In terms of popularity, reviewing Medicare plans during the open enrollment, going on now, ranks right up there with doing taxes.
Retirees on Medicare view healthcare as their most burdensome expense. But they are less likely to comparison shop for Medicare plans than for their groceries and gas, even though plan shopping would probably save more money.
Deciding on a Medicare Advantage plan or deciding to switch to traditional Medicare, with or without a Medigap supplement, is “overwhelming, scary, and has consequences, so we put it off,” said Bart Astor, a spokesman for the insurer WellCare Health Plans, whose nationally representative survey quantified just how much retirees dread Medicare enrollment.
Selecting one path over another also necessitates predicting the impossible: their future health and how much coverage they will need.
Squared Away can’t predict your medical needs in 2018 either. But perhaps one of these blogs will help you decide which path to take:
Driving around major U.S. cities, it seems like every other car has a Lyft or Uber logo in the back windshield.
These ride-sharing apps are prominent players in the increasingly popular “platform economy,” which links sellers with buyers of their goods and services, from used couches and basement junk to handymen and car rides. This is one corner of the fast-growing gig economy, which also includes freelancers and the self-employed.
But who takes on these jobs, are they long-term or short-term endeavors, and how reliant are participants on the income they generate through online platforms or apps?
Scouring its database of transactions in the bank accounts of 240,000 bank customers who participate in the platform economy, the JP Morgan Chase & Co. Institute has put together a completely anonymous but interesting profile of the participants in this ever-present, but little-understood part of the economy.
Despite a proliferation in platforms, Fiona Greig, director of research at the JP Morgan Institute, said it’s fairly clear from these data this usually is not U.S. workers’ first choice for earning a living. Most people, “are not relying heavily on this,” she said. While users have to sell their wares on a piece-rate basis, “the flexibility that this offers makes for the perfect opportunity to add income.” …Learn More
The typical baby boomer couple had $135,000 in retirement savings last year, up from $111,000 in 2013 amid a rising stock market and a strong job market that has kept them employed, according to a report on the new Survey of Consumer Finances (SCF) by the Federal Reserve.
Yet $135,000 – the balance for working couples who have a 401(k) – won’t go very far. This amount, held in both their 401(k)s and IRAs, will generate about $600 per month, said the SCF analysis by the Center for Retirement Research, which supports this blog. That’s obviously not enough to supplement most retirees’ primary source of income: their Social Security benefits, which are slowly eroding for various reasons. The purchasing power of the $600 will also be eroded by inflation over time.
Another way to assess retirement preparedness for 60-year-olds couples hoping to retire in five years is that they need assets equal to 8.5 times their household income at age 60. They actually have around 2.5 times income, on average, the researchers found. This assumes a replacement rate of 75 percent, a reasonable target for how much of a working couple’s income they will need to maintain their standard of living into retirement.
It’s Halloween today, and here is more evidence of just how scary Americans’ retirement prospects are: the $135,000 applies only to older people with retirement savings – about half don’t have a retirement plan at all at work. … Learn More
In contrast to baby boomers, who are now mostly too old to rack up appreciable increases in their 401(k)s – though they should try – younger Gen-X and millennials have time and compounding investment returns on their side.
This blog examines how they are faring – millennials, because saving and investing well now poises them for a secure retirement, and Gen-X because this “ignored” generation is sandwiched between the financial demands of parenting and parent care. Their own assessments of their retirement preparedness appeared in a recent report by the nonprofit Transamerica Center for Retirement Studies (TCRS).
“Millennials have heard the word that they need to save for retirement,” TCRS declared in its report summarizing its 2016 online survey of more than 4,000 workers.
Millennials’ ages are up through 37 in this survey. Nearly three out of four who have 401(k)s at work are already saving for retirement. They typically started saving at 22, indicating impressive foresight about retirement dates far in the future. Gen-X, ranging in age from 38 through 51, didn’t get started in earnest until they were 28.
While it’s great that millennials are saving for retirement, women in particular are not saving enough, said Catherine Collinson, president of TCRS. Among workers who participate in their employer’s 401(k) or similar plan, the survey finds that the typical millennial woman contributes only 5 percent to her plan, compared with 10 percent for millennial men.
Millennials aren’t taking advantage of their uniquely long investment time horizon, the survey finds. Retirement experts encourage younger adults to more aggressively invest 401(k)s in the stock market to enjoy decades of the long-term growth and compounding investment returns and potentially ride out the market’s inevitable volatility. Theoretically, if the stock market’s history proves true, equity-investing millennials can build up substantial retirement accounts, accumulating employers’ contributions and their own contributions and investment earnings over time.
