Older Americans Are The Happiest

Americans grow happier as they grow older. The study also found that baby boomers are not as content as other generations, African Americans are less happy than whites, men are less happy than women, happiness can rise and fall between eras, and that, with age the differences narrow. The happiness measure is a guide to how well society is meeting people’s needs.

Charted happiness across age and racial groups, Yang Yang, Assistant Professor of Sociology at the University of Chicago, found that among 18-year-olds, white women are the happiest, with a 33% probability of being very happy, followed by white men (28%), black women (18%) and black men (15%).

Differences vanish over time, however, as happiness increases. With age comes positive psychosocial traits, such as self-integration and self-esteem; these signs of maturity could contribute to a better sense of overall well-being. Second, group differences in happiness decrease with age due to the equalization of resources that contribute to happiness, such as access to health care, Medicare and Medicaid, and the loss of social support due to the deaths of spouses and friends.

Looking over the study’s 33-year period, she noticed definite upticks when the nation flourished economically. For example, she found that 1995 was a very good year on the happiness scale.

Programs provide chefs, home repair and other services to help suburban seniors age in place.

Many community planners believe that aging-in-place programs could help many elderly homeowners avoid institutional care. More than 100 programs exist in places as diverse as Boston’s Beacon Hill, New Canaan, Conn., Madison, Wis., and the Indianapolis suburbs. Often, it’s the small, inexpensive service (a ride to a doctor’s appointment or home-delivered groceries) that can make all the difference.

Aging-in-place programs got their start in 1986 in Penn South, a ten-building apartment complex in Manhattan. Residents and local social-service agencies created the program after an 84-year-old woman with dementia wandered onto a roof and died of exposure. “This event spoke personally to residents about their vulnerability,” says Fredda Vladeck, director of the Aging in Place Initiative at the United Hospital Fund.

ElderSource created Elder-Friendly Communities, which covers an area of mostly two-story, three-bedroom homes built 40 to 50 years ago. “Our program works in the suburbs because we literally went door-to-door to introduce ourselves,” says Claudette Einhorn, chairperson for ElderSource. Elder-Friendly Communities’ vendors, such as drivers and gardeners, offer discounts from 5% to 50%. The program charges an annual membership fee of $120. Beyond the support services, the program provides social and educational activities. In some communities, the residents themselves are creating aging-in-place programs.

When Is It Time For Financial Intervention, Mom and Dad?

When does it make sense to search for a planner for your parents? In Jennifer Openshaw’s opinion, right now. It doesn’t matter what age or stage they’re at. Problem is, the majority of Americans wait until a crisis or retirement hovers over them to take action.

You can always use a triggering event to broach the topic, such as:

• A divorce

• An illness, even a short-term one. “What if this had been more serious?”

• Loss of income, even if minor. “What if [the primary breadwinner] lost his job?”

• A refinancing or a new loan. “Why did you need to refinance? Are you having some financial pressures?”

• Unpaid credit cards, other bills - a sign of trouble

Openshaw believes the keys to success in making this happen are:

1.) Remove yourself from the process. Don’t assume that just because you’ve been down the financial-planning road or invested your money yourself that you’re the one to handle it for your parents.

2.) Bring in an independent, fee-only adviser. Most advisers will only talk to you if you have $500,000 or $1 million in assets. That is, unless they sell commission-based products. Opt for an adviser geographically close to your parents, and one who is truly objective - meaning, they’ll charge by the hour, as high as $400 depending on where you live.

As part of her search, Openshaw developed a mini-RFP (request for proposal) that outlined my requirements (location, experience, references) and her needs. Those needs might include any of the following:

• Cash-flow (budgeting)

• Retirement planning

• Investments

• Insurance (life, but maybe long-term, too)

• Taxes

3.) Give them a say in the decision. Don’t forget to allow your parents the opportunity to meet and give the “go-ahead” with your planner.

Each of the following mistakes can cost you $100,000.

1.) Investing too conservatively during retirement. If you follow conventional wisdom and, as you approach retirement, shift money out of stocks into more stable investments you could miss many opportunities. Instead of parking too much of your assets in bonds, invest in an asset mix that leaves enough room for Standard & Poor’s 500 stock index.

2.) Launching a divorce war. A full courtroom showdown can easily cost $250,000. Try to soften the financial impact by using a lower-cost mediation option. Or try to work on saving your marriage.

