement? Financial Status at Advanced Ages in the HRS and AHEAD Cohorts.”

The following is a small slice of what the researchers found in the last years before the elderly died…Learn More

Two cartoon birds, one black, one white, sitting on a branch.

Will Saying “I Do” Affect Your Saving?

The single-married divide is dramatic: single adults between the ages of 22 and 35 are far less likely to have retirement savings accounts than are married people their age.

This difference, which is most pronounced for women but also true for men, highlights a conflict between two mega-trends. The number of single Americans has surged to nearly 100 million – 43 percent of the adult population. Yet they are less likely to save at a time that all young Americans face greater responsibility for funding their own retirement than any prior generation.

About 22 percent of single women have employer-sponsored retirement accounts, compared with 44 percent of married women. For single men, only 28 percent have employer accounts, while 44 percent of married men do, according to a February paper in the Journal of Marriage and Family by researchers at the Social Security Administration (SSA).

“By highlighting the link between marriage and retirement savings in young adulthood, our analysis identifies an often-overlooked economic outcome related to marriage,” SSA researchers Melissa Knoll, Christopher Tamborini, and Kevin Whitman write. Data for their sample of 3,894 people came from the Federal Reserve’s Survey of Consumer Finances in 2001, 2004, and 2007.Learn More

Reports Explain Key Retirement Issue

The Society of Actuaries released a series of very readable reports dealing with specific issues, from how to handle a forced retirement to whether to withdraw savings incrementally.

“Around the time of retirement, there are so many decisions,” said Joseph Tomlinson, chairman of the working group that produced the new reports. The goal of the two-year project was to provide “friendly and unbiased” information, said Tomlinson, a Maine actuary and financial planner.

He said members of the professional organization also felt the public needed information that wasn’t from “someone trying to sell something – and we’re not.”

The online reports are free. Click here. …Learn More

Street signs at the intersection of Broad and Wall Street.

Questioning Wall Street Convention

Walk into your financial adviser’s or broker’s office, and the conversation inevitably leads to your portfolio’s “asset allocation” and “total return.”

Financial planners, the media, investors – we’ve been under Wall Street’s spell for three decades. But a small chorus of skeptics, bucking the orthodoxy, argues that brokers and planners don’t always match investments with an individual’s goals and needs. The human gets lost – in more ways than one.

“People are being guided by the asset management industry,” said Boston University finance professor Zvi Bodie, co-author, with consultant Rachelle Taqqu, of “Risk Less and Prosper: Your Guide to Safer Investing.”

The industry’s premise is that “you can’t afford not to take risk,” he said, referring to the tenet that more risk means a larger potential return. But what happens if you roll the dice and lose? “They never say that,” he said.

Keen to this critique, Barclays in London and a few other large investment houses have started pitching wealthy clients by focusing on their “unique” circumstances.Learn More

A group of women in business attire holding signs with question marks on them in front of their faces.

Women Crave More Information

It’s common knowledge that women save less in their retirement plans than men do. This is a major problem, because they live longer, are more likely to require nursing home care, and need more money.

To learn why women save less, Karen Holden and Sara Kock at the University of Wisconsin, Madison, recently conducted focus groups with state employees and analyzed data for the Wisconsin Deferred Compensation Program. Similar to a 401k, the program for Wisconsin government workers also allows tax-deductible, voluntary contributions, though there is no employer match. Squared Away interviewed Holden about their findings.

Q: Do women save less, because they earn less?

Holden: Average lower earnings are a factor but more surprising is that, at any specific salary level, women contribute a lower percentage of their earnings than do men. Women on average contribute 6.28 percent of gross pay, compared with 7.03 percent for men. While lower pay and age differences accounted for some of that, being a woman led to lower contribution rates. …Learn More

A red thumbtack stuck into the number 20 on a calendar.

Target Date Funds Deciphered

This blog’s mission is to explain financial behavior – why we do what we do. It is not to provide personal financial advice about what to do. The mere mention of a “Target Date Fund” was a conversation stopper for me.

No longer. The Center for Retirement Research, which sponsors Squared Away, explains them simply and clearly in a new booklet. The name is inscrutable but the concept isn’t. In fact, your employer’s target date fund, if it is well designed, should make investing easier, not more difficult.

Check out the booklet, “Why Target Date Funds?”, (along with brochures about how to decide when to claim Social Security and how to manage your money after retirement).Learn More

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