But many millennials came of age during the 2008 financial crisis and still seem to be “in a state of shock with their concerns about the stock market,” Collinson said. One in five millennials say they are investing conservatively in bonds, money market funds, and cash.
Baby boomers will be the last generation with substantial access to traditional pensions. Gen-X is the first generation to heavily rely on defined-contribution accounts. …Learn More
Behavioral economist Richard Thaler, winner of the 2017 Nobel Prize for economics, regards his field’s greatest contribution as showing that people are more likely to save if the saving happens automatically.
“I’m all for empowerment and education, but the empirical evidence is that it doesn’t work,” he said in a 2015 Wall Street Journal interview. “That’s why I say make it easy.”
To make saving for retirement easier, employers have increasingly turned to automated 401(k)s. Automation has taken two basic forms. The first, automatically enrolling each employee, is pervasive and has had notable success in increasing participation in retirement savings plans. The second form, automatically increasing the amount employees save – a concept originated by Thaler and economist Shlomo Benartzi – is catching on. It’s hoped that the second will correct a problem created by the first.
Last year, 45 percent of Vanguard’s client base used auto-enrollment plans, according to its “How America Saves 2017” report. Historically, employees were asked to enroll in their employer’s 401(k). Today, more employers are – as Thaler would say – “nudging” workers by automatic enrolling them, usually when they are hired. Although they then have the freedom to opt out, inertia tends to keep them in the plans.
Participation in all types of 401(k)s has roughly increased in lock-step with the spread of auto-enrollment. Last year, 79 percent of workers participated in Vanguard-administered plans, up from 68 percent a decade ago, when a new federal pension law made auto-enrollment more appealing to employers.
The irony, however, is that while auto-enrollment encourages more people to save, Vanguard partly blamed a 2016 drop in employee contributions on their popularity. The average employee contribution in all types of 401(k) plans declined from 6.9 percent in 2015 of pay to 6.2 last year, well below the 7.3 percent rate prior to the Great Recession, according to Vanguard. … Learn More
The first thing that came to mind while listening to a recent webcast about part-time students was, Wow, people like me who attended four-year colleges are clueless about how hard it is to be a part-time student!
My second thought was better summed up by one of the webcast’s panelists. Solving part-time students’ immense financial and logistical challenges “is really about economic and social mobility for a large group of citizens in our communities,” said Karen Stout, president of Achieving the Dream, a non-profit network of community colleges that promotes students’ success.
Four in 10 U.S. college students are part-time and about four in 10 part-time students drop out very early in their education, according to the Center for American Progress, which hosted the discussion and produced the video above.
The panelists – and two former part-time students who shared their experiences – described the high obstacles part-time students overcome to receive a two-year degree, or to move on to further educational programs. To succeed, these students need financial support and an understanding of their particular needs: …Learn More
The unemployment rate is an incredibly low 4.4 percent, and a Federal Reserve survey released last week shows that American households’ net worth is increasing.
Yet all is not well.
One in three Americans say they are suffering financial hardships, and another third report they are making it but aren’t exactly thriving. One in five struggles to cover what is most basic: food, housing and medical care. These new findings, which came out of a report by the federal Consumer Financial Protection Bureau (CFPB), aren’t about economists’ traditional, objective measures of security, income and wealth levels. This is about how people are feeling about their financial state of affairs.
The common, everyday financial distress expressed in the report is one marker of the familiar socioeconomic chasm that persists in this country. The CFPB highlights the most significant – and unsurprising – differences separating the secure from the struggling: education and income levels, the presence of health insurance, and how much of one’s budget is consumed by housing costs. “Access to jobs, benefits, sufficient income, and family resources likely play a major role in a person’s financial well-being,” the CFPB said.
But it’s also more complicated than that. For example, some lower-income people might, despite their challenges, be able to find their comfort level, CFPB said, while not all higher-income people do. One thing the survey can’t get at is the extent to which feelings of financial security or insecurity are being influenced by how Americans are doing relative to co-workers or people in their communities.
The agency used answers to its 2016 survey to assign financial well-being scores, ranging from 0 to 100, to nearly 6,400 participants. The findings are summarized in a new report.
Myriad factors influence how individuals feel, sometimes leading to surprising results in the CFPB report: …Learn More