My Hillbilly Roots

J.D. Vance’s rural Kentucky roots, described in his book, “Hillbilly Elegy,” differ from my father’s family in southern Indiana in one important way. Vance’s violent, angry mother was a substance abuser with a trail of failed relationships in her wake. Vance carries the childhood scars. My dad’s family was a bunch of kind, reticent, teetotaling farmers.

Alvin and Lena Belle Blanton and sons Gerald and Leland, 1966.

But the similarities between our families struck me too – Vance called his grandfather Blanton “Papaw,” which I’d always thought was unique to my own Papaw Blanton but, I now know, is an endearment. And believe me, the corn fields and hills of southern Indiana and contiguous Kentucky are more southern than Midwestern. My grandma’s fried chicken was heaven.

The backdrop for Vance’s hillbilly stories emerges front and center in my own take on family: I look at rural poverty through a socioeconomic lens.

Vance, an acclaimed writer and Silicon Valley investment banker, “got out” via the Marine Corps, Ohio State University and Yale Law School. “To move up,” he writes, “was to move on.”  With sheer determination – supported by his tough, caring Mamaw – he overcame long odds, childhood stress-eating, and psychological retreat from a conflict-filled home. His Yale scholarship wasn’t earned on grades but because “I was one of the poorest kids in the school.”

To be clear, I do not see “getting out” as pejorative. Nor does “getting out” mean getting away from family. Rural people relocate in search of better job opportunities than what is available in depressed areas with eerily quiet “downtowns” of struggling or abandoned establishments pushed out of town by big-box retailers like WalMart and fast-food joints. Getting out is code for earning a decent living, buying a modest house, having health insurance, and being able to retire. In short, capturing the American Dream.

In my family, the strategy of getting out worked for some but not for others. Please bear with me through my generational story.

My late father, Leland Blanton, left home – Jasonville, Indiana, population 2,147 – so that my two brothers and I didn’t have to. His father – Papaw – owned a small-town gas station and, due to childhood polio, walked with a cane. A midwife helped my father’s true-grit mother deliver him into a three-room farmhouse with an outhouse. Twenty years later, his ticket out was a high test score that paved the way to becoming a hotshot pilot in the U.S. Air Force in the 1950s and 1960s. Greenland, Saudi Arabia, Morocco, Greece, Germany, Bangkok, Saigon, Turkey – he flew to every corner of the globe. We all lived nearly three years outside Tokyo. …Learn More

half of boomers

Half of Boomers Social Security Eligible

This milestone must be noted: about half of baby boomers are now over 62 and can claim their Social Security benefits.

The year 1955 was the midpoint for the post-World War II population explosion – and those boomers born in 1955 will turn 63 sometime this year.

This marks the time to take stock of differences between the old boomers (born 1946-1955) and young boomers (1956-1964).  Of course, Social Security eligibility doesn’t automatically mean retirement, and boomers of all ages are retiring later than their parents.  Today, only around a third of 62-year-olds file immediately for Social Security benefits – it was closer to half for the oldest boomers. The downward trend should continue.

But a yawning difference between the two boomer groups is their vastly different stages of life.  Those born in the late 1950s and early 1960s are still working full-time. Entrenched in work, they have several years to go to retirement – their big challenge is having enough time to prepare financially.

The oldest boomers, now in their late 60s and early 70s, are already retired. They can take great joy in their grandchildren, which most have. That’s a comforting antidote to sobering thoughts like whether my financial affairs are in order (just in case), who will take care of me when I no longer can, and how do I want to spend my final years or days?

The good news is that baby boomers are healthier than any previous generation and will live longer. Old and young boomers still have lots to enjoy.Learn More

dollar art

Know About the Roth 401(k) Surprise?

Financial experts and writers often tout the Roth 401(k)’s main selling point: when the money is withdrawn in retirement, it won’t be taxed.

Well, that’s not entirely true.

An employee’s own money saved in his Roth account over the years is, indeed, shielded from income taxes when he retires and starts pulling out the money. That’s because the worker had paid the taxes before he put the money into the Roth.

But employer contributions to Roths are different. Employer contributions and any resulting investment earnings are taxed as income in the year that the money is withdrawn.

“Most everyone I talk to is shocked by this and surprised,” said CPA Sean Stein Smith, a business and finance professor at Lehman College in New York. Understanding the difference between the two types of savings plans offered to employees – Roth versus regular 401(k) – is already complicated enough, he said, and the tax distinction only adds to the confusion.

