Behavioral economist Richard Thaler, winner of the 2017 Nobel Prize for economics, regards his field’s greatest contribution as showing that people are more likely to save if the saving happens automatically.
“I’m all for empowerment and education, but the empirical evidence is that it doesn’t work,” he said in a 2015 Wall Street Journal interview. “That’s why I say make it easy.”
To make saving for retirement easier, employers have increasingly turned to automated 401(k)s. Automation has taken two basic forms. The first, automatically enrolling each employee, is pervasive and has had notable success in increasing participation in retirement savings plans. The second form, automatically increasing the amount employees save – a concept originated by Thaler and economist Shlomo Benartzi – is catching on. It’s hoped that the second will correct a problem created by the first.
Last year, 45 percent of Vanguard’s client base used auto-enrollment plans, according to its “How America Saves 2017” report. Historically, employees were asked to enroll in their employer’s 401(k). Today, more employers are – as Thaler would say – “nudging” workers by automatic enrolling them, usually when they are hired. Although they then have the freedom to opt out, inertia tends to keep them in the plans.
Participation in all types of 401(k)s has roughly increased in lock-step with the spread of auto-enrollment. Last year, 79 percent of workers participated in Vanguard-administered plans, up from 68 percent a decade ago, when a new federal pension law made auto-enrollment more appealing to employers.
The irony, however, is that while auto-enrollment encourages more people to save, Vanguard partly blamed a 2016 drop in employee contributions on their popularity. The average employee contribution in all types of 401(k) plans declined from 6.9 percent in 2015 of pay to 6.2 last year, well below the 7.3 percent rate prior to the Great Recession, according to Vanguard. … Learn More
The first thing that came to mind while listening to a recent webcast about part-time students was, Wow, people like me who attended four-year colleges are clueless about how hard it is to be a part-time student!
My second thought was better summed up by one of the webcast’s panelists. Solving part-time students’ immense financial and logistical challenges “is really about economic and social mobility for a large group of citizens in our communities,” said Karen Stout, president of Achieving the Dream, a non-profit network of community colleges that promotes students’ success.
Four in 10 U.S. college students are part-time and about four in 10 part-time students drop out very early in their education, according to the Center for American Progress, which hosted the discussion and produced the video above.
The panelists – and two former part-time students who shared their experiences – described the high obstacles part-time students overcome to receive a two-year degree, or to move on to further educational programs. To succeed, these students need financial support and an understanding of their particular needs: …Learn More
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
One thing has gotten lost in the turbulence around the fate of the Affordable Care Act (ACA): the health insurance provided by U.S. employers is relatively stable.
Total premiums increased
3 percent for family plans (to $18,764 for the average, combined premium for employers and employees) and 4 percent for single employees’ coverage in 2017 (to $6,690), according to the Henry J. Kaiser Family Foundation’s annual report on the employer health insurance market. Employees enrolled in family plans pay under one-third of this total premium; single people, less than one-fifth.
In contrast, there was a 20 percent spike in 2017 premiums paid by workers lacking employer health insurance who purchase their policies on the state ACA exchanges – and premiums are expected to increase sharply again in many cities in 2018. While the ACA’s system of mandates and subsidies has pushed the share of Americans covered to record highs, the new challenge clearly is to contain costs.
“It’s really striking how much more stable the group market is than the far smaller marketplaces in the non-group market,” Drew Altman, the Kaiser Foundation’s president, said during a recent webinar. He compared the 20 percent increases and “very high deductibles” typical of ACA plans to modest premium increases and “no real deductible growth this year” for employer health plans.
The rise last year in total employer plan premiums, although somewhat faster than inflation and wages, is an improvement over the 5 percent to 10 percent annual premium growth in the past decade.
No obvious explanation exists for this relative stability, Altman said, especially at a time prescription drug costs are surging and health care providers are consolidating their market power. “I think it’s healthcare’s greatest mystery right now,” he said about the employer market.
That’s not to say everyone can afford their employer medical plans. …Learn More
The unemployment rate is an incredibly low 4.4 percent, and a Federal Reserve survey released last week shows that American households’ net worth is increasing.
Yet all is not well.
One in three Americans say they are suffering financial hardships, and another third report they are making it but aren’t exactly thriving. One in five struggles to cover what is most basic: food, housing and medical care. These new findings, which came out of a report by the federal Consumer Financial Protection Bureau (CFPB), aren’t about economists’ traditional, objective measures of security, income and wealth levels. This is about how people are feeling about their financial state of affairs.
The common, everyday financial distress expressed in the report is one marker of the familiar socioeconomic chasm that persists in this country. The CFPB highlights the most significant – and unsurprising – differences separating the secure from the struggling: education and income levels, the presence of health insurance, and how much of one’s budget is consumed by housing costs. “Access to jobs, benefits, sufficient income, and family resources likely play a major role in a person’s financial well-being,” the CFPB said.
But it’s also more complicated than that. For example, some lower-income people might, despite their challenges, be able to find their comfort level, CFPB said, while not all higher-income people do. One thing the survey can’t get at is the extent to which feelings of financial security or insecurity are being influenced by how Americans are doing relative to co-workers or people in their communities.
The agency used answers to its 2016 survey to assign financial well-being scores, ranging from 0 to 100, to nearly 6,400 participants. The findings are summarized in a new report.
Myriad factors influence how individuals feel, sometimes leading to surprising results in the CFPB report: …Learn More
Older workers face fewer headwinds and better working conditions than their younger co-workers, according to the first analysis of a new survey of 3,900 blue- and white-collar workers between ages 25 and 71.
The U.S. workplace overall is “very physically and emotionally taxing,” according to the study – that’s why they call it “work.” Two out of three workers of all ages reported in the 2015 survey that they are often required to move at high speeds under tight deadlines, feeling intense pressure to accomplish too much in too little time.
But after people pass the age of 50, things get a little easier. Older workers report having more flexible work schedules, more predictable hours, fewer scheduling changes, less stress, and greater ease in arranging time off to take care of personal matters, the analysis found.
Their workplace situation isn’t all rosy. Larger shares of older workers feel under-employed or have unsupportive bosses – this held true whether they had college degrees or not.
The analysis of the new American Working Conditions Survey (AWCS), by researchers led by Nicole Maestas at Harvard Medical School and recently published in an e-book, is an introduction to what will inevitably be more research using this new, publicly available data. The AWCS might, for example, provide new fodder for studying the factors that influence older Americans to continue working or to retire.
The new study found some striking differences between older and younger workers – and among different groups of older workers: …Learn More