3.) Underinsuring your home. If you’ve lived in the same house for at least 10 years, it’s probably worth 50% to 100% more than you paid for it. But if you haven’t updated your homeowners insurance, you could lose those gains if disaster strikes. Ask your insurer to reassess your home’s replacement cost and adjust coverage accordingly.

4.) Overpaying for your mortgage. The annual percentage rates on mortgages in a given area can vary by close to a percentage point. Over a typical 30-year term, this can cost you $27,000 on a $299,000 home. Shop for the best mortgage rate by checking local banks, your credit union, big-lender Web sites and mortgage-related sites.

5.) Maintaining an unhealthy lifestyle. Bad health habits not only catch up with you as you age but they can also hit you in the pocketbook in the form of higher life-insurance premiums. Before you apply for life insurance, consult your doctor about the best way to get your health status in line with the “preferred plus” underwriting requirements.

6.) Paying needless fund fees. If you buy mutual funds from a broker, you could pay a commission, or “load,” of up to 5.75%. Annual expenses can also vary among funds, from 1.5% or more a year to as little as 0.1%. Fix: Choose no-load mutual funds with low expense ratios. You can buy them directly from investment companies such as Fidelity, T. Rowe Price, and Vanguard.

Many parents say they will do anything for their children. But that doesn’t mean you have to go out on a financial precipice. Median Price Per Child: $338,000  

Children born in the U.S. today will cost their parents more than $338,000, on average, by the time they graduate from a public college. Send your precious offspring to a private university, and you can expect to shell out an additional $70,300 for tuition. Think education is your only big tab? Think again. Just keeping a roof over junior’s head will cost nearly $105,000 through age 18. Food will eat up $41,400, and health care will set you back $17,400 over 18 years.

Experts say the best way to plan for many of the biggest expenditures, be it college, vacations, child care, summer camp, or a Bar Mitzvah, is to set aside individual reserves of cash for each goal.  Most people don’t do that. Instead, they just throw it on a credit card and worry about it later. A good plan is an automatic investment program that transfers money out of your bank account on a recurring basis. Businessweek asked financial planners and advisers for additional strategies and tips on planning and saving for some of the biggest costs of child rearing.

College: Since this is your biggest potential expenditure, start saving as soon as possible, ideally within the first year of your child’s birth. Your best bet is probably a what’s known as a 529 college savings plan because the money accrues tax-deferred—and some states let you put away as much as $300,000. Here’s a good calculator to give you an idea why you should start saving now.

Housing: Aside from college, one of the biggest costs associated with raising children is providing shelter, which amounts to more than $100,000 per child over an 18-year span. The bulk of those costs go toward a mortgage, property taxes, maintenance, repairs, utilities, and furnishings. You can save money by handling some home maintenance yourself—but only tasks you’re capable of doing well.

Food: It certainly helps to shop in bulk at stores like Costco and Sam’s Club, but make sure you bring a list and stick to it. Another smart way to keep food costs in line is to learn to cook.

Activities: Extracurricular activities can get very expensive, with an average cost of $35,000 over an 18-year period. While your son or daughter might play ice hockey for just five months out of the year, your best bet is to set money aside year-round to finance things like the cost of team membership, additional ice time, travel, and equipment. Though parents may want to expose kids to many different experiences, one way to limit expenses is to focus your children on a few activities they are passionate about.

Child and Health Care: Costs for child care and health care are significant, though they vary wildly around the country. Find out whether your employer offers a child-care or health-care flexible spending account. If you are in the 28% federal tax bracket and live in a state with a 5% tax rate, a $5,000 annual contribution saves you $1,650 in taxes.

Lessons On How To Keep Your Children Wealthy

Some teens with ultrawealthy parents have been known to go prom-dress shopping in Paris, drive an $80,000, fully loaded Range Rover to college and leave their laundry for the servants to wash. It sounds great, but it also has its perils:  What if these children lose their potential to ennui or bad choices and end up squandering the huge sums of money their parents give them?

With $41 trillion in private wealth set to be transferred in the United States in the first half of this century, both old- and new-money families are wondering how to prepare their children for the riches coming their way. The important question is, ‘How do you build confidence and competence in the next generation so they can handle whatever inheritance you leave them?’ Parents may want children to show that they can live on a budget, manage a portfolio, start a career or have a variety of life skills before receiving great sums of money.