The reason withdrawals of employer contributions to Roths are not exempt from income taxes is because they are no different than employer contributions to regular 401(k)s. They are another form of income, just like your hourly wages. However, no taxes are deducted from a worker’s paycheck for Roth and regular 401(k) contributions when the employer puts them into the account. So the worker eventually has to pay the taxes – they are simply being delayed.

The next logical question is, how do you know how much you owe in taxes? What if you withdraw retirement income from both a Roth and a traditional 401(k) over the course of a year?

Figuring out the tax bite “is not your problem,” said Jaleigh White, CPA for a Louisville, Kentucky, investment firm and member of the National CPA Financial Literacy Commission for the American Institute of CPAs. …Learn More

No Longer Homeless at Christmas

Lenny Higginbottom

 
A social worker hands Lenny Higginbottom, 52, the keys to a 378-square-foot apartment, the first home of his own after 24 years on the streets.

“Try to fight the tears,” he says, gripping the keys during a video accompanying a story by Boston public radio (WBUR) reporter Lynn Jolicoeur. “Something I thought I’d never be able to do,” Higginbottom says.

His past issues are not uncommon among the homeless: a father who died when he was six, depression, substance abuse, and a failed marriage. He had a Section 8 housing voucher but couldn’t find a landlord willing to rent to him due to minor criminal activity in his past. …Learn More

Employers Chop Down College Loans

Edward, Ashley, and Kirby Cash

Edward Cash would really rather spend his hard-earned paychecks from the Memphis Police Department on his daughter than on humdrum necessities like student loans, replacing a broken-down car, or saving.

“I need money, as much money as I can to take care of this new human in my life,” Cash said about 4-year-old Kirby.

Of course, he and his wife, Ashley Cash, a Memphis city planner, pay their bills, in between doting on Kirby.  But college loans are different: they get help.  The city government pays down $50 a month on each of their loan balances – as it does for some 600 employees.

In May, Memphis joined Fortune 500 companies in the vanguard of employers offering this benefit, including to its police force, which requires some college education, and the fire department, where time in college is not required but also not uncommon.

With college debt exceeding $1.4 trillion nationwide, help with student loans appeals to young employees, who say in surveys that paying them off is their No. 1 financial priority. Recognizing this, major employers are using the tuition benefit to recruit talent, including Fidelity Investments, Live Nation, Natixis Global Asset Management, Pricewaterhouse Coopers, and Staples Inc., according to company and media reports. …Learn More

Advantage Premiums Reflect Networks

Chart: Medicare premiumsA new study of Medicare Advantage plans in 20 U.S. counties found that plans with higher premiums generally offer broader networks of physicians to their customers.

“There are exceptions but there does seem to be a fairly clear relationship between how much plans are charging and the size of the network,” said Tricia Neuman, a Kaiser senior vice president and one of the study’s authors.

The correlation between premiums and network size is one finding in a rare study that tries to get a handle on the quality of Advantage plans around the country amid a scarcity of data on these plans. An earlier Kaiser study looked at how many of a county’s hospitals and top cancer treatment centers are available in Advantage plans.

Advantage plans are increasingly popular for good reason: they have lower premiums or offer more extras than enrolling in the traditional fee-for-service Medicare program and purchasing a Medigap supplement and Part D prescription drug policy.

They are able to offer lower premiums based, to some extent, on their ability to keep their costs under control, whether this is how much they’re paying to their physicians or to testing labs. But because there is very little data on what Advantage plans pay for medical services, Neuman said that it’s difficult to sort out what is driving the plans’ costs – and, in turn, the premiums customers pay.

However, others argue that an insurer’s degree of control over the costs of its medical providers depends on how much market power it has over the physicians it pays for services. The federal Medicare program, for example, has tremendous clout to set prices for medical services, because it controls a large segment of the demand for health care by elderly beneficiaries relative to the supply of physicians and other medical service providers. Research suggests that Advantage plans may partly control their costs by anchoring their payments to Medicare’s payment rates. However, narrowing the networks may be another way for Advantage plan insurers to gain market clout to control costs.

There is wide variation, from county to county, in the breadth of the physician networks. For example, most of the retirees in Advantage plans in Clark County (surrounding Las Vegas) and in Harris County (Houston) are enrolled in narrow networks. …Learn More

Before Retiring, Do this Homework

If you don’t know this chart on the Social Security website, you should:

Social Security table

The chart shows the so-called Full Retirement Age (FRA), which is the age at which you’re entitled to your full monthly Social Security benefit, a pension based on your earnings history.

Many boomers see their FRA as the time they ought to retire. But the question they should be asking themselves is: will the monthly benefit I’ll get at my FRA be enough?

At a time when many Americans are in danger of not having enough money for retirement, the answer is frequently no. …Learn More

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