February 20, 2014
Mass. Health Law Cut Debt, Bankruptcy
Medical debt is a primary cause of bankruptcy. But new research finds that the Massachusetts health reform, by extending health insurance to a greater share of the state’s population, has reduced residents’ total debts and bankruptcy filings and improved their credit scores.
This experience is especially relevant now that the federal Affordable Care Act (ACA), modeled after Massachusetts’ 2006 reform, has effectively made health insurance mandatory nationwide, starting this year.
Health insurance is central to a household’s financial health, because one medical catastrophe can blow a hole in their savings account or throw them into bankruptcy. Most households who lack coverage are in the bottom half of the income distribution, and more than one in three uninsured individuals can’t afford his medical bills and is forced to pay them over time. Two out of three individuals paying over time owe more than $2,000, and one out of five owes more than $8,000.
Researchers at the Federal Reserve Bank of Chicago and Notre Dame examined the Massachusetts reform’s financial benefits for state residents between the ages of 18 and 64, using a Federal Reserve data set based on credit reports. Between 2006 and 2012, health reform increased the state’s insured population from 90 percent to 97 percent of all residents.
The benefits included: …Learn More
January 30, 2014
TV’s “Shameless” Takes on 401(k)s
In this video clip from “Shameless,” young adults may relate to Fiona’s reaction to “the 401(k) talk” by a manager who pops into Fiona’s cubicle.
This popular television dramedy, “Shameless,” is about the dysfunctional Gallagher family of Chicago, and oldest daughter Fiona (played by Emmy Rossum) does what she can to keep things together. But how to cope with the 500-page 401(k) binder her manager drops on her desk with a thud?
It’s been rare that 401(k)s are mentioned on television. So, why have retirement savings accounts entered our popular culture?Learn More
January 28, 2014
Gen-X Retiree Income Inequality to Widen
There’s a growing awareness of the chasm between average working Americans and those at the top of the earnings scale.
What isn’t widely recognized is that this broad economic trend is spilling over into retirement incomes, which depend on how much people earn and save while they’re still working.
“The increasing wage inequality we see during the working years plays out over the life course and will result in more unequal incomes at older ages,” said Richard Johnson, an economist with the Urban Institute in Washington.
Johnson recently compared the incomes of today’s retirees with his income projections for the youngest members of Generation X who will enter retirement in about 30 years. He found that the imbalance between those at the top and bottom is expected to be wider for Gen-X.
In his study, retiree income includes Social Security benefits, pensions from traditional defined benefit plans, and employment earnings. Johnson also assumes that people spend down their 401(k)s, but he does not include equity in one’s home, which retirees can also convert to income. …Learn More
November 19, 2013
Housing Market Adds to Seniors’ Equity
The equity in older Americans’ homes has risen smartly over the past year, fueled by the housing market rebound. But whether retirees will tap these gains to pay their bills remains in doubt.
Equity values for homeowners who are 62 or older was $3.34 trillion in the second quarter of this year – nearly 10 percent above its $3.05 trillion value a year earlier – according to new data released by the National Reverse Mortgage Lenders Association (NRMLA), a trade organization.
Rising house prices are restoring equity even in places like Florida devastated by the housing market bust. Seniors’ home equity has surged 14 percent there over the past year, to $241 billion in the second quarter of 2013, though it remains far below the levels reached during the bubble.
The equity gains are not being propelled by homeowners paying off their home loans. U.S. seniors owed $1.07 trillion on their mortgages in the second quarter, compared with $1.09 trillion a year earlier, the trade organization said.
The housing market rebound is a reminder that equity is the largest single asset that older Americans hold – it’s worth more than their savings in their 401(k)s and IRAs. But the question remains: does this help them? …Learn More
October 24, 2013
Oldest Americans Are Lucky Generation
Americans in their 70s and 80s have earned more and are wealthier than the baby boom generation – for the simple reason they were born at the right moment in history.
It was easier for members of this older generation to get ahead, because they came of age in the aftermath of World War II, when economic and demographic trends were strongly working in their favor, contends new research by William Emmons and Bryan Noeth of the Federal Reserve Bank of St. Louis. The emergence of a modern social safety net and the rise of unions may’ve also contributed to their relative prosperity, they said.
Baby boomers born after about 1950 do not seem to have the same income and wealth over their working and retired lives that their parents have enjoyed, even after the research takes into account numerous things that determine an individual’s prosperity, such as their level of education. If the current trend continues, these younger boomers just won’t be as lucky.
Birth year “comes up as a significant variable in terms of influencing income and wealth,” Emmons, a senior policy adviser, said about the study, which analyzed decades of U.S. data on household finances. …Learn More
October 15, 2013
U.S. Families: Not Poor But Feeling Poor
New research shows the share of Americans who lack enough ready cash on hand for emergencies shot up in the aftermath of the Great Recession.
These families do not have access to the liquid assets – cash or funds in their checking or savings account – to cover emergencies like layoffs, health crises, or even car repairs, according to an analysis of federal data by Caroline Ratcliffe of the Urban Institute, who presented the finding to the Congressional Savings and Ownership Caucus in late September.
Ratcliffe’s measure of financial fragility was families who did not have enough liquid assets to subsist at federal poverty levels for three months. That amounts to $2,873 for a single person, $4,883 for a family of three, and $5,888 for a family of four.
By this measure, 37 percent of families in the middle income group – earning $35,600 to $57,900 a year – in 2010 were financially fragile – up sharply from 28 percent in 2007, a year before the Great Recession began. No income group was spared by the downturn: in most cases, the share of families at risk increased between 9 percentage points and 13 percentage points.
Ratcliffe said that financial problems can cascade if cash-poor families resort to high-cost loans or credit cards to pay their bills, and building wealth becomes extremely difficult.
“A shortage of liquid assets can lead to cycles of debt when financial emergencies arise,” creating “further financial instability,” she said.Learn More
August 22, 2013
More Carrying Debt into Retirement
No matter how you measure it, older Americans are falling deeper in debt.
The number of people in their 60s who have debt has grown from just under half of that age group in 1998 to nearly two out of three in 2010. And their debt, as a share of their assets, has surged during that time from 10 percent to 18 percent.
Debt is becoming increasingly common among older people, regardless of their level of income, according to Urban Institute researchers, who presented their findings at the August meeting of the Retirement Research Consortium. (The Center for Retirement Research at Boston College, which sponsors this blog, is a Consortium member.)
Among individuals with incomes that place them in the top third of incomes, the share of older people in debt increased from 57 percent to 70 percent between 1998 and 2010 – a 13 percentage point rise. But that share rose by 17 percentage points for middle-income and by 14 percentage points for low-income people. In all three income groups, the amounts owed also rose. …Learn More