Financial readiness comes from parents who act as role models when it comes to their family values, enforce limits and consequences and find ways to offer practical and continuing financial training. In a survey of affluent families, only 27% of parents said they had shared or discussed the family budget with their teenage children. While some families play down their wealth and its history, others incorporate their legacy as an important aspect of child-rearing. Most wealthy parents aspire to raise their children with middle-class values but with an upper-class balance sheet, says Kristi Kuechler, director of the Institute for Private Investors. The challenge, she says, is how to convey the importance of those traditional values of hard work, accomplishment and self-reliance to young people whose wealth could permit them to pursue none of those things.

A family’s charitable foundation or business can be a bridge between generations — and a way to share both family values and financial acumen. Some wealth managers advise bringing in the next generation, starting in the teenage years, to work alongside the older generation. Ms. Kuechler also advises parents to make sure that their heirs receive formal investor education so that they can interact confidently with their financial advisers and ask the right questions. Many wealth management firms do provide educational opportunities for their high-net-worth clients. Some firms may consult with family members one on one. Some parents take financial education into their own hands. Wealthy parents often wonder about when to tell their children about the family’s money — or that they will inherit a great deal of it. Telling them too early may disable a budding career, but telling them too late may squander the time needed to teach them how to manage it.

While independence in children is highly prized, its recommended to promote interdependence in children, too. To avoid siblings fighting over the family fortune when their parents are gone, he recommends that they work together as they are growing up on less confrontational subjects like philanthropy or planning the family vacation.

Oxymoronic Volunteers

An ever-growing number of retirees and nonprofit executives say paid volunteering is an apt description of the way modern retirees view nonprofit work. And while no one has gathered statistics on the tendency, experts say there is a good chance that the automatic link between doing good and working for nothing has been permanently severed. “People used to say, ‘Here I am, what do you need done?‘ ” said Deborah Russell, director of work-force issues for AARP. “Today’s retirees say, ‘Here’s what I do well, how can you use it, and what will you pay?’”

Economists, behavioral scientists and gerontologists point to multiple reasons behind the switch. For some retirees, economics ranks high on the list. People expect to live for many decades beyond retirement. Many started their families late, which means they may be financially responsible for children as well as aging parents. They may not want to continue full-time work at high-pressure jobs, and for many, unpaid volunteerism is simply not practical. Even the wealthiest retirees insist on being paid for doing good. Volunteer work used to be considered women’s work, so it is not surprising that career women reject the concept.

Modern organizations are leaner and more competitive than they used to be, and the idea that you get paid for performance, not just for showing up, has taken hold. Nonprofit executives say the reverse is also true: people who are paid work harder and seem more committed to their jobs.

Here’s a list of calculators ranging from Mortgage APR to Auto Rebate vs. Low Interest Financing to Hourly Paycheck.

Millionaires Have Problems Too

The surge in the number of millionaires in the world is spawning a fast-growing industry — wealth psychology. U.S. wealth managers are adding services such as psychological counseling for wealthy clients to set them apart from the competition, experts said. Some of these psychologists handle clients who feel guilty about inheriting wealth. Others help with problems such as how to raise children in an environment where almost anything can be bought, or intervene when spouses fight over money.

One of the biggest concerns: How am I going to raise my kids responsibly with all this money? Some experts predicted that within 10 years most financial management firms will offer psychological services. The more cutting-edge wealth management firms and banks are beginning to realize they need to get people available and in house. Wells Fargo recently hired two psychologists to meet with its clients, and is seeing demand for another new service for the wealthy — catering to the aging parents of millionaires.

The United States is the world’s biggest wealth market but many players find it hard to achieve and sustain profitability in part because they cannot differentiate themselves, according to a recent study by Boston Consulting Group.

Common Slips We All Make

Insurance is the product you buy in case the unthinkable happens. Unfortunately, by the time you need it, it’s too late to make sure you have the right type and amount of coverage. Make sure you don’t make any of the following seven mistakes while buying financial protection against disaster.

