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Parent PLUS College Loans Can Spell Peril

QuoteA dramatic increase in 1993 in how much parents are permitted to borrow from the federal government for their children’s college is coming home to roost.

Since then, average debt through the parent PLUS loans has more than tripled, adjusted for inflation, according to a Brookings Institution report. About one in 10 parents owe more than $100,000. And as loan balances have ballooned, the rate of repayment has slowed.

Now that the college applications have been submitted, Allan Katz, a financial adviser in Staten Island, New York, has this advice for parents contemplating their next move:

PLUS loans should be avoided “at all cost,” he said. “A big part of my practice is avoiding PLUS loans.”

His dire warning stems from the 1993 change in the law, which made it easier for parents to get into trouble. The reform increased how much parents can borrow from $4,000 per year to whatever the teenager needs to cover his or her school expenses – regardless of the institution’s cost. Total borrowing per child used to be capped at $20,000 – there is no limit today. …Learn More

An elderly woman making pies with a young woman

Holidays with Dementia in the Family

When my grandmother was spirited away by dementia and no longer recognized me, I stopped visiting her in the nursing home.

I didn’t understand this at the time but now think that I just wanted to remember her baking lemon cream pies or waving at me as she rode around on her lawnmower cropping the lot next to her Indiana farmhouse.

I wish I could get another chance and do things better this time. Regret is hard to live with.

Psychologist Ann Kaiser Stearns views the holidays as a precious time of year to make elderly family members feel they are loved and included in the festivities.

“People respond for as long as they live to smiles, to touch, to music, to kindness, to sitting in the sun, to pumpkin pies,” Stearns, a professor of behavioral science, said in an interview.

“We just need to remember that all of that nourishes an elderly person to whatever degree they have impairments,” said Stearns, who also wrote “Redefining Age: A Caregiver’s Guide to Living Your Best Life.”

Stearns encourages people to make an extra effort to connect with a loved one over the holidays and provides some tips:

Be patient. Take the extra time to sit down with your parent, aunt, or uncle and talk to them. Encourage them to reminisce. “Don’t do something if you don’t have the time,” Stearns said.

Be present. If grandma doesn’t remember you or something that happened in the past, do not argue with her or ask, “Why don’t you remember?!” She advised that it’s better to say, “Remember grandma, it’s your granddaughter from Baltimore.” When an elderly person repeats or forgets, connect with them where they are now, even if it means going through the same conversation again.

Stir sweet memories. Stearns said that her friend’s father, a former minister, has Alzheimer’s but the friend brings him to church anyway. When Stearns’ parents were old, they used to sit happily watching the squirrels in their yard while her father smoked cigars. It’s important to repeat rituals that are uplifting and have always brought meaning to their lives. …Learn More

Boomers Find Reasons to Retire Later

It is one of “the most significant labor market trends” in the United States, says Wellesley College researcher Courtney Coile.

Bar graph showing the average retirement ages for men and womenShe’s referring to big increases since the 1980s and 1990s in the share of older Americans in the labor force, including one in three men in their late 60s.

As for women, the baby boomers were really the first generation to thoroughly embrace full-time employment. Older women’s participation in the labor force hasn’t quite caught up with their male coworkers, but they’ve made impressive strides since the 1980s and have rapidly closed the retirement-age gap.

Given the implications of this trend for retirement security – the longer people work, the better off they’ll be – Coile and many other researchers have investigated what’s driving it. They agree on several things that are changing the retirement calculation.

College. College graduation rates have increased dramatically over the past few decades, and people who’ve spent at least some time in college tend to remain in their jobs longer. This trend has played a big role in the increase in baby boomers’ participation in the labor force, Coile said.

Social Security. Three major reforms to the program have boosted U.S. retirement ages. A 1983 reform is slowly increasing the age at which workers are eligible to receive their full benefits, from 65 for past generations to 67 for workers who were born after 1959. This amounts to a significant benefit cut at any given age that a retiree claims his benefits. Various studies show that this has created an incentive to delay signing up for Social Security in order to increase the size of the monthly benefit checks.

The 1983 legislation also played a role in pulling up the average retirement age by providing larger monthly benefit increases for people who delay Social Security beyond their full retirement age. In 2000, a third reform ended the temporary withholding of some benefits that had been in place for people in their late 60s who worked while simultaneously collecting Social Security.

Employer retirement plans. Two employer benefits that encourage people to retire at relatively young ages have largely gone by the wayside in the private sector. …Learn More

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Why Couples Retire Together – or Don’t

Married couples don’t necessarily know what the other spouse is thinking about retirement.

This insight came out of a new Fidelity Investments survey that asked some 1,600 people if they knew when their significant other planned to retire. Only 43 percent answered the question correctly. This disconnect reveals just how few couples are talking about retirement, said Fidelity spokesman Ted Mitchell, who worked on the survey.

Fidelity’s survey went out to adults of all ages, so the younger ones no doubt felt they’re too young to be thinking – much less talking – about what their lives will be like decades from now.

But things change as couples age. When retirement comes into sharper focus, it’s natural to start talking through the options – mine, yours, and ours.

One option is to retire around the same time, and prior research has shown that roughly half of older couples do so.

New research takes a more nuanced look at how couples retire and finds a more complicated picture.  Mixed arrangements are common in the pre-retirement years. Perhaps one spouse continues working full-time, even though their partner has retired, or one spouse might shift down to part-time work while the other is either still in a full-time job or has already retired.

