December 10, 2013
Compare Your Retirement to Peers
How are your retirement plans going? If you’re a conservative Generation Y investor, are you in the mainstream? Baby boomers, how many in your generation are planning to retire at the same age you do?
Compare yourself with your peers in this cool interactive quiz developed by the Boston mutual fund company, Fidelity Investments.
Click here to check it out.
As you answer each question, you can compare yourself with your peer group’s answer to that same question, based on a prior survey for Fidelity by the polling company, Gfk. Your peer group is determined by your income and your generation – baby boomer, Generation X and Generation Y. Fidelity also provides useful information and tips with each question. …Learn More
November 14, 2013
Will Millennials Be Ready to Retire?
As he logged on to his online 401(k) retirement account, Jordan Tirone, a 25-year-old insurance underwriter, explained the mental accounting behind his 5 percent contribution.
He pays $300 a month to live with his mother so he can pay off student loans. Nevertheless, a regular paycheck from his Hartford, Conn., employer is finally giving him some financial stability. “I’m feeling like I’m gaining some traction,” he said.
Spontaneously, he clicks his mouse and increases his contribution to 6 percent of his salary.
Although it can be difficult to focus on a retirement that is still 40 years away, many young adults like Tirone try very hard to save. But are they doing enough? A lot of evidence suggests they’re not, either because they can’t afford to, refuse to, or don’t know what to do.
Adults in their 20s and early 30s, in a recent survey of 401(k) participants by Brightwork Partners LLC, predicted they would have to rely on their personal savings for half of their income in retirement.
Their 401(k) contributions don’t square with their expectations. Data on retirement plans administered by Fidelity Investments show that adults in their late 20s contribute 5.9 percent to their 401(k)s; by their early 30s, that increases to 6.5 percent.
But a typical 25-year-old who wants to retire at age 67 should contribute anywhere from 10 percent to 12 percent of his pay, according to various estimates. … Learn More
November 7, 2013
Healthcare Credits Reach Middle Class
Individuals earning nearly $46,000 a year and families of four earning $94,000 may be eligible for federal tax credits under the new health care law.
Tax credits are the mechanism by which the federal government caps how much people pay for health insurance premiums, which are set by the private market. The premium caps are based on how much someone earns, relative to the federal government’s definition of poverty.
Here’s an example of how premiums are calculated for, say, young, single workers who earn between $17,236 and $22,980 per year, which is between one-and-one-half and two times the poverty level. The premiums, which range from 4 percent to 6.3 percent of their income, start at about $57 a month for those at the low end of this income range and up to $121 at the high end.
In the following charts, Squared Away converted into dollars the income and premiums that the Henry J. Kaiser Foundation, in its brief on the healthcare law, has expressed as percentages of the U.S. poverty thresholds: …Learn More
October 24, 2013
Oldest Americans Are Lucky Generation
Americans in their 70s and 80s have earned more and are wealthier than the baby boom generation – for the simple reason they were born at the right moment in history.
It was easier for members of this older generation to get ahead, because they came of age in the aftermath of World War II, when economic and demographic trends were strongly working in their favor, contends new research by William Emmons and Bryan Noeth of the Federal Reserve Bank of St. Louis. The emergence of a modern social safety net and the rise of unions may’ve also contributed to their relative prosperity, they said.
Baby boomers born after about 1950 do not seem to have the same income and wealth over their working and retired lives that their parents have enjoyed, even after the research takes into account numerous things that determine an individual’s prosperity, such as their level of education. If the current trend continues, these younger boomers just won’t be as lucky.
Birth year “comes up as a significant variable in terms of influencing income and wealth,” Emmons, a senior policy adviser, said about the study, which analyzed decades of U.S. data on household finances. …Learn More
October 22, 2013
Food Stamps Need Rises in Good Times
Enrollment in the federal food stamp program, known as SNAP – for Supplemental Nutrition Assistance Program – has more than doubled over the past decade to 47 million.
What’s remarkable is that for the first time the number of Americans receiving food stamps increased even in a period when the economy was growing. During the 2003-2007 expansion, the SNAP case load, in a break with historic trends, rose 24 percent.
One explanation is the change in the longstanding correlation between the unemployment rate and poverty, according to research findings by economists Matt Rutledge and April Yanyuan Wu of the Center for Retirement Research, which were presented at the Retirement Research Consortium meeting in August.
Poverty used to fall in tandem with the jobless rate, reducing the need for food stamps. But the researchers found that the mid-2000s expansion was different: poverty did not decline as the economy grew.
In the recovery that has followed the Great Recession, the number of people receiving food stamps continued to rise, according to federal data.
The assumption has always been that a stronger labor market will reduce the need for food stamps. But this new trend suggests rising employment might no longer be enough. Reducing the food stamp rolls may require a broader recovery or initiatives to reduce poverty and provide more jobs for the marginally employed.
Full disclosure: The research cited in this post was funded by a grant from the U.S. Social Security Administration (SSA) through the Retirement Research Consortium, which also funds this blog. The opinions and conclusions expressed do not represent the opinions or policy of SSA or any agency of the federal government.Learn More
October 17, 2013
Video: Mutual Funds or Designer Shoes?
Prithi Gowda’s animated video was one of two winners in a competition among New York University film school students and alums to produce a video that would turn young adults on to mutual funds. The winners were awarded a trip to Monaco to premier their work.
The filmmaker practices what she preaches in this short animation, “Frenemies.” Gowda’s freelance work as a website designer and videographer for Wall Street firms has allowed her to build up “a nice, comfortable savings.” Investing, she said, has given her the freedom to start her own company, 21st Street Projects in Manhattan.
“I just feel strongly the world could be a much better place if people really understood how to deal with their finances,” Gowda said.Learn More
October 15, 2013
U.S. Families: Not Poor But Feeling Poor
New research shows the share of Americans who lack enough ready cash on hand for emergencies shot up in the aftermath of the Great Recession.
These families do not have access to the liquid assets – cash or funds in their checking or savings account – to cover emergencies like layoffs, health crises, or even car repairs, according to an analysis of federal data by Caroline Ratcliffe of the Urban Institute, who presented the finding to the Congressional Savings and Ownership Caucus in late September.
Ratcliffe’s measure of financial fragility was families who did not have enough liquid assets to subsist at federal poverty levels for three months. That amounts to $2,873 for a single person, $4,883 for a family of three, and $5,888 for a family of four.
By this measure, 37 percent of families in the middle income group – earning $35,600 to $57,900 a year – in 2010 were financially fragile – up sharply from 28 percent in 2007, a year before the Great Recession began. No income group was spared by the downturn: in most cases, the share of families at risk increased between 9 percentage points and 13 percentage points.
Ratcliffe said that financial problems can cascade if cash-poor families resort to high-cost loans or credit cards to pay their bills, and building wealth becomes extremely difficult.
“A shortage of liquid assets can lead to cycles of debt when financial emergencies arise,” creating “further financial instability,” she said.Learn More