November 14, 2017
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
October 17, 2017
Advantage Premiums Reflect Networks
A 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
October 12, 2017
Before Retiring, Do this Homework
If you don’t know this chart on the Social Security website, you should:
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
September 28, 2017
Medicare Advantage Shopping: 10 Rules
Janet Mills is a veteran in the Medicare Advantage marketplace.
At Florida’s SHINE program for 13 years, Mills has provided unbiased counseling to thousands of seniors trying to make difficult choices about their Medicare coverage. Now an area coordinator, she also fields questions from volunteer counselors at SHINE – the Serving the Health Insurance Needs of Elders program – in Pinellas and Pasco counties, which include St. Petersburg and Clearwater.
It can be difficult for retirees with multiple Medicare Advantage options to distinguish one plan’s benefits from another plan’s and pull the right one off the shelf. But based on her experience, Mills said, the decision retirees make during open enrollment for Medicare Advantage plans is crucial to controlling their health care costs. One in three Medicare beneficiaries is now enrolled in an Advantage plan, according to the Henry J. Kaiser Family Foundation. Their growing appeal centers on premiums that are lower than Medigap premiums. But retirees in Advantage plans also face the potential for up to $6,700 in out-of-pocket costs annually, the legal maximum allowed in the plans. The out-of-pocket U.S. average is $5,219, according to Kaiser.
“You really don’t want to sleep through the annual enrollment period,” Mills said.
Here are her pearls of wisdom for those preparing to launch into their comparison shopping for Medicare Advantage plans, which go on sale Oct. 15: …
September 26, 2017
Help Navigating the College Debt Jungle
A new report laying out loan data per student at more than 1,000 U.S. colleges can be useful to parents and future students.
From the California Institute of Technology and the California Institute of the Arts to the Massachusetts Institute of Technology and Bridgewater State University (also in Massachusetts) – data on debt levels for the 2016 graduating class at public and non-profit institutions are contained in a newly released report by the Institute for College Access & Success (TICAS).
TICAS has put together a handy interactive map summarizing the data. An individual college’s data can be found by clicking the state where it’s located and scrolling through the colleges in that state. Not all colleges are presented, because very few for-profit colleges report their students’ debt data.
Diane Cheng, associate research director of TICAS, walked through the most important things to look for when considering where to attend. But the bottom line is, “When students see colleges where a large share of students borrow, and they take out a lot of debt, that can be a red flag,” she said.
It’s virtually impossible to generalize about how much a prospective student will have to borrow, because every student has a unique combination of academic accomplishment and socioeconomic status. Also factoring into borrowing is each college’s sticker price and unique tuition policy. Tuition at public colleges is also affected by state funding, which remains 16 percent lower than before the recession, Cheng said.
She recommends starting with the following four indicators in the map:
- Average dollars of debt after graduation: Click on a specific state or states on the map where the teenager is looking at colleges. Scroll through the colleges displayed for each state.
What to look for in the data: Compare the average dollar debt level per student for each of the colleges your teenager is considering. If eight colleges are in the mix, compare average debt for all eight. Parents might even want to make a spreadsheet comparing average debt levels and the other data below for each institution of interest. …
September 21, 2017
The 411 on Roth vs Regular 401ks
Traditional 401(k) or Roth 401(k)?
Workers usually don’t know the difference. Yet employers increasingly are asking them to choose. Nearly two-thirds of private-sector employers with Vanguard plans today offer both a traditional and a Roth 401(k) in their employee benefits. Just four years ago, fewer than half did.
For tips on navigating the traditional-vs-Roth decision, we interviewed two members of the American Institute of CPAs: Monica Sonnier is an investment adviser in the Salt Lake City, Utah, area; and Sean Stein Smith is an assistant professor in the economics and business department at Lehman College in New York.
The difference in the two types of plans is the timing of federal income taxes:
- In a traditional 401(k), a worker who contributes to his or her account will see taxable income reduced by the dollar amount of the contribution. For example, contributing 6 percent of a $30,000 annual salary ($1,800 per year) means the worker pays federal income taxes on just $28,200. The taxes will be paid decades later, when the IRS will require the retiree to pay income taxes on the amounts withdrawn from the traditional 401(k).
- In a Roth, a worker pays income taxes on his or her full $30,000 salary, as usual. The 6 percent is an after-tax contribution that does not reduce the tax bill. The benefit will come decades later, because a Roth does not require the retiree to pay income taxes when the savings – including the Roth account’s investment earnings – are withdrawn.
If a retiree is taxed at the same rate as he was taxed as a worker, there is no difference in the after-tax retirement income the two 401(k) plans provide. However, traditional 401(k)s have generally been viewed as more advantageous, because people typically have lower incomes – and lower tax rates – in retirement than when they were working.
But things might also be changing. Over the long-term, increasing federal deficits due to increased spending pressures from popular programs to support aging baby boomers are expected to push up individual income tax rates. When that occurs, many retirees might be better off with a Roth so they won’t be taxed when they withdraw their savings.
Of course, each individual’s or couple’s tax situation is unique. Given all these caveats, here are the accountants’ rules of thumb for deciding between a traditional and Roth 401(k): …Learn More
September 19, 2017
Unaware and in Need of Flood Insurance
West Houston homeowner Mary Sit surveys flooding in her neighborhood caused by a release of dam water several days after Hurricane Harvey made landfall. Photo credit goes to Amy Sit Duvall
Millions of U.S. homeowners may not realize they’re at risk of flooding, due to outdated flood plain maps and even less information about dam and levee “failure zones” and urban storm-water hazards like the river running through downtown Miami during Hurricane Irma.
Hurricanes and floods tend to be low-probability events with enormous consequences. When they slam our coasts and waterways, they randomly take aim at one of middle-America’s largest financial assets: their houses. Double-barreled hurricanes in Texas and Florida over the past month underscore just how vulnerable this asset can be to storm surges and the unpredictable effects of climate change.
“Someone on the coast of New Jersey or New York says their home is part of my retirement plan. It’s worth $400,000” – or so they think, said Larry Larson, senior policy adviser for the Association of State Flood Plain Managers in Wisconsin.
“What we’re going to see happening, especially in Florida in areas very close to the ocean, is that with the sea level rise, the value of these structures are probably going to go down 30 percent,” he predicted. The Northeast is also at risk, as Hurricane Sandy reminded homeowners in 2012.
A lack of accurate information about flooding is an issue for people who want to properly insure themselves. For example, the flood plain maps compiled by the Federal Emergency Management Association cover only about one-third of the 3.5 million miles of waterfront property located in low-lying flood plains, according to a study by the Association of Flood Plain Managers.
Most oceanfront property has been mapped, but the crux of the problem is that FEMA can’t keep up with rapid urban sprawl, said Chad Berginnis, the association’s executive director. “Today’s cow pastures and corn fields are tomorrow’s residential subdivisions and commercial growth areas,” said Berginnis, a former flood plain manager in rural Ohio.
Further, some sections of Houston that flooded, post-Harvey, when water was released from local dams are not mapped as areas where FEMA requires flood insurance. In northern California, thousands of homeowners around Lake Oroville were unaware they were in a failure zone until they were evacuated last winter for a dam-water release.
Larson sees homeowners make three major mistakes: no or inadequate flood insurance, no contents insurance, and no replacement coverage. …Learn More