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from MacroScope:

The plight of minority elderly Americans

It’s something many people know intuitively but that makes the reality no less harsh when it is framed by concrete figures: the sluggish U.S. economy is squeezing black and Latino seniors even harder than their white counterparts.

The deep recession of 2008-2009 took a heavy toll on the retirement prospects of aging Americans. With so many retirement savings plans linked to employer-based stock market investments, the downturn took a steep toll on the holdings of those who were lucky enough to have savings.

A new study from the University of California, Berkeley’s Labor Center shows the extent of the difficulties facing elderly minorities. Here are some of the low-lights:

Elder poverty rates are twice as high among Blacks and Latinos compared to the U.S. population as a whole: 19.4 percent of Black seniors and 19.0 percent of Latino seniors have incomes below the federal poverty line, compared to 9.4 percent for the senior population overall.

Less than a third of employed Latinos and less than half of Black workers are covered by an employer sponsored retirement plan, a critical resource in ensuring adequate retirement income.  As a result, they are disproportionately reliant on the limited income provided by Social Security.

Among retirees age 60 and older, people of color are disproportionately likely to be low income: for 2007-2009, 31.6 percent of Blacks and 46.5 percent of Latinos were in the bottom 25 percent income group. The “other” race group, which includes Asian/Pacific Islander and Native American populations, is also more likely to be low-income (38 percent).

from Global Investing:

Being chic and not saving

Japanese people are generally regarded as saving a lot and not spending much, but in olden times when Tokyo was called Edo (until the mid-19th century), it was considered iki (chic or sophisticated) not to keep one's earnings overnight.

The latest survey from the Central Council for Financial Services Information (part of the Bank of Japan) may suggest that people are going back to that tradition -- although perhaps not for style reasons.

The survey, only available in Japanese so far, showed more than one in four households (consisting of at least two people) said they have no savings, the highest level since the survey started in 1963.

The average level of savings was 11.5 mln yen ($143,232), down 190,000 yen from last year.

More than 40 percent of the respondents said their savings fell from a year ago, double those who said their savings increased.

As Goldman Sachs predicted last year, it may be a matter of time before Japan's savings rate goes negative.

from James Saft:

Going for crazy broke

Why aren't Americans still saving?

James Saft is a Reuters columnist. The opinions expressed are his own.

A look at the fall in the U.S. savings rate raises one crucial question: are Americans crazy, or just broke?

The answer may hold the key for whether the country is headed for another recession or a policy-engineered recovery.

The personal savings rate fell in September to 3.6 percent, the lowest since December 2007. Given that household balance sheets are still under stress from tumbling housing prices -- and tiny rates of savings for much of the last decade -- this makes little sense as a strategy.

If anything, the past 20 years should have taught Americans that their expectations about how fast their assets can grow, and how likely they are to be dealt a financial blow like illness or unemployment, were too rosy. Conventional wisdom in the wake of the great financial crisis was that savings were headed higher and would stay high for a long time. Many people in the U.S. were working a financial high-wire act without a net and needed to reduce risk.

Things have not turned out that way. The savings rate did claw its way higher in 2008 and 2009, ranging mostly in the 5 to 5.5 percent range, but started to head south this summer and has now been falling for three straight months.

from Reuters Money:

Study up on these 5 ways to save on college textbooks

College textbook publishers apparently haven’t heard there’s a recession going on.

The average college student spends $1,137 a year for textbooks and other course materials, up from $988 three years ago according to collegeboard.org.

There are some cases where students just can’t avoid buying new books, especially if the new edition comes “bundled” with a CD or online access code for supplemental materials. These are often stripped or damaged with rented or used books, and if you buy them separately you could end up paying as much or more than you would for a new book with everything intact.

The only bonus of buying new is that you can make some money selling books back after you’re done using them. My daughter, a college junior, tells me her college bookstore pays a small fraction of a book’s original cost when she brings it in for resale. Because she’s a science major, her books are updated so frequently that they often don’t take them back at all. Her experience with college bookstore stinginess when it comes to buying back books is not unusual. Get a better price by selling books yourself through web sites such as half.com, BetterWorldBooks.com orvalorebooks.com.

The drawback? It takes some time and effort, but nobody is going to cry for a college student about that.

When you can avoid buying new, however, it’s going to save money, and today’s c0-eds have plenty of options. Here are ways for new and returning students to slash textbook costs by one-third or more as they head to school over the next few weeks:

from Reuters Money:

Pssst, wanna buy a stolen Rolex or diamond?

Wanna deal on a diamond? Time to get a new Rolex? Sure, they might be stolen goods, but it's all perfectly legal.

Seriously.

Say what?