Two sentiments are usually in conflict when older workers are trying to decide whether to retire: a longing for more leisure time and a need to bank more in savings, Social Security, and pensions.

Spouses often influence one another’s retirements for a variety of reasons, including their health, their relative ages, and how much each one likes their job. But financial security is usually a major consideration. …Learn More

Boston or Florida?

Retire in Boston or in Naples, Florida?

My husband is newly retired, and we’ve spent hours talking about where we might want to live after I retire in a few years. Our imagined scenarios are always changing.

But I’m clear on one thing: I do not want to buy a house in Naples, Florida, where a couple we know did recently. No offense to Naples, which has lots to recommend it – no shoveling! But the typical resident is 65 years old. In fact, Naples is older than the state of Florida, where retirement communities are so pervasive that they distinguish between the “young-old” (ages 60-75) and the “old-old” (over 75).

Boston, where my husband and I live now, couldn’t be more different. It is swarming with college students and young people, including his two sons and daughter-in-law. Boston’s young people work in rapidly changing industries like high-tech or environmental engineering, and I like it that way. Boston’s median age is 32 – half of Naples.

As I get closer to retiring and am faced with change, I think to myself, “Who wants to live in the midst of a bunch of old people like me?”

But that’s precisely what many retirees do. There are many examples of cities that have moved dramatically in the direction of one or the other extremes – Boston or Naples; Madison, Wisconsin, or Scottsdale, Arizona. The Wall Street Journal reported that new retirement communities are popping up in places that weren’t traditional resting places for snowbirds: retired baby boomers’ net migration to the Appalachian region where Georgia, North Carolina, and Tennessee converge has quadrupled since 2011.

This age segregation is a relatively new area of interest to demographers. Almost 60 percent of the neighborhoods and other subdivisions within U.S. counties have moderate or high levels of segregation, which is similar in degree to the level of segregation between the U.S. Hispanic and white populations, Richelle Winkler found in a 2013 study of federal Census data.

Age segregation also occurs in rural areas, as younger people leave for jobs and older people move in. In some rural parts of the Great Plains, Winkler writes, there are two times more seniors than young adults. …Learn More

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How Retirees Can Negotiate Drug Prices

A Squared Away reader wrote recently that he and his wife saved $2,400 a year by paying cash for their medications.   

When a pharmacy sells a prescription drug to a customer, the health insurer reimburses the pharmacy at a negotiated rate that covers its cost for the drug, its dispensing fees, and any additional markup. It’s often the case that a patient’s copayment exceeds the pharmacy’s reimbursement, resulting in an overcharge in the copayment. More than one in four copayments were overcharges in a March analysis in the Journal of the American Medical Association of some 4,000 outpatient drugs and
9 million insurance claims by people of all ages.

We asked Mohamed A. Jalloh in Napa, California, to guide consumers on how to reduce their costs. He is a pharmacist, assistant professor at the Touro University California College of Pharmacy, and a spokesman for the American Pharmacists Association. 

Question: How can retirees access their option to pay a cash price for a prescription if it is lower than their Part D or Medicare Advantage plan copayment?

Jalloh: The big picture is that elderly patients should work with a pharmacist to see if they can get a better deal. If you process a prescription through your insurance – whether under an employer’s health insurance or Medicare drug coverage – the price may be higher than paying straight cash for the medication. Anyone can do this. But I imagine it helps seniors the most because they’re the ones taking the most medications.

The key is to ask the pharmacist to go over your medications with you. Do a medication check-up once a year. That’s the best time to see if a pharmacist can get a better deal for you.

Q. Is it common practice to negotiate a cash price?

Jalloh: I think that people do not know about this option and would really appreciate learning about it. It’s also important to remember that, in most cases, people are still going to get a better deal with insurance by paying, say, a $5 or $10 drug copay. …Learn More

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Millennials Give Saving a Low Priority

Bar graph showing millennial savingRetirement clearly is not a priority for far too many young working adults.

Large minorities of the 22- to 37-year-olds who responded to a recent LendEdu survey said their retirement saving every month amounts to less than they spend on various categories of consumer goods. Nearly half of them report they spend more on dining out than on retirement saving. Almost one in three spend more on alcohol or new clothes, and one in four spend more on streaming services such as Netflix and Spotify. What that indicates is that a lot of them aren’t saving very much.

It might seem unfair that saving for retirement is such an urgent matter for someone not yet out of their 30s. After all, they aren’t earning very much yet, are managing household expenses for the first time, and might have a big student loan payment.

But the reality today is that Millennials were not lucky like some of their parents born into a world where they had a decent shot at a job with a pension. And a Social Security check alone is definitely not enough for a retiree to live on.

More and more employers are countering a reluctance to save by automatically signing workers up for the company retirement plan – nearly 50 percent of employers are doing this, compared with just 20 percent a decade ago, according to Vanguard’s client data. The idea behind automatic enrollment is that, just as inertia prevents people from signing up for a 401(k), inertia will keep them in the plan if the employer puts them there.

The strategy seems to be working: 92 percent of workers in their mid-20s to mid-30s whose employers have auto-enrollment are contributing part of their paychecks to their 401(k) plans, according to Vanguard. Contrast that to just 52 percent of workers in this age group whose employer plans are voluntary.

There’s nothing better than to be young and carefree, but the young adults who aren’t saving are already putting their well-being in old age at risk. …Learn More

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