Alzheimer’s: a Financial Plan Revamped

Ken Sullivan and Michelle Palomera with their daughters Leah (left) and Abby.

Ken Sullivan’s diagnosis of Alzheimer’s disease at age 47 unleashed a torrent of feelings: shock, isolation, fear.  It’s probably why he lost his demanding job at a large financial company.

The diagnosis was also emotionally devastating for his wife, Michelle Palomera.

But for both of them, it was a rude awakening to the myriad financial preparations required for Alzheimer’s.  Even though both are financial professionals, they had no idea how complex it would be to revise their existing financial plan, how hard it would be to find professionals with the specific legal and financial expertise to help them, or how long this project would take – 17 months and counting.

“This disease has so many layers and aspects to it,” Palomera said.

The risk to an older individual of getting Alzheimer’s is only 10 percent – and early-onset like Sullivan’s is even rarer.  But when there is a diagnosis, one issue is the lack of a centralized system for managing care and coordinating the myriad professionals and organizations involved.  These range from the medical people who diagnose and treat an Alzheimer’s victim to health insurers, attorneys, social workers, disability and long-term care providers, and the real estate agent who may be needed if a victim or the family decides they can’t remain in their home.

Sullivan and Palomera had always shared their family’s financial duties.  But Sullivan’s new struggles with details and spreadsheets left these tasks entirely on Palomera’s shoulders – all while juggling her job as a managing director for a financial company.  “If something were to happen to me, I have to be really air tight on having everything squared away so the trustee – someone – can manage the situation for our daughters and Ken,” she said.

After Sullivan’s June 8, 2013 diagnosis, the couple called family to gently break the news. Their next calls were to a disability attorney and a financial planner.   They’ve since gone through four estate attorneys to find one who could answer their questions and suggest the best options for themselves and daughters Leah, 9, and Abby, 11.Learn More

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Income and Disparate Death Rates

The differences in Americans’ longevity, depending on one’s income level, are striking.

The annual death rates for 50- to 74-year-old men and women with the lowest earnings are more than double what they are for high earners.

This gap in life spans, which is well-documented in the research literature, has been growing with each new generation.  A recent study digs deeper to uncover specific ailments, such as heart disease, that may be driving the growing disparity.

Brookings Institution researchers Barry Bosworth, Gary Burtless, and Kan Zhang used data from a nationally representative sample of almost 32,000 older Americans that included the causes of individual deaths occurring between 1992 and 2010.  The survey contains detailed information about the cause and timing of the deaths, as well as interviews with family of the survey participants after they die.

The researchers compared the mortality rates linked to specific diseases for high- and low income people, defined as those whose earnings in their prime working years fell either above or below the median, or middle, income. They found that the risk of dying from the nation’s leading causes of death – cancer and heart conditions – has declined significantly for high-income Americans, both men and women. No such improvements were evident, however, for low-income men and women. …Learn More

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Pension Cuts Could Hurt Worker Quality

Cuts in public pensions taking place around the country could reduce the ability of state and local governments to recruit and retain top-quality workers, according to new findings by the Center for Retirement Research, which sponsors this blog.

Economists have long argued that pensions and worker quality are related.  Pensions, like paychecks, are a form of compensation, one that particularly appeals to workers with the foresight to value financial security in a retirement still decades away.  And these are often better, more productive workers.

To examine the effect of pension generosity on worker quality, the Center’s researchers first had to find good measures of each.  For worker quality, they used U.S. Census Bureau survey data on workers who have moved between the public and private sectors.  The data show that private-sector wages paid to those leaving government were consistently higher than the private-sector wages of people leaving the private sector to work in government – about 7 percent higher, on average, between 1980 and 2012.  This wage difference represents the “quality gap” among workers. …Learn More

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Trusting Souls Want Financial Advice

Here’s a conundrum: Americans struggle to save for retirement or reduce their credit card spending.  But only about one out of three seeks help with financial issues.

So what lies at the heart of our decisions about whether and when to seek help?  Trust.

In the video below, Angela Hung, director of the RAND Center for Financial and Economic Decision Making, describes research showing that people who trust financial institutions – the markets, financial services companies, brokers – are also more likely to ask for advice from a financial adviser or similar professional.

