Guy in front of chalkboard with equations

Your Social Security: 35 Years of Work

This blog is for a part-time Macy’s saleswoman and immigrant whom I met in a hospital waiting room – she’d never heard of Social Security.

It is also for a 22-year-old contingent worker I know who lacks steady employment and isn’t regularly accruing credit toward the Social Security pension he will probably need when he retires.

And it is for a 62-year-old eager to claim his benefit right away, possibly short-changing his retirement.

A substantial share of retirees would fall into poverty were it not for the Social Security program passed during the Great Depression.  It’s especially important for two groups of people to understand how Social Security calculates their pension benefits: young adults making employment decisions that will impact them decades from now and older people figuring out when to retire.

Yet research shows that many people do not know the basic workings of a program that is crucial to their financial security.

Steve Richardson, a Social Security official in Boston, holds regular seminars to explain the pension program to the public. “The first thing I ask is – before I say my name – ‘How many people in this room know how many years Social Security looks at to determine your pension payment?’

“Not many of them know it’s your high 35 years of earnings.”

To qualify for a pension benefit at all, a person must work full- or part-time for 40 quarters – a total of 10 years. That’s not a difficult hurdle for most to clear during decades in the labor force. What’s central is the size of your future benefit check, which is determined by your highest 35 years of indexed earnings, Richardson said – and that brings us to the math thing. …Learn More

Prescription pills

Fewer, Clearer Medicare Part D Choices

medicare part d chartA decade ago, the nation’s Medicare enrollees had more than 1,800 different prescription drug plans to choose from. In the 2017 open enrollment that started on Oct. 15, that number dropped to just 746.

News of higher Part D drug plan premiums and out-of-pocket costs in 2017, estimated in a new report by the Henry J. Kaiser Family Foundation, will not be welcome by the nation’s older population.  But Squared Away also wanted to know whether fewer plan options are good or bad for consumers.

“It’s good in the sense [federal] efforts are bearing fruit in giving people options that are more distinct from each other than in the past,” said Juliette Cubanski, Kaiser’s associate director of Medicare policy. At the same, she said, retirees “still have a lot of choice in this marketplace.”

The number of plans has shrunk steadily for a variety of reasons since the 2006 inception of the prescription component of Medicare, known as Part D. In the early years of the program, plans started disappearing amid consolidation among insurers and pharmacy benefits managers, she said. More recently, a few Part D plan providers have pulled out of the market.

But Cubanski said recent reductions in the number of plans were primarily by federal design. In 2011, the Centers for Medicare and Medicaid (CMS) stepped in and began requiring insurers that offered more than one Part D plan in a region to make sure the differences among their plans were clear and distinct to Medicare beneficiaries. …Learn More

Medicare Enrollment Help is Plentiful

Medicare posterOpen enrollment starts Oct. 15 for people who’ve signed up for Medicare and must buy into or change their supplemental Advantage or Part D prescription drug plans.

The Medicare Rights Center in New York tells me that you can “make as many changes as you need during this period” and that “only your last coverage choice will take effect Jan. 1.”

A long list of resources appears at the end of this blog to help Medicare beneficiaries through the enrollment process. But there’s a lot of hoopla around the Oct. 15-Dec. 7 enrollment period, so it’s important to know what Oct. 15 is not about.

One’s birthday – and not a date on the calendar – determines when people should initially enroll in the Medicare program. Most people turning 65 who are not covered by their own or their spouse’s employer health insurance at work are required to enroll in Medicare Parts A and B during a seven-month period that starts three months prior to their 65th birthday. During this seven-month window, new Medicare participants must also sign up for their Part D drug plans – or risk paying a lifelong penalty. Oct. 15 is not the trigger date for selecting Medigap plans either.

Here’s what the Medicare open enrollment that starts Oct. 15 is about: figuring out the right Advantage or Part D drug plan to buy or switch to. This is a complex process that involves multiple choices, anticipating your future health care needs and expenses, and a lot of research into the plans available.

It’s an implicit recognition of Medicare’s complexity that so many resources are available to help with this process, from private and government-funded consultants to YouTube videos and detailed web pages on the Medicare website. The following resources and blogs can help answer your questions: …Learn More

Financial Product Legalese – it’s on You

Road sign

The Center for Plain Language had this to say about the legal fine print that overran one advertisement for an investment product:

“Once again a financial institution that expects me to trust them with my money makes it impossible for me to know what they are going to do with my money.”

The Center had singled out a Charles Schwab & Co. ad for a Wondermark “award” for unintelligible writing. But the center might have been referring to any of the hundreds of financial institutions that inundate us daily with online and television ads or the credit card offers that come in the mail.

Consumers are often faulted for making poor financial decisions, but surely much blame falls on financial companies that present consumers with terms of use agreements chock full of legalese or with disclosures that are difficult to read and understand.

