August 16, 2012
Out-of-Pocket Medicare Costs Bite Deep
The bite taken out of Social Security checks to pay Medicare premiums and co-payments for doctor visits has more than doubled, from just 7 percent of benefits in 1980 to 15.5 percent currently.
People born on the tail end of the baby boom wave are suddenly waking up to retirement, which is barreling towards them. While many have no idea how Medicare works or how much they will pay for health care, the program’s future has emerged as a key issue in a presidential campaign with competing notions of how best to slow Medicare’s growth to a more sustainable level.
Whatever your political stripe, the costs of retirement health care are rising “significantly,” according to a forthcoming report by the Center for Retirement Research, which sponsors this blog.
Medicare covers a large portion of health costs, but retirees must pay Medicare premiums, which are deducted from their monthly Social Security checks, as well as copayments for doctor visits and other medical services such as some tests. These additional expenses are often, though not always, covered by employer-sponsored or private “Medigap” insurance policies, which smooth out these expenses for retirees…Learn More
August 14, 2012
Hard Labor Spells Earlier Retirement
Men with the most physically demanding jobs retire earlier – by choice or due to exhaustion or chronic pain – increasing the financial pressures facing this segment of the workforce once they reach old age.
The retirement age for most Americans continues to float upward as people delay the date so they can sock more money away or boost the eventual size of their Social Security checks. But that’s often not a viable option for people with highly physical jobs, such as the 1,500 Alcoa plant workers in a new study.
The retirement pattern for Alcoa workers studied by the Stanford University School of Medicine suggests that men in manufacturing jobs face a unique set of retirement issues related to the physicality of their work. Most of the workers in Stanford’s 2001-2008 study were employed in aluminum smelters. The study found that men in these demanding jobs retired, on average, at age 60 and six months – a full year earlier than their male Alcoa coworkers with jobs such as floor inspector or shipping clerk.
“Those with heavier jobs retire earlier. Those with more sedentary jobs retire later,” Sepideh Modrek, a Stanford medical school lecturer, said at the recent Retirement Research Consortium conference, where she presented the results of her working paper. [The Center for Retirement Research, which sponsors this blog, is a consortium member.] … Learn More
August 9, 2012
Social Security Advice That Harms Wives
Most financial advisers give troubling advice to married couples about when to claim their Social Security benefits, advice that can substantially reduce the wife’s income during retirement.
Social Security rules generally make it more beneficial for the higher-earning spouse – usually the husband – to delay signing up for his benefits well past age 62. By delaying, he boosts the size of his monthly Social Security check, automatically increasing his wife’s “survivor benefit” after he dies. This holds true for most couples, whether the wife works or not.
A new survey of U.S. financial advisers provided them with hypothetical couples’ situations and asked how they would advise them on when to start receiving Social Security. For the couple in excellent or average health, only 20 percent recommended “that the man delay claiming as long as possible.” This advice leaves most widows with a substantially smaller monthly benefit for years or even decades.
The survey’s finding demonstrates “the lack of understanding of both the benefits of delaying and the compounding factor it can have on the spouse,” said Lisa Schneider, research director for Greenwald & Associates, a private research firm that conducted the study with researchers at the University of Pennsylvania. …Learn More
August 7, 2012
Gilded Age: Pride in Excess
The flaunting of wealth that marked the Gilded Age is difficult to grasp. Forbes reports there are currently 425 U.S. billionaires, the most in any country. They tend to live in cocoons, flinching when the media write about their vast homes or other trappings of wealth.
But Newport Rhode Island’s Gilded Age mansions were built for the express purpose of showcasing the unprecedented fortunes accumulated during the new industrial age. Summer residents paraded in their finery during afternoon carriage rides and held lavish parties for hundreds – sometimes thousands – on the grounds of their seaside homes, which replicated the castles that wealthy Americans saw during their European vacations. [On Aug. 16-19, The Preservation Society of Newport will host a weekend of carriage rides.]
