Moving? Check the State Taxes First

New Jersey’s retirement income exclusion for couples leaped from $20,000 to $100,000 in 2016.  Minnesota and South Carolina now have income tax deductions for retired military. And Rhode Island started exempting the first $15,000 of retirees’ income from the state’s income tax.

State taxes are one piece of the financial puzzle to consider when retirees – or Millennials – are thinking about moving to reduce their living costs, find a job or friendlier climate, or be close to the grandchildren.

Map of state sales taxThe Retirement Living Information Center recently compiled a nice summary of tax rates for all 50 states on its website. The information comes from sources like the Federation of Tax Administrators, The Tax Foundation and the National Conference of State Legislatures.

State taxes vary dramatically. Alaska, Florida, and Texas are among the states boasting no personal income taxes, though some offset this with relatively high property or sales taxes. A few states – yes, Alaska again – have no sales taxes.  Tax deductions and exemptions for retirement income are the norm, but they vary widely from one state to the next.

Full disclosure: the Retirement Living Center is a company that makes money by referring retirees to senior communities listed on its website or by arranging residents’ reviews of these communities. But the state tax website is free and publicly available.Learn More

Not All Good Jobs Require 4-Year College

The number of quality jobs held by workers with a two-year associate’s degree rocketed from 3.8 million in 1991 to 7 million in 2015.  Total employment over that time didn’t come close to that rate of growth.

“There are still good jobs out there for workers who don’t have a four-year degree,” explains the above video by Georgetown University’s Center on Education and the Workforce. These jobs, which require a bit more education and training than high school, typically pay $55,000 per year.

The video and accompanying report, released in late July, introduce a three-year project to document and analyze employment opportunities for people who do not want, or haven’t been able to obtain, a college degree. This blog will watch for the center’s future reports on this important topic. …Learn More

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Behind Asian-Americans’ Wealth Divide

wealth divide chartWhen it comes to wealth, Asian-Americans aren’t much different than whites. The typical household’s net worth is around $133,000 in each group, and about 10 percent have no wealth at all.

And like white America, Asian-American inequality is high and rising. Asian-Americans ranking in the top 10 percent (in terms of their wealth levels) have $1.45 million in savings and home equity – about 170 times more than those in the bottom 20 percent.  In the 1990s, the top 10 percent had 75 times more wealth.

Given this high concentration of wealth, “many Asian Americans, especially Asian American seniors who need to live off of their savings, live in an economically precarious situation,” according to a Center for American Progress study in December. The Urban Institute in a newer study concluded that “Asian American seniors are often left out of the national conversation on poverty.”

A deeper analysis reveals the dynamics at work in this rapidly growing and diverse socioeconomic group.

The timing of immigration is key to socioeconomic status. The Japanese, who came to this country in large numbers in the early 1900s, have had plenty of time to improve their lot. A new report by the Federal Reserve Bank of San Francisco, focused on the Los Angeles area, found that people of Japanese descent are, by far, the wealthiest segment of the Asian community there. Remarkably, the median household’s net worth approached $600,000 in 2014.

Immigration from Korea, by contrast, didn’t pick up steam until the 1980s and 1990s. Not surprisingly, the typical Korean household lags behind, with about $25,000 in wealth.  But that could be changing: one in five Koreans owns a business, the highest rate of business ownership for Asians in the Los Angeles area.

Inequality also emerges between generations in upwardly mobile Asian-American families. …
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Beach Reads for and about Old Folks

The Accomplished Guest coverCan't We Talk About Something More Pleasant?Die Laughing

 

 

 

 

 

 

 

 

Who wants to spend their beach vacation reading about growing older? These recommendations just might surprise you.

“The Accomplished Guest” by Ann Beattie

Ann Beattie’s 1983 book of short stories, “The Burning House,” explored the drift, emotional detachment, and cynicism of boomers, whose worldview was darkened by Watergate. That book made Beattie’s reputation, and she has been prolific ever since, including regular appearances in The New Yorker.  Her 2017 short story volume, “The Accomplished Guest,” is, for now, a bookend to “The Burning House” (Beattie is only 69 and no doubt has more books in her). While baby boom skepticism remains a central theme, her characters have developed a little heart and sentimentality over the years. I particularly liked “Company,” about an older couple entertaining newlyweds at their Maine summer house (one advantage of getting older).  All night, Henry ruminates about his death.  But as this glorious summer evening draws to a close, he finds reason to celebrate his friendship with the much younger Jackson.  Jackson is still decades away from facing his own mortality, but tonight, they are “just two men – you know, any two men – passing time on the back porch.”

“Can’t We Talk About Something More Pleasant?” by Roz Chast  

For months, I ignored raving recommendations about Roz Chast’s book on how she navigated her parents’ old age. I should not have.  This book by the long-time New Yorker cartoonist is a poignant, laugh-out-loud funny examination of the guilt, love, memories, regrets, anger, and tenderness that churn inside adult children carrying their parents through the final stages of their lives. …Learn More

401k Saving Harder at Lower Incomes

Sales assistant working in a supermarketOur 401(k) retirement system doesn’t work as well for lower- and middle-income workers as it does for those at the top.

That’s because they face more severe headwinds in pursuit of their retirement goals, concludes a new study.

