June 2014

Retiree Health Plans Considered

Retiree health benefits are a luxury item.

In 2013, just 28 percent of government and private-sector employers with more than 200 employees offered health benefits to their retiring workers, down from 66 percent in 1988, according to the Kaiser Family Foundation.

Bar chart showing large firms who offer retiree health benefitsThese plans are popular with workers, but their declining prevalence has a silver lining.

A long history of research shows that people who can retain their employer health benefits if they retire tend to retire earlier, confident they’ll be insulated from extraordinary medical expenses that could wipe out their savings.

Here’s the silver lining when retirees lose that coverage: by inducing them to remain in the labor force longer, perhaps until their Medicare starts, it improves their retirement security in other ways. …Learn More

Social Security: Vale La Pena Esperar

Waiting to claim Social Security is good for retirees’ financial health – none more so than the U.S. Latino population.

This message is delivered in Spanish in the above video, “El Seguro Social: Vale la Pena Esperar.” The video was produced by the National Academy of Social Insurance, a policy research non-profit, and Squared Away found it on the website of Latinos & Economic Security.

Latinos & Economic Security, which is part of UCLA’s Center for Policy Research on Aging, said Latinos make up 7 percent of the U.S. population age 65 and older. But due to their lower incomes during their working years, Latinos are more reliant on Social Security than are Asian-American, African-American and white, non-Latino retirees, the organization said.

Its research also shows that Social Security provides at least 90 percent of the income of well over 40 percent of elderly Latino couples. So it pays to delay and increase the size of that monthly pension check. …Learn More

Aging, but Oblivious

Older people often wonder why young adults get tattoos that they’ll later want to remove.

In this Ted video, psychologist Dan Gilbert says tattoos are a good example of a universal error in thinking. …

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Depression Up After Pension Benefits Cut

Sudden changes in older workers’ financial expectations for retirement can cause depression, according to a 2011 study.

The study, which came out of the Netherlands, suggests that cuts in Dutch pensions, announced on very short notice, produced feelings of differential treatment and a loss of control that increased the incidence of depression among the workers who were adversely affected.

Workers were tested for depression two years after a 2006 pension reform reduced the share of their salaries replaced by the government-mandated defined benefit pension plans provided by employers.

Workers born in 1950 and after suddenly learned their “replacement rate” – the percent of pay the pension replaces – would drop to 64 percent, from the 70 percent initially promised.  Everyone born before 1950 was unaffected.  To replace the lost benefits, workers facing the cut would either have to save substantially more or work an additional 13 months. …Learn More

Government Workers See COLA Cuts

State and local government workers have long felt their pensions were more secure than the vanishing pension coverage in the private sector.  But a spate of changes to cost-of-living protections should give them pause.

In the wake of the Great Recession, 17 states reduced, suspended, or eliminated cost-of-living increases (COLAs) in their defined benefit pensions for state and local workers, according to a recent summary of legislative actions around the country by the Center for Retirement Research, which sponsors this blog.  And the courts are backing them up, deciding that the inflation protections – a fixture of the majority of public pensions – do not have the same constitutional or other legal protections that apply to core benefits.

The COLA changes, enacted to reduce government pension liabilities, generally affect both current retirees’ benefits and the future retirement benefits of active employees.

The above map shows where the cuts have occurred.  The following is a summary of the specific change in each state: …

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Social Security at 62 but Fairly Healthy

Are people who claim their Social Security retirement benefits when they’re 62 too sick or impaired to work?

Fast forward three years, to when these early claimers turn 65.  They’re about as healthy as those who decided to wait until age 65 to start receiving their Social Security retirement benefits, according to preliminary findings from a study using Medicare spending data as a proxy for health.  The early claimers are also far healthier than people who left the labor force early to go on federal disability.

Some 8,500 older Americans were in the study’s sample, and they fell into four different groups: those who claimed a reduced Social Security pension soon after turning 62; those who claimed a larger pension at 65; those who were awarded a Social Security disability benefit before turning 62; and those who applied for disability but were denied and then claimed their retirement benefit after age 62. …Learn More

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Test Yourself for Dementia

Dementia is a critical personal finance issue when so much is at stake in managing, investing, and spending one’s lifetime savings.  But one study found that, in the vast majority of older couples, the person in charge of managing the household finances continues to do so after dementia sets in.

Dementia can be difficult to perceive in oneself or a spouse or parent, because changes are usually so gradual, psychologists say.

Individuals can now get a rough assessment of their own or a loved one’s cognitive abilities with a test posted on the website of Ohio State University’s Wexner Medical Center in Columbus. Spokeswoman Elaine Scahill said more than 900,000 people have downloaded the test since it went online in mid-January as a public service.

The test, appropriately named SAGE – for Self-Administered Gerocognitive Exam – is similar to others used by mental health professionals as an initial screen; another one is the Montreal Cognitive Assessment. …

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