Enjoy this photo tour of The Breakers and Marble House! Newport’s most spectacular homes were built by two grandsons of the steamship and railroad magnate “Commodore” Cornelius Vanderbilt.
Arial View of The Breakers, Newport, Rhode Island:
Cornelius Vanderbilt II introduced his “summer cottage” to high society with a 1895 debutante party for daughter Gertrude, officially putting his $75 million fortune on grand display. …Learn More
August 2, 2012
In Session: Retirement Conference
Squared Away is not on vacation: I’m attending the annual Retirement Research Consortium’s conference in Washington D.C.
Follow my tweets @SquaredAwayBC to learn about some of the research findings being presented at the conference. I’ll also be writing blog posts about individual research papers in coming weeks.
Topics being discussed today at the conference include the impact of a decline in smoking on U.S. life expectancy, the personality traits that are associated with being prepared for retirement, and how Social Security policies affect your decisions about when to retire.
To receive email alerts about the week’s blog posts, click here.
There’s also Twitter @SquaredAwayBC, or “Like” us on Facebook!Learn More
July 31, 2012
Student Loan Prevention: Part 2
Last week, Squared Away published the first five of 10 strategies to help parents and their college-bound kids limit their borrowing through student loans. As promised, readers can find the remaining five ideas below.
On a complexity scale, finding a college is comparable to buying a house, and some of these debt-cutting strategies are extremely difficult to put into practice. In addition to the financial challenges involved, the emotional aspects of parent-child dynamics and the college application process are daunting.
But the soaring cost of an undergraduate education has made student debt prevention a top priority for most families. Here’s more help from college financial advisers.
Deborah Fox of Fox College Funding LLC in San Diego said the days of majoring in English, philosophy or history are over – or should be. Given the financial pressures of college, she said, students can’t afford to “just study what’s interesting to you.” When weighing future earnings for graduates with such majors, the numbers just don’t add up, especially if the English degree is from a high-cost institution like Columbia University (high cost among private colleges) or the University of Illinois at Urbana-Champaign (expensive for in-state students).
Fox asks her clients to identify skills the college-bound teenager is good at. When entering college, they should already have a handful of potential occupations in mind. Then they can focus on relevant internships, jobs, courses and life skills that will help them get a job when they graduate – and begin paying back their loans. Freshmen should immediately begin testing their theories about the work they’ll want to do – “possibilities they could get excited about,” she said. She tells clients’ kids to “start exploring them immediately, shadow [people in their field], take someone out for coffee. Find out what is the day-to-day work like.” …Learn More
July 26, 2012
Student Loan Prevention: Part 1
It’s panic time! College-bound teenagers and their parents are excitedly touring colleges this summer, or they’re signing the dreaded Stafford loan documents to pay for college in the fall.
One thing is crystal clear in the emotional fog of this exhilarating rite of passage: parents and their teenagers both need to get serious about limiting their dependence on student loans. Squared Away asked several experts on financing a college education for their best tips on minimizing total borrowing for college.
Some of their debt-cutting strategies are difficult to swallow. But since 2005, student loans have shot up 55 percent, to $24,301 per student, for an undergraduate degree that has, as one financial adviser noted, become “ubiquitous.” Yet college places an unprecedented financial burden on parents also saving for retirement and on graduates when they get their first full-time jobs. Debt prevention also requires families to face head-on the emotional roadblocks to an affordable education.
Squared Away came up with 10 debt-prevention strategies. Here are the first five ideas, with five more scheduled for next Tuesday. Links to Web resources are also sprinkled throughout the article.
- Aid Deadlines Are Crucial
Buy a calendar and red marker and closely track every single deadline for merit or need-based aid – they’re different for each college under consideration.
“If I could give you one piece of advice that would be it,” said Lyssa Thaden, a financial education manager for American Student Assistance, which educates and counsels student-loan borrowers.
Thaden listed four common mistakes that cost parents dearly, requiring them to borrow more: …Learn More