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It's Only Money: Credit Cards
A Personal Finance Blog by The Oregonian's Brent Hunsberger

• Links: Frontline on credit cards & the latest on your workplace benefits
  

  IT'S ONLY MONEY BLOG: PBS documentary "The Card Game" on the credit card industry airs at 9 tonight on PBS.

  Useful items from better sources:
  
  The New York Times reviews "The Card Game," the Frontline documentary on the credit card industry that airs tonight on OPB. It has, the Times says, "briskly paced content with a high outrage quotient and casting that draws clear distinctions between good guys and bad guys." Preview it yourself below.
  
  It's Only Money recently wrote about employee benefit open-enrollment season. Employee Benefit Research Institute senior research associate Paul Fronstin offered some great insights to Marketplace Money about how to approach it.
  
  Speaking of EBRI, the institute recently found that employee holdings of company stock in 401(k) plans declined last year. This is good news. Workers are diversifying. Still, 7 percent still had more than 80 percent of their holdings in their employer's stock. PGE/Enron anyone?
  
  Also from EBRI, the marketing of lifecycle funds (a.k.a. target-date funds) seems to be working with twentysomethings. 401(k) account holders in their 20s have 15 percent of assets in such funds; thirtysomethings have 9 percent.
  
  Fidelity Investments, meanwhile, says (via Bucks) that average 401(k) balances among its 11 million customer accounts are back to September 2008 levels -- $60,700.
  
• Links: Rebuilding your credit history
  

  Bloggers offer tips on how to start or resurrect a respectable credit trail.

  It's Only Money needs to build credibility.
  
  Many of the rest of you might need to build your credit history.
  
  As Calculated Risk pointed out Monday, Moody's expects credit card delinquencies to continue to increase, at least as long as the unemployment rate does. For those who default, that will mean rough going getting another loan, much less another card.
  
  Budgetpulse has some ideas for re-establishing a line of credit. So does PT Money.
  
  The ever reliable Liz Weston also offers a couple tips to a reader, including CardRatings.com and CreditCards.com.
  
  IndexCreditCard.com's founder advocates on Get Rich Slowly that you use a secured credit card. It requires you deposit money in an account as collateral before you begin swiping it.
  
  Master Your Card suggests you start by borrowing from Uncle Sam (i.e., go back to school).
  
  Any other ideas you want to share? Chime in below.
  
  
  
   
  
• Sad but true: Financial smarts depreciate as we age
  

  It's Only Money: We know financial literacy among youths is low, but new research suggests that it's "even scarier" among older folks than anyone imagined.

  It's tough growing old, especially when it comes to managing money.
  
  Medicare note Last week's column on Medicare contained the 2009 deductibles for Parts A and B. The amounts have since been updated: For 2010, deductibles will be $1,100 for Part A and $155 for Part B.Several recent studies reinforce that. Retirees need to act carefully and even seek help in selecting loans, credit cards and Medicare drug plans. That's not just to protect themselves from untoward children or salespeople; it's also to protect them from themselves.
  
  At the same time, some researchers say the warnings on how much younger families need to save for retirement are a bit over the top.
  
  Now that you're completely enraged with me, here's the good news/bad news about money and growing old.
  
   Age of financial reason
  
  We know financial literacy among youths is low, but a new study found the level among older people is "even scarier" than previously thought.
  
  Researchers from Dartmouth College and the University of Pennsylvania say they find that people 55 and older "lack even a rudimentary understanding of stock and bond prices, risk diversification, portfolio choice and investment fees."
  
  When you consider "that individuals are increasingly required to take on responsibility for their own retirement security, this lack of knowledge has serious implications," they say in a paper for the University of Michigan's Retirement Research Center.
  
  There's also a significant gender gap. Older women show much less financial sophistication and ability to perform financial calculations than men, says Annamaria Lusardi, a study co-author and Dartmouth economist. This is true in other parts of the world as well, she says, including Italy, Germany, the Netherlands, Russia and Mexico.
  
  These findings echo those of the Federal Reserve, whose economists put the Age of Reason regarding finances at around 53. That's when people borrow at lower interest rates and pay fewer fees on loans and credit cards, relative to younger and older adults, they say.
  
  The reason? Younger people are less experienced with financial concepts such as interest rates, says Sumit Agarwal, an economist at the Federal Reserve Bank of Chicago. And the ability to process information related to those concepts declines rapidly with age.
  
  Middle-aged folks are at a "decision-making sweet spot" -- lots of experience but no significant decline in their mental processing.
  
  Experts don't know how best to address these problems. More disclosure would help, Agarwal says. Some say mandatory safe harbors that automatically shift a retiree's nest egg into annuities, bonds or a life-cycle mutual fund would help. Some nations do this. A financial driver's license would be required to opt out of such an arrangement.
  
  For now, though, the elderly and their kin should be aware of their vulnerabilities -- and the need to be vigilant and protective of their money.
  
  How much to save?
  
  You've probably seen this retirement planning rule of thumb: If you want to maintain your current lifestyle, plan on needing 70 to 85 percent of your current income in retirement. Knowing that, you and/or your adviser (or online calculator) can figure how much you'll need to save over time to get there.
  
  But researchers at the University of Wisconsin are skeptical. John Karl Scholz, an economist at the Madison campus, says the rule overstates what most singles and couples with kids need.
  
  Families, he reasons, devote much more of their income to their children and therefore are more accustomed to a lower standard of living.
  
  "The couple with no kids can get used to driving a reasonably late-model car, taking vacations in the warm weather during the winter and eating out once a week," says the father of three girls. "The couple with four kids drives the beat-up station wagon. Their vacations tend to be car camping, and they eat tuna out of a can once a week."
  
  Nearly half of the population can get by with less than 65 percent of their average annual income during working years, Scholz estimates in another paper for the Michigan research center. Singles can get by on eve