Financial minefields pervade all aspects of our lives too. The 2016 Wondermark awards went to Victoria’s Secret for the “mumbo-jumbo” in its lengthy credit card agreement and to a Phoenix healthcare company that offers discounts to low-income customers – but first, they must decipher the confusing chart that explains who qualifies.

The person who nominated the healthcare company for an award said its discount information “seems like a classic case of the 0.2% who understand this chart will receive 85% of the Medical Financial Assistance, but they are clearly 400% above the average American who just got out of the hospital and has 0% of a clue as to what they’re talking about.” [Oddly, this chart seems to indicate that customers with higher incomes get larger discounts.] …Learn More

college kids

Starting the College Conversation Early

Parents have finished the summer college tours with their teenagers.  Now comes the hard part: figuring out how to pay for college. But Judith Ward, a senior financial planner for T. Rowe Price in Baltimore, urges parents to prepare for this moment well before their child’s high school graduation to help minimize college costs when the time comes.

Squared Away interviewed Ward, whose advice comes from a combination of her professional experience and putting her own two kids through college. They are now 23 and 27, employed, and paying back modest student loan balances.  

Your company’s 2016 survey of parents and children between ages 8 and 14 about paying for college points to a disconnect between what young kids are expecting in terms of paying for college and what their parents are planning on.

Yes, we found in our survey that 62 percent of kids expect their parents to cover most of whatever college they want, but 65 percent of parents say they’ll only be able to contribute some to their college. There’s definitely a disconnect. But it’s easy to rectify – just start talking to your kids about college.

Question: Can parents really talk to their kids about college at 8, 9 or 10? And what do they talk about?

In fairness to the kids who answer these survey questions, they have no idea what the cost of college is. It’s not the enormous number it is to their parents. But start when they’re young by having conversations that are not necessarily about the cost of college. Just start making college part of the conversation and sharing your own stories. That will have them thinking about college and thinking, “I’m going to be expected to go to college.” …Learn More

Kids sleeping at daycare

Day Care Costs Factor into Mom’s Work

Table about daycareIn 26 states, the average cost of full-time care for just one infant at a day care center approaches or exceeds $10,000 a year, according to ChildCare Aware of America.

No wonder many new mothers (and sometimes fathers) ask themselves: Is it even worth it to work in the first place?

Proposals by both presidential candidates to subsidize care for the nation’s 11 million pre-schoolers amount to non-partisan recognition that parents need some help.

The IRS does provide a child care tax credit of up to $3,000 for one child and to $6,000 for two. But despite this, the United States lags well behind Europe in the financial assistance extended to parents of young children.

The result is that the child care costs shouldered by two-earner American families – the percent of their after-tax incomes that go toward care – are two times what parents pay in countries that subsidize care, such as Germany, Australia, Sweden, Denmark, France and Greece, according to the OECD.

A series of academic studies over more than two decades document a deep and enduring link between steep child care costs and mothers’ decisions to drop out of the labor force.

One study in 2005 found a “striking” impact on mothers when Quebec made child care for pre-schoolers affordable by putting in place subsidies for private day care in the late 1990s, which capped parents’ daily costs at $5. The program spurred big increases in child care use in the province. The study found that universal day care also significantly increased married women’s labor force participation, by 14 percent. …Learn More


Is There a Senior Housing “Crisis”?

Headlines about how much senior housing the aging baby boom generation is going to require often include the word “crisis.”

But it might be time to rethink our dire assumption that there won’t be enough housing for seniors, since boomers are living longer and are healthier than past generations and are changing what it means to grow old in this country.

One example is the U.S. nursing home population, which has remained fairly stable even though the elderly population is growing, according to a 2010 report by the Stanford Center on Longevity. The center cited better health as a key contributing factor.

Taking trends like these into account, a California real estate services firm has raised the age assumptions it uses to project increases in demand for senior housing, defined as facilities that include some level of care. The firm, Rockwood Pacific, still expects demand to increase over the next decade but at a slower rate. After that, when the oldest boomers are starting to turn 80, demand will continue to rise but also more slowly.

“When I started in this business in the 1990s, everyone talked about the 65-plus population” and its need for senior housing, said co-founder Frank Rockwood. “Now when you go to a senior housing conference, we talk about 75-plus. I’m saying now the time’s come we need to discuss 80-plus, rather than 75-plus.”

Doing so leads to big drops in the number of potential candidates for nursing homes, memory care units, and assisted living and independent living facilities, according to Rockwood’s estimates. (Residents in independent living communities share a central dining room and tend to be healthier than people the same age who reside in assisted living facilities, he said.)

Assuming people largely won’t need senior housing until at least 80, the firm lowered its forecast of demand growth over the next decade to about 2-3 percent annually, down from 3-4 percent under the 75-plus assumption. …Learn More