February 8, 2018
Cautionary Tale of Defrauding the Elderly
Two Morgan Stanley investment advisers agreed last week to plead guilty to stealing nearly $500,000 in a set of schemes that took particular aim at their elderly or retired clients, the U.S. Department of Justice charged. One client is in his mid-80s.
Multiple allegations detailed in the federal complaint demonstrate the creative ways that trusting older individuals might be deceived. For example, the Justice Department (DOJ) indicated that college tuition may have been the auspice or motivation for adviser and broker James S. Polese’s alleged fraud to obtain $320,000 from the client in his 80s – labeled Client B in the complaint.
The allegations included that Polese, age 51, knew a $50,000 loan from Client B for his children’s college expenses was prohibited by Morgan Stanley and was “a conflict of interest between the client and his adviser,” said the complaint, which was filed last week in U.S. District Court in Boston.
Polese and Cornelius Peterson, who both live in the Boston metropolitan area, also worked together to divert money from Client A and also a Client B to a failed wind farm investment without their knowledge, the complaint said. A third client allegedly paid inflated fees.
The brazen allegations in this case come amid reports that financial fraud against the elderly is on the rise. Retired people with nest eggs can be enticing targets for scam artists, and the elderly are “likely financially vulnerable” if they are experiencing cognitive decline, one study said. Further, a trusting senior might have more difficulty detecting financial deceptions that involve complex transactions. (Little detail about the clients’ personal situations was disclosed in the court documents.)
Morgan Stanley said that it fired Polese and Peterson in June 2017 immediately after uncovering the fraudulent activities and “referred the misconduct to regulatory and law enforcement agencies.” The two are registered brokers, and the Securities and Exchange Commission was involved in the investigation. The brokers agreed to plead guilty, said a statement from the U.S. Attorney in Massachusetts. A plea hearing is scheduled for February 15.
Client A and Client B were involved in the wind farm investment, the complaint said: Client A lost $100,000 after Peterson made “false statements” to his employer “when he signed a form stating that Client A had verbally authorized the $100,000 [wind farm] investment.” Client B, a businessman, was unaware that his funds were being used to support the wind farm, in the form of a loan account that could be used as a collateral backstop to the project, according to the charges. Although the funds were never used, Client B’s money was nevertheless put at risk, DOJ said, and he paid $12,000 in fees associated with the transaction.
Boston attorney Carol Starkey said her client, Peterson, age 28, was a “minor participant” and noted that Polese, who is 23 years his senior, was Peterson’s supervisor. Polese’s attorney did not respond to requests for a comment. …Learn More
February 6, 2018
Health Coverage Varies Widely by State
When it comes to state residents’ health insurance coverage, Utah and New Mexico are polar opposites.
Sixty percent of Utah residents are covered at work – the most nationwide. New Mexico employers cover only 36 percent – the lowest coverage rate.
It follows that their Medicaid populations also differ. In Utah, the federal-state health insurance program covers the nation’s smallest share (10 percent) of poor and low-income workers. New Mexico’s Medicaid population is triple that (31 percent of residents), and its poverty rate is among the highest nationwide.
“Where you live can play an important role in what coverage options are available to you and how affordable they are,” said Rachel Garfield, the Henry J. Kaiser Family Foundation’s senior researcher and associate director of its Medicaid and uninsured program. The Kaiser data are from 2016.
The factors driving the two indicators – employer vs. Medicaid coverage – are intertwined. A larger presence of big, successful companies ensures more employer coverage, raising the standard of living and reducing the need for federal aid. These are, in turn, influenced by other cross-currents in each state, Garfield said: the nature of its industry, whether retail, industrial, high-tech, or agricultural; population demographics, such as the number of immigrants; whether the state expanded Medicaid eligibility under the Affordable Care Act (ACA); and the ebbs and flows of regional recessions and recoveries.
Take Utah. Despite being a primarily rural state with its “Mighty Five” national parks, it is chock full of major employers. Utah’s three largest have 20,000-plus workers each: Intermountain Healthcare, the University of Utah, and state government. Many more employ at least 5,000. Utah’s relatively slim Medicaid population is no doubt influenced by both its employer base and the state’s decision not to participate in the ACA’s Medicaid expansion, which increased the program’s income limits to make more workers eligible. …Learn More
February 1, 2018
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
January 30, 2018
WSJ Recognizes our Retirement Blog
I was honored to be in the company of some excellent retirement writers recognized in a recent article in The Wall Street Journal, “My Favorite Writers on Retirement Planning.” Since I started writing this blog in May 2011 for the Center for Retirement Research, which is funded by the U.S. Social Security Administration (SSA), retirement writers have come out of the woodwork to help the swarms of retiring baby boomers – and many of us need it!
Others featured in the article by the Journal’s Glenn Ruffenach – some new, some veterans – include financial planner Michael Kitces, whom I’ve interviewed about tax strategies for retirement plan withdrawals. Most everyone knows Jonathan Clements, a former long-time Journal reporter now editing and writing a blog. Last but not least, I’ll mention Mike Piper, a certified public accountant – someone new to interview! – and Christine Benz of Morningstar, a Chicago firm that is a long-time source of data and information for this blog.
Each writer is distinct. So, what do we try to do here at Squared Away? …Learn More
January 25, 2018
Just Half of Americans Enjoy Bull Market
The stock market’s 19 percent climb in 2017 was nothing short of impressive. This year, it has gained another 6 percent.
This means that many boomers with 401(k)s are feeling a little more secure about retirement – at least for now. That more people feel they will be able to afford a vacation this summer with their children. And that Warren Buffett is getting richer even faster.
But one in two Americans isn’t at the party. According to the Survey of Consumer Finances in 2016, the Federal Reserve Board’s latest triennial survey and the most comprehensive look at Americans’ personal finances, 48 percent of U.S. families do not own equities.
Less surprising is how stock holdings break out at various income levels. About 30 percent of families with earnings in the bottom half of all incomes own equities, whether in the form of 401(k) investments, brokerage accounts, mutual funds, or individual stocks. For these lower-paid workers, the 2.5 percent average increase in hourly wages in 2017 is usually more meaningful. But inflation increased 2.1 percent last year, leaving them with just 0.4 percent more spending money, according to U.S. Bureau of Labor Statistics wage and inflation data. This is half of 2016’s inflation-adjusted wage gain.
In the next highest income group – from the middle-income level up to the 90th percentile – about 70 percent of families own equities in various forms. In the top 10 percent, the vast majority do (94 percent).
The chasm between the well-heeled and ordinary workers has been widening. Stock ownership is one prism through which to view that inequality. …
January 23, 2018
Millennial Retirement ‘Discouraging’
Baby boomers have limited time and only a few options to improve their financial prospects when they retire and give up a regular paycheck. Millennials have more time to do something about it.
They should start thinking about it, indicates a study by the Urban Institute’s Richard Johnson, Karen Smith, Damir Cosic, and Claire Xiaozhi Wang.
Their test of a comfortable retirement was set at a 75 percent replacement rate, meaning retirees need 75 cents in monthly income for every dollar earned in their final decade of working. For this analysis, the researchers estimated retirement income at age 70 – an age when most people have already retired – for every individual in the federal data sources used in their analysis.
They found that about a third of boomers and boomers’ parents don’t have enough retirement income to make that 75 percent cutoff. Millennnial households will be significantly worse off at age 70: nearly half are at risk.
The prospects for Millennials are “discouraging,” the researchers said. …Learn More
January 18, 2018
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