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How Does Aging Affect Financial Decision Making?

January 23, 2015 Comments off

How Does Aging Affect Financial Decision Making?
Source: Center for Retirement Research at Boston College

The brief’s key findings are:

  • With the shift from traditional pensions to 401(k) plans, the welfare of retirees depends increasingly on their ability to make sound financial decisions.
  • Using a dataset that follows a group of older individuals in the Chicago area, the analysis examines how aging affects financial decision making.
  • Participants who suffer cognitive decline experience a reduction in their financial literacy but no change in their confidence in managing their money.
  • Perhaps not surprisingly then, while they are more likely to get help with financial decisions, more than half retain primary responsibility for managing their money.

National Retirement Risk Update Shows Half Still Falling Short

December 26, 2014 Comments off

National Retirement Risk Update Shows Half Still Falling Short
Source: Center for Retirement Research at Boston College

The brief’s key findings are:

  • Between 2010 and 2013, the National Retirement Risk Index improved only slightly, dropping from 53 percent to 52 percent of working-age households.
  • This result may seem surprising given that the stock market was up and housing prices had begun to rebound.
  • But other factors ­– Social Security’s rising “Full Retirement Age,” declining interest rates, and changes in reverse mortgage rules – acted as counterweights.
  • The bottom line is that retirement security remains a serious challenge; Americans need to save more and/or work longer.

Medicaid and the Elderly

July 31, 2014 Comments off

Medicaid and the Elderly
Source: Center for Retirement Research at Boston College

The brief’s key findings are:

  • Medicaid covers not only the low-income elderly but also those with higher incomes who become impoverished by health costs, such as nursing home care.
  • The percentage of high-income single retirees receiving Medicaid rises with age – from near zero for those in their 70s to 20 percent for those in their late 90s.
  • Even higher-income retirees who never receive Medicaid benefit from the insurance value that it provides, which allows them to maintain smaller reserves.
  • The analysis suggests that single retirees of all incomes value current Medicaid benefits at more than their cost but an expansion at less than its cost.

Social Security’s Financial Outlook: The 2014 Update in Perspective

July 30, 2014 Comments off

Social Security’s Financial Outlook: The 2014 Update in Perspective
Source: Center for Retirement Research at Boston College

The brief’s key findings are:

The 2014 Trustees Report shows little change from last year:

  • Social Security’s 75-year deficit rose modestly to 2.88 percent of payroll.
  • But the deficit as a percent of GDP is still 1 percent.
  • And trust fund exhaustion is still 2033, after which payroll taxes still cover about three quarters of promised benefits.

The shortfall is manageable but, with the deficit rising to about 4 percent in two decades, action should be taken soon to avoid larger tax/benefit changes later.

And the disability insurance program needs immediate attention, as its trust fund is expected to be exhausted in 2016.

Retirement — How Much Should People Save?

July 29, 2014 Comments off

How Much Should People Save?
Source: Center for Retirement Research at Boston College

The brief’s key findings are:

  • The National Retirement Risk Index framework is used to address how much working-age households need to save for retirement.
  • A typical household should get a third of its retirement income from a savings plan, with the low income needing one quarter and the high income one half.
  • A typical household needs to save about 15 percent of earnings, with the low income requiring less and the high income more.
  • For those with a savings shortfall, the necessary savings hike is much more feasible for younger households than for older households.
  • Starting to save early and retiring late dramatically reduce a household’s required saving rate.

The Funding of State and Local Pensions: 2013-2017

June 12, 2014 Comments off

The Funding of State and Local Pensions: 2013-2017
Source: Center for Retirement Research at Boston College

The brief’s key findings are:

  • Despite a strong stock market, the funded status of public plans in 2013 remained unchanged at 72 percent for two reasons:
  • actuarially smoothed assets grew modestly;
  • andCalPERS, one of the nation’s largest plans, significantly revised its reported funded ratio.
  • An encouraging sign is that sponsors appear to be paying a larger share of their annual required contribution.
  • Going forward, the funded ratio is projected to gradually move above 80 percent, assuming historical stock market returns.

The U.K.’s Ambitious New Retirement Savings Initiative

April 15, 2014 Comments off

The U.K.’s Ambitious New Retirement Savings Initiative
Source: Center for Retirement Research at Boston College

The brief’s key findings are:

  • The United Kingdom is rolling out a low-cost retirement system for workers who lack pension coverage.
  • The new system has three core elements:
    • Employers auto-enroll their workers at a 4-percent contribution rate, matched by the employer and government combined.
    • A new non-profit provides the infrastructure to keep costs low.
    • The plans’ target date funds start young workers with low-risk investments to avoid losses that could discourage saving.
  • The U.S.’s new “myRA” program includes two similar design features – low-risk investments and government infrastructure – but it lacks auto-enrollment.
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