1. Not Shopping Around   The most common mistake is that people don’t shop around for insurance. They wind up going to one agent and letting that person handle all of their insurance needs. If you would just read the insurance buyers guides offered by their state insurance departments and then call around to a few companies, it could make a huge difference in the price they pay for insurance.
2. Comparing Only Rate Prices   When you’re shopping around, it’s best to look not only at prices but at companies’ reputations for paying claims. You can check out insurance companies by looking at how they rank with third-party insurance rating companies, such as A.M. Best, Fitch Ratings and Standard & Poor’s. Examine a company’s complaint ratio. State insurance departments sometime publish this information, and the Web site of the National Association of Insurance Commissioners publishes these numbers.
3. Not Comparing Agents   Not all agents are created equal. First, make sure an agent is properly licensed. Check with your state department of insurance. Then make sure to get referrals and ask each agent some questions. Ask them to explain the policy. Ask what value they’re going to bring to the table. How will they help you?
4. Not Understanding Your Policy   A consumer’s biggest mistake is not knowing what’s in the fine print of a policy. Many people don’t know what their deductibles are and don’t realize what’s not covered until disaster strikes.
5. Not Buying Enough   Don’t skimp on health insurance no matter how robust you feel today.  It’s really important so you don’t just go into such medical debt that you never can dig your way out. People think they don’t have to deal with it until they’re 50. You’re uninsurable at that point. Consider getting life insurance if you have dependents. It can help pay the bills after a working parent dies unexpectedly. Buy it when you’re young and healthy because it’s much cheaper and easier to obtain when you don’t have a chronic disease.
6. Buying Unncessary Insurance   You don’t need life insurance on children, only on people who have dependents. In terms of specialized insurance, don’t buy insurance from somebody you went to buy something else from. If you’re worried about identity theft, don’t rush out to buy identity-theft insurance. Check your homeowners policy. It might already include some identity-theft protection. Credit cards also offer some protection against unauthorized charges.
7. Not Updating Coverage   Evaluate your coverage whenever you go through a life change, such as birth, adoption, marriage or divorce, but at least once annually. If your home has gone up in value, make sure you increase your policy limits. If the kids have left home, you can get more-affordable auto insurance coverage.

Grandparents Aren’t Always Aiming The Money Where It’d Best Be Used

Being able to spend money on your grandchildren is truly one of life’s great pleasures, according to a new survey by the American Association of Retired Persons (AARP). Grandparents at all income levels typically spent 1.3% of annual income on their grandkids, and that many folks would spend more if they had more. Fun as it is, it may not be easy money. Family complications (ungrateful kids who never send thank-you notes or parents who don’t agree with the way the gifts are spent) are just a part of it. Most of the gifting grands expressed concern that their grandchildren didn’t understand the value of a dollar. There’s also the possibility the grandparents aren’t aiming the money where it will be best used. Sometimes it’s good to take some of those dollars and direct them to something they’ll really need - like a college education or the down payment on a first house. Here’s how to have some fun while helping the kids the smart way:

• It’s great to be the grandparent who steps in and supplies all. And everybody of every age loves a birthday card with money in it. But use a portion of what you can afford for these visible gifts, and keep some aside for a bigger gift down the road.
• Talk to the parents before setting up any accounts or handing over dramatic gifts. Saving money in your grandchild’s name can affect the family’s tax situation. They may have their own preferences for how money is saved. Don’t use your money to force your kids to behave in any specific way relative to their children.
• Young children should have three piggy banks: one for everyday spending and splurges, one for their longer-term goals (the Xbox or iPod), and one for charity. Pouring coins into each category when the kids are little gives them some instant gratification and might reinforce the differences between those three categories.
• Consider a 529 college savings account. It can be started with small amounts of money when a child is born. With regular monthly contributions (or even just nice checks on birthdays and holidays) you can build a significant amount of money. Put in $1,000 when baby is born, add $50 a month, and at an earnings rate of 8% she can have $28,200 to spend on college when she’s ready.
• Start a family investment club. If your grandchildren are teens and have the interest in learning about investing, you can set up a family investment club, even if you have to seed the club’s account with your own cash for a while. The grandkids can learn how to choose stocks or mutual funds by investing the club’s money. Each “meeting” can include a simple lesson that different family members present.
• Help with that first house, if you can afford to. Helping with a home purchase is a gift that is not likely to be squandered.  Helping to buy a home also can free up some of the young person’s income to fund retirement and the education of his or her own children.