Consider what happens when a worker’s earnings drop 10 percent or he experiences a bout of unemployment. These episodes are more common among lower-paid workers, and when they hit, they hit their 401(k)s harder than the 401(k)s of people who earn more, according to the study, “Defined Contribution Wealth Inequality.”

In theory, 401(k)s could work for everyone – if everyone had access to an employer savings plan (which they don’t).  And while people who earn more money obviously have more to sock away in their retirement plans at work, smaller paychecks aren’t necessarily a problem either.

The key to retirement for any worker is whether he or she has saved enough, along with Social Security, to cover about 75 percent of what they earned at work during the years leading up to their retirement. It’s true that lower-paid workers can’t save as much, but less could still be enough to reach their more modest retirement goals.

But earnings declines, unemployment, smaller employer contributions, and unwise investment choices – these “barely affect earners in the top 10 percent of the earnings distribution but are associated with less DC [defined contribution] wealth accumulation for those at the bottom,” concluded the researchers, Joelle Saad-Lessler at the Stevens Institute of Technology and Teresa Ghilarducci and Gayle Reznik at the New School for Social Research.

This disparity, they argue, has increased the retirement wealth gap in this country.  In the post-recession period 2009-2011, for example, more high-income workers saw their DC account balances increase than did workers in the bottom half.

The researchers tracked the same people over time in two groups – the bottom 55 percent of the earnings ladder and the top 10 percent. They were able to more precisely compare each group’s ability to save for retirement by using the actual earnings and employer contributions to individual workers’ retirement plans. Here are their other findings: …Learn More

Medicaid: it’s Not Just for Nursing Homes

Medicaid serves millions of low-income Americans, many of them elderly. Federal spending on this program now approaches the dollars spent on Medicare, the primary health care program covering virtually all Americans over 65.  Many people confuse the two programs, or cast Medicaid as a program strictly for the poor.  Many are unaware of the financial support that it provides to seniors.

With major changes to Medicaid now being debated, Squared Away interviewed Diane Rowland, executive vice president of the Henry J. Kaiser Family Foundation, to learn just what Medicaid does.

Medicaid Basics Chart - Revised

Q. Describe Medicaid’s broad mission and how older Americans fit into that mission.

A. Medicaid’s basic mission has been to provide support from the federal government to the states to enable them to provide health and long-term care services to their low-income populations, which include seniors in many states. This includes both people who need assistance with long-term care, but Medicaid also helps one in five Medicare beneficiaries pay for their premiums and cost-sharing obligations under Medicare. In essence, Medicaid is the gap-filler for many of Medicare’s seniors, including seniors with disabilities who have low incomes.

Q. Virtually everyone over 65 enrolls in Medicare? So why do seniors need Medicaid?

A. Seniors need Medicaid, because over one-quarter of seniors have very low incomes. Medicare doesn’t pay for 100 percent of medical care, and some of the gaps in Medicare coverage are unaffordable for low-income seniors. They can’t afford Medigap policies to help with Medicare’s cost-sharing requirements. Many struggle even to pay their Part B premiums. One of the first roles of Medicaid – and over the 52-year history of the program – was always that the program was going to fill in the holes for seniors under Medicare. Medicaid’s other role is that Medicare does not provide a lot of the benefits that seniors need in nursing homes and in their communities. At one time, Medicaid also helped with prescription drugs – back when Medicare didn’t cover them. In many places, Medicaid will also help to pay for dental, eyeglasses and other services Medicare doesn’t cover. Essentially Medicaid has always been the wraparound for Medicare for both the benefits Medicare doesn’t cover and for the financial obligations that Medicare imposes on low-income people.

Q. Nearly two-thirds of nursing home patients are on Medicaid. This nursing home funding isn’t just for the poor, is it?

A. Medicare will pay for some nursing-home coverage immediately after hospitalization, but it does not include a benefit that helps people who need long-term assistance, especially people with cognitive impairment or Alzheimer’s or who need other services that require substantial help at home. Nursing homes are expensive – $90,000-$100,000 per year – so even if someone enters a nursing home with their own resources, they quickly spend that down. Once they spend it down, Medicaid picks up the remainder of their care. Many good, hard-working, middle-class seniors who retire – if they or their spouse need nursing home care – quickly become unable to pay the full cost of their nursing home stay, and that’s when Medicaid kicks in. …Learn More

Boomer Men’s Lifetime Earnings Lower

The first study known to look at changes over several decades in lifetime earnings for the nation’s workers shows a dramatic trend: women are up and men are down.

The oldest people studied, mostly men, began working in the 1950s, when the post-war U.S. economy was going full throttle, and they started retiring in the 1980s when the industrial economy was only in the early stages of a protracted decline. The youngest workers studied are “middle” baby boomers, who came of age during the twin 1980s recessions in heavy industry and experienced the rise of the service economy and two high-tech booms and busts.

Over this time period, men’s earnings went through two distinct phases.  In the first phase – which spanned the working lives of men born in 1932 through 1941 – the typical man’s lifetime earnings, adjusted for inflation, saw a 12 percent increase, the researchers found.

In the second phase, men’s lifetime earnings turned negative. Boomers born in 1958 have earned 10 percent less in total than men born in 1942. The decline is primarily due to men being paid less after accounting for inflation, and not from reductions in how many hours or how many years they worked, the analysis found.

In contrast, lifetime earnings for women born over the same 27-year period enjoyed “steady” and “broad-based” gains of 20 percent and 30 percent over the two sub-periods. …Learn More

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