have recently been working on a project with colleagues where we compared
research-based retirement planning recommendations with what people actually do
in real life. My assigned topic was Social Security and below are six things
that I discovered during my research literature reviews and online searches:
Social Security claiming age decision is complex and requires an analysis of
unique personal factors including health status and financial need.
American households have too little wealth accumulated to retire successfully
before their full retirement age or FRA (age 66 to 67, depending upon year of
maximize lifetime Social Security benefits, workers should consider delaying
their receipt of benefits to at least FRA if they foresee average or better
life expectancy and it is affordable to do so.
status is a key variable. Recommendations for claiming age vary for single
individuals vs. couples. A common recommendation was for men to consider
delayed claiming while women claim as early as possible.
a disconnect between simulation research results and “real world” practices.
The most popular Social Security claiming age is 62 and, in 2017, only 4% of men
and 6% of women waited to claim benefits at age 70.
are viable strategies to stop working and still postpone Social Security to
receive larger benefits later. Options include tapping IRA balances and using
reverse mortgages as sources of “stopgap” income.
research is needed to determine exactly why people claim Social Security
benefits when they do. Possible explanations include spousal pressure to
retire, mistrust of the federal government, financial need, unemployment,
uncertainty about future health status and life expectancy, and “take what you
can now” attitudes.
the past six months, a number of states have passed personal finance course
mandates for students in middle school (e.g., New Jersey) and/or as a high
school graduation requirement. Other states are considering similar legislation
and/or establishing or upgrading their personal finance curriculum content
thinking behind many of these laws is that teaching financial “rules of the
road” now can prevent costly problems later. Case in point: almost two-thirds
(63%) of American adults could not answer more than 3 of 5 questions correctly
on the FINRA National Financial Capability Study
There is, perhaps, no better time to be
involved with financial education than right now. Stars have been aligning
recently with respect to states approving course mandates, new professional
development opportunities for teachers, and increased availability of
interactive learning activities that engage students and foster retention.
In addition, several national financial
education advocacy efforts with BHAGS (big, hairy, audacious goals) are now
underway. This can only bode well for future expansion of financial education
mandates, strong curriculum content standards, and student outreach nationwide.
Next Gen Personal Finance (NGPF) set a BHAG called Mission 2030: “100% of U.S. high
schoolers will have guaranteed access to at least one semester of personal
finance instruction before graduation.” Over the past five years, this
California-based non-profit has been providing high quality materials and
professional development for personal finance teachers.
The Jump$tart Coalition for
Personal Financial Literacy advocacy effort, Project Groundswell, has a goal to
increase classroom-based financial education and teacher training in personal
finance by 25% by the end of 2025. The basic premise of Project Groundswell is
to harness the power of Jump$tart partners, parents, and other advocates to
“make the case” for financial education. An aligned web site, “Check Your School,” allows users to check if their local
school has personal finance courses and to add a school if courses exist but
are not listed.
best way to gauge the effectiveness of financial education programs is to study
how they change the financial practices of participants. The best studies
investigate causation, not correlation, using large randomly selected samples
and rigorous statistical methods. Below is a summary of three recent research
¨Mandates Matter- Research by Carly Urban and Christiana
Stoddard at Montana State University examined the causal effect of financial
education graduation requirements on college borrowing behaviors. Their study found that students in states where financial education is required to
graduate from high school make better financial aid decisions as college
freshmen; e.g., applying for grants and selecting lower-cost federal loans.
¨Payday Loan Avoidance- A study by Melody Harvey at the University of Wisconsin-Madison found that
state financial education mandates were associated with a decreased likelihood
of costly payday loan borrowing. Specifically, young adults who were required
to take a personal finance course in order to graduate are 4% less likely to
take out payday loans than peers who weren’t required to do so.
¨Long-Term Impacts- Research by Jamie Wagner and William Walstad (University of Nebraska) found
that financial education appears to have more positive and stronger effects on
long-term behaviors (e.g., having an emergency fund, owning investments, and
calculating retirement savings) for which the consequences are not fully
realized until later in life. Conversely, people often learn about short-term
behaviors (e.g., paying monthly bills and paying off credit cards) by
experience because there is regular feedback and a greater opportunity to learn
through “the school of hard knocks” (e.g., paying interest and fees on late
credit card payments).
a recent Jump$tart Coalition Partner’s Meeting, Chris, Lee, the Connecticut
State Coalition leader and a financial advisor, spoke about trends in the
robo-advisory industry. “Robo-advisor” is the term used to describe digital
platforms that provide automated financial planning and investment advice. The
advice is generally driven by algorithms with little or no human interaction.
Clients complete an online survey on which advice is based.
predictions for robo-advising are as follows:
firms (think Google and Amazon) will enter the robo-advising field as they have
already done in many others (e.g., Amazon’s purchase of Whole Foods
supermarkets in 2017).
intelligence will be increasingly integrated into robo-advising platforms so
that they will become more “human-like” and appealing to consumers.
will be increased government regulation and “fee compression” and profit
margins for advisors will be squeezed. Lower fees will increase access to
financial advice for lower net worth and younger investors.
will be new technological advances (e.g., a “real time” analysis of the cost of
buying something with minimum payments) and more mobile-friendly platforms.
blending of human financial advisors and technology components in a “high-tech
and high-touch” combination of services. Human advisors can help people keep
their emotions in check and stay on track.
serve on the Advisory Committee of the Senior Medicare Patrol of New Jersey.
SMP-NJ receives federal funding to prevent and investigate Medicare fraud.
Below are three types of fraud that were discussed at a recent meeting:
¨Medical Brace Scams- A health care fraud involving $1.2 billion
in fraudulent payments for medical braces was recently shut down. Beneficiaries
are urged to contact Medicare authorities if they receive unneeded durable
medical equipment purportedly ordered by doctors that they have never seen.
Call 1-800-MEDICARE as soon as possible to report a scam.
¨Phone Call Scams- The best defense against phone calls by
fraudsters is to not answer the telephone if you have caller ID and do not
recognize the number. Instead, let your answering machine pick up the call and
delete messages that do not come from legitimate callers. Another option is to
use call-blocking services such as Nomorobo and Hiya.
¨DNA Testing Scams- “Free DNA testing” is another scam being
directed against Medicare recipients. Following the popularity of services that
provide DNA testing for people to discover their family background, fraudulent
companies are touting DNA tests to Medicare beneficiaries as a “preventative
service.” In reality, Medicare will pay for genetic tests only in very limited
you see something, say something. Medicare fraud costs taxpayers millions of
dollars each year. SMP-NJ director Charles Clarkson noted that, if
beneficiaries and/or their caregivers do not report scams such as those noted
above, Medicare has less money to pay legitimate claims.
American has a stake in fighting Medicare fraud.