Police departments nationwide recover all sorts of stuff when they arrest bad guys and there are some real gems amidst the eclectic array of goods that gather in evidence rooms. Enter PropertyRoom.com, a site that has grown exponentially over its dozen years of life.

PropertyRoom.com has become the agent for some 2,600 police departments that have to purge their evidence rooms of items where there the owner can't be found, insurance has already been paid out and the insurer has no interest in the item. More than $36 million generated by sales from the site has gone back to municipalities.

CEO Tom Lane said he was caught up in the big burst of auction sites in the late 1990s and was trying to identify sources of inventory to sell. He harkened to his days as a detective on Long Island charged with purging the department's property room.

Lane reached out to some old friends, who had risen up the ranks and allowed him to post the items on his site. The result was a boon to police departments (and municipalities) nationwide whose auctions went from sparsely attended local affairs to nationwide bidding contests.

from Reuters Money:

“War for talent” has employers ramping up employee benefits: survey

If there's a silver lining to be had following the financial crisis that shook the global economy in 2008, it's this: more employers are feeling increasingly responsible for the fate of their employees -- and that's translating to more comprehensive employee benefit plans, a new survey finds.

The downside? Nearly 60 percent of the employers polled say most of their employees fail to take advantage of the resources available to them.

"The disconnect we’re seeing today... is that despite the fact that employers are making financial education and advice programs available to employees, many employees do not engage in these programs because they do not find the information relevant enough to them personally," says Andy Sieg, head of retirement services for Bank of America Merrill Lynch, which commissioned the survey.

Despite the fragile economic recovery and high jobless rate, the labor market is in a so-called "war for talent," Sieg says. In fact, a recent report from the American Society for Training and Development found that by 2015, 60 percent of all new jobs will require skills held by only 20 percent of the population. Add in the fact that two out of three employees at big companies are looking for the exit sign, Deloitte reports, and there's legitimate reason for employers to be jittery about losing top talent. As a result, workplaces are ramping up efforts to not only attract younger employees, but to retain older employees for a longer period of time.

Among the efforts underway:

• 50 percent of employers surveyed offer flexible or customized work schedules
• 33 percent are implementing retirement and healthcare education
• 22 percent are giving employees the chance to work remotely
• 21 percent are offering extended benefits to older workers

With Social Security worries plaguing Americans, employers are beginning to recognize the need for a workplace benefits program that goes beyond the standard auto-enrollment plan.

from Expert Zone:

Isn’t it time for Asians to live life king-size?

(The views expressed in this column are the author's own and do not represent those of Reuters)

Have you wondered why it is that Asians, even the ones who are affluent, seem to have a lower quality of life than the average guy from the developed world? Now why would that be so?

Critics might say that this is due to bad infrastructure, population being very high, etc. implying that the services available need to be shared by many. But the fact is that all our lives we save and save for a better tomorrow -- but a better tomorrow for whom?

Going by textbook economics, savings is the best thing that would lead to long-term economic growth, right? Refer back to the oft used equation: Savings (S) = Investment (I). Although I have tried to be an ardent economics student, apart from mugging this up for exams, I have never really understood its practical implications.

In a single country model, this might work. Statistics also indicate this. The savings rate of China and India is one of the highest, 14 pct and 27 pct respectively and that is perhaps one of the reasons why these economies are the fastest growing in the world. But let’s delve a bit deeper since we are definitely not living in a single country world.

It's a well known fact that the average Asian saves a huge amount. Where do savings come from? It means we produce more than we consume. We produce goods and services. The fact that we don’t consume all of it means we export the excess. We get paid for the services in foreign currency. The central bank keeps some of this foreign currency and injects an equivalent amount of rupees in the system. Then they devise ways to mop up the excess liquidity since they start fearing inflation. So far so good, right? Confused? So am I. Let’s use simple numbers then.

Say we produce 100 kg of rice as a nation. We consume 50 kg of it ourselves and export the balance. The international market pays us $50 for that exported rice. We sell this to a bank and get 2500 rupees to be spent on our other requirements. But we are middle-class Asians, so instead of saving a little we set aside a substantial amount of this in our savings account.

from Reuters Money:

Groupon regret: How great deals make you spend more

Justine Rivero considers herself a bonafide personal-finance expert. She’s an adviser at the credit-tracking website Credit Karma, doling out tips on how to control spending, avoid crippling debt and keep your credit record pristine.

But even Justine Rivero is powerless against the lure of popular daily-deal site Groupon. When faced with a seemingly incredible bargain, she finds herself compelled to click that mouse again and again – against her own better judgment.

“I regretfully admit to totally blowing money on Groupons I never used,” says Rivero. “A dinner cruise for six people, a paintballing weekend, yoga classes. I swore it off for awhile, until something else popped up that I couldn’t resist. I should know better.”