“Senior Experts” Who Claim To Help Manage Money For An Outrageous Commission

Less than a year before he died, an ailing, wheelchair-bound Arthur Moyer, 79-year-old former machinist, converted his $500,000 life savings into a complex investment he could not tap for a decade without incurring steep fees. He poured his money into a deferred annuity at the urging of a salesman who collected a hefty commission and presented himself as a retirement expert, according to Moyer’s son and a family adviser. They said Moyer spent the final weeks of his life slumped with his head between his knees, fending off depression. On the day Moyer was buried, a letter arrived, saying that the insurance company had agreed to the family’s demands to unwind the deal and return his life savings.

State and federal authorities say the Moyer case reflects the kind of misleading sales pitches that are directed at senior citizens, who control more than $14 trillion in assets, according to AARP’s Public Policy Institute. Government officials worry that unscrupulous financial advisers are preying on retirees by calling themselves senior experts, using fancy titles to lure the elderly to marketing seminars and then locking up their savings in investments that carry high commissions and withdrawal fees. Federal regulators and authorities in seven states are set to release the results of an investigation of firms that run “free lunch” investment seminars, which draw large numbers of retirees. The results have produced multiple law enforcement referrals. SEC leaders and their state counterparts will host a daylong summit Monday to discuss a nationwide approach to combating bogus yet official-sounding titles that salesmen use to curry favor with older investors. The nerve of some people…

“Some people are giving everything away before they die. They want to see how it turns out.”

You used to have to wait for a loved one to die before you found out how much you were going to inherit if you were going to inherit at all. That’s no longer the case. Now, if you’re among the lucky minority of Americans who have received an inheritance or expect one, you’re increasingly likely to get at least some of it while your relatives are still alive.

“Giving while living” is becoming popular as more Americans decide to spread their money around while they’re still here to see its impact. They’re giving to children, grandchildren and others. They’re paying for college educations and providing down payments for houses. They’re setting up trusts and paying for vacations. To keep families working together and to support favorite causes, more Americans are setting up private foundations and hiring their children to run them or serve on the boards. The number of independent foundations has jumped 77% in the past 10 years to 63,059. Nine out of 10 of them are family foundations.

According to a USA TODAY/Gallup Poll of 1,012 people taken this month, 22% have received what they regard as a large gift of money from relatives who were still alive. Paying for education is one way that older generations are helping younger ones. In a 2006 survey of 828 people who had grandchildren under age 21, 55% said they contribute in some way to their grandchildren’s education. Fewer than one-quarter of Americans ever inherit money, according to an AARP study, and most of it goes to the wealthiest people — those with net assets exceeding $450,000.

Americans earned a smaller average income in 2005 than in 2000

It’s the fifth consecutive year Americans had to make ends meet with less money than at the peak of the last economic expansion, new government data show. The average income in 2005 was $55,238, nearly 1% less than the $55,714 in 2000, after adjusting for inflation, an analysis of new Internal Revenue Service statistical tables shows. The combined income of all Americans in 2005 was slightly larger than it was in 2000, but because more people were dividing up the national income pie, the average was smaller.

People with incomes of more than $1 million also got 62% of the savings from the reduced tax rates on long-term capital gains and dividends President Bush signed into law in 2003. The IRS data showed that the number of Americans making less than $25,000 a year shrank, down by 3.2 million, or 5.5%. The fact that average incomes remained lower in 2005 than five years earlier helps explain why so many Americans report feeling economic stress, despite overall growth in the economy. Many Americans are also paying a larger share of their healthcare costs and have had their retirement benefits reduced. Boo!

For the first time in history, four generations are working together

There’s a growing number of people for whom retirement age has lost its meaning. They’re staying on the job longer and longer past that point – some for personal satisfaction, others out of necessity. Some are even working away into their 90s and beyond: In Maryland, Grace Wiles, 97, works about 25 hours per week at a shoe repair store. In Nebraska, 98-year-old Sally Gordon is the legislature’s assistant sergeant at arms. They’re all younger than Waldo McBurney, a 104-year-old beekeeper from Kansas who was recently declared America’s oldest worker.

The number of older workers is likely to continue to rise as Americans live longer and are unable to make ends meet on Social Security and savings in 401(k) plans. About 6.4% of Americans 75 or older, or slightly more than 1 million, were working last year. That’s up from 4.7%, or 634,000, a decade earlier, according to the U.S. Department of Labor. With the first wave of Baby Boomers reaching the traditional retirement age, companies are start to think about ways to retain and recruit older workers, through flexible scheduling, for example. This will help them fill positions as the labor pool shrinks.