Further, Hung’s research found that people who trust the industry are also “more likely to be satisfied with their financial service provider.”  Watch the video for Hung’s explanation of an interesting experiment that explores the circumstances under which people follow the advice once it’s given to them.

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Paid Sick Time Wins on Ballots

In last Tuesday’s election, voters in Massachusetts and three cities – Oakland, California, and Montclair and Trenton, New Jersey – approved paid sick time initiatives that benefit working mothers in particular.

These election results come on the heels of a slew of similar initiatives approved in the past year covering all or certain groups of workers in California and in San Diego, Washington, DC; Eugene, Oregon; several New Jersey municipalities; and the Tacoma suburb of SeaTac, according to an inventory of sick time laws compiled by the advocacy group, A Better Balance.

Mandated paid sick time for employees is growing in popularity but is still unavailable to significant numbers of working mothers, who, the data show, are more often responsible for children’s health than fathers. This issue is one more thing that – like lower pay – can disadvantage single women struggling to secure their personal finances today or save for retirement in the future, especially low-income women.

Research by Usha Ranji, associate director of women’s health policy for the health care non-profit organization, the Kaiser Family Foundation, found that 39 percent of working moms are forced to miss work when a child is sick, because they don’t have back-up child care; of them, 60 percent do not get paid for that time  – a decade ago, fewer than half of this group were in this position. …Learn More

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Taxes and Social Security Progressivity

Social Security’s old-age pensions were designed to replace more of the earnings of retired low-wage workers than of higher-wage workers.

But how is this progressivity affected by the federal income taxes paid by all workers and retirees?  A study by economists at the Center for Retirement Research, which sponsors this blog, analyzed this complex issue and found that income taxes have not had any real impact on the overall progressivity of the Social Security program.

To reach this conclusion, the researchers used the actual experiences of older American households contained in survey data linked to their lifetime earnings.  There were several different tax effects to consider.

First, the payroll tax that funds Social Security is shared by workers and employers, with differing effects.  Although the workers’ payroll tax is deducted from their paychecks, workers must still pay income taxes on that amount.

The payroll tax paid by employers, on the other hand, is transferred directly to the federal government, and no income tax is paid.  Although the amount transferred is effectively part of workers’ compensation, they do not have to pay income tax on this portion of their compensation.  This reduces the taxable income of all workers, but it is more valuable to higher income workers who pay higher tax rates: a one dollar employer contribution costs a taxpayer in the 35-percent bracket just 65 cents, compared with 90 cents for a lower-paid worker in the 10-percent bracket.

Many low-wage workers pay no income taxes or even receive an Earned Income Tax Credit.  But a negative tax rate – in the form of a credit for the lowest-wage workers – means they can’t benefit from the tax exemption implicit in employers’ contributions to Social Security on their behalf. …Learn More

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5 Signs of Financial Impairment

In a videotaped experiment testing her financial cognition, an elderly woman must prepare three utility bills for mailing. She’s seated at a table holding the bills, along with three filled-out checks, and three envelopes – each with one utility’s name on it.  After considerable effort and confusion – checks paired with the wrong bills; bills placed into the wrong envelopes and taken back out – she finally finishes her task.

New difficulty carrying out simple financial tasks or understanding financial concepts that were once familiar can be warning signs of cognitive impairment due to aging, early stage Alzheimer’s or other causes, said Daniel Marson, a neurology professor and director of the Alzheimer’s Disease Center at the University of Alabama, Birmingham.

Financial skills are “the canary in the coal mine from a functional standpoint,” he said. “When you are seeing new problems in the checkbook or arithmetic errors, those are signs of an emerging disability.”

Driving, for example, may not be affected as much early on, because it relies more heavily on motor memory. “You don’t have to think about making a right turn or signaling,” he said.

The chances of having Alzheimer’s disease are slim for most older Americans; only one in nine do. Forgetting to pay a bill is more often just a sign of a bad day, and the inability to balance a checkbook or understand investments is not a warning sign if the person was never able to do so. To gauge whether the cognitive ability of a loved one or client may be in decline, the benchmark should be what he or she was able to do financially in the past – and whether that’s changed over time.

At a recent symposium, “Financial Planning in the Shadows of Dementia,” Marson provided five financial warning signs, developed from his clinical work and research as a neuropsychologist. The warning signs are: …Learn More