Rivero isn’t alone in her hopeless addiction to the site. Think of it as a new strain of the virus that has long bedeviled shoppers at big-box retailers like Costco, Walmart or Target: The compulsion to buy a five-gallon jar of capers, or a gross of electric toothbrushes, because the deal is just too good to pass up. As a result, you end up spending far more than you would have otherwise.

“When we see that ticking clock stating there are only 45 minutes left until the offer expires, we lose our minds,” says Farnoosh Torabi, a personal-finance expert and author of the books Psych Yourself Rich and You’re So Money. “Our dopamine levels skyrocket, and we begin to imagine taking that balloon ride for 50 percent off or enjoying those buy-one-get-one-free smoothies. We end up making an impulse purchase -- only to regret it soon after.”

And yet, we can’t seem to help ourselves. Maybe that’s why the recently-announced Groupon IPO appears to be such a hot property: The site already boasts 83 million subscribers in 43 countries, and has been noted as one of the fastest-growing companies in history.

That’s despite the fact that 20 percent of voucher deals end up going unused, according to industry estimates. That figure, just like wasted gift cards, amounts to pure profit for both the coupon site and the retailer -- and indeed, allows them to offer the attractive deals in the first place.

from Reuters Money:

How safe are your savings?

Let's say a broker or banker offered you a way of reaping market gains while protecting your principal. You'd jump at it, wouldn't you?

Thousands did and were burned to the tune of more than $113 billion in complex "structured" products since 2008, including Florida businessman Charles Replogle and his 86-year-old mother. They were told that the principal-protected notes sold by UBS Financial Services were safe. He bought the six-percent-yielding Lehman Brothers notes from UBS for his mentally disabled brother and mother.

Replogle trusted his broker, a friend whom he had known since he was nine. The Replogles lost every penny of the $130,000 they invested in the notes when Lehman went bust in September, 2008.

“There was no mention of Lehman Brothers,” Replogle said. “I felt UBS deceived us. You can’t sell a guaranteed product and not guarantee it.”

UBS neither admitted nor denied that it was involved in wrongdoing, even though it was fined a paltry $2.5 million by the securities industry self-regulator FINRA on April 11 and ordered to pay $8.25 million in restitution for "omissions and statements that effectively misled investors." UBS sold about $1 billion of these dogs.

(A UBS spokeswoman told Reuters on April 11 that the bank "pleased" to settle the case, which concerned "a limited number of investors who purchased certain Lehman principal protection notes during a discrete 3 1/2 month period of time." She said a "significant majority" of UBS's sales of Lehman structured products were conducted properly.)

If the Replogles were the victims of a Madoff-like Ponzi scam, you could shrug your shoulders and attribute the incident to outright fraud.

from Reuters Money:

Recession’s price tag: $2,300 a year

The so-called "Great Recession" has taken a permanent bite out of everyone's retirement and not just at a macro level. Today's workers will lose an average of $2,300 a year each in retirement benefits because of the anemic wage growth which started in 2008, according to a new study written by Urban Institute analysts and released by Boston College's Center for Retirement Research. Younger workers and wealthier workers will lose even more.

The study came as Social Security and Medicare trustees reported that both of those programs would run out of money earlier than had been expected. Medicare will exhaust its funds in 2024, not 2029, and Social Security will run out of money in 2036, not 2037, the trustees said. Legislators may be prompted by those findings to shore up or revise those programs, but even if they do, that would not reverse the decline projected by Urban Institute study authors Barbara A. Butrica, Richard W. Johnson and Karen E. Smith.

They said the real impact of the recession for workers was not in transitory unemployment, but was in permanently lowered future wages that would then feed into Social Security formulas in a way that would permanently lower benefits. "The reduction in wage growth affects nearly all workers -- not just the relatively few who lost their jobs -- and lasts for their entire post-recession career," the report said.

Young workers will be harder hit, because the length of the careers they have ahead of them will magnify the effect of the lost wage growth, the study said. Their income at age 70 will be almost five percent lower than it would have been, or about $3,000 per person.

But higher income workers will have the most to lose and will lose the most. Young workers in the top 20 percent of wage earners will lose an average of $7,500 a year in their 70s, the study said.

Besides losing sleep worrying about it, is there anything future retirees can do about the new shortfall? They can be aggressive about their careers, hoping to squeeze bigger than expected raises out of their bosses, or changing jobs more frequently to climb the ladder quickly.

Or, they can try to save more on their own to make up for the loss. A rough rule of thumb is to multiply the amount you need to withdraw every year by 25 to see how much you'd need to accumulate to fund it. So, a 25-year-old who expects to need an extra $2,300 a year when he is 70 would have to build an extra $57,500 nest egg before then. In an account earning seven percent, that would mean just tucking away an extra $15 a month.