December 4, 2012
Long-Term Care Policies Unpacked
The typical, elderly couple spends about $260,000 on health care and long-term care services during retirement – for the unlucky ones, the amount can be double. No wonder sales of long-term care policies this year will increase nearly 10 percent, according to the American Association for Long Term Care Insurance. At the same time, major insurers are pulling out of the market in droves, and premiums are surging due to higher demand by aging baby boomers, record-low interest rates, and rising medical costs.
To help navigate this increasingly treacherous market, Squared Away interviewed Larry Minnix Jr., chief executive of LeadingAge, a non-profit consumer organization in Washington.
Q: Is there anyone for whom long-term care insurance does not make sense?
A: Not many. I’ve seen too much of the consequences for too many age groups and too many families – long-term care just needs to be insured for. A majority of the American public is going to face the need for some kind of long-term care in their family. The only people it doesn’t make sense for are poor people – they have Medicaid coverage, mostly for nursing homes. And for people who are independently wealthy, if they face a problem of disabling conditions they can pay for it themselves. You find out at age 75 you have Parkinson’s or Alzheimer’s, but it’s too late to insure for it. Think about it like fire insurance. I don’t want my house to burn down, and very few houses do. But if mine burns down, I do have insurance.
Q: The Wall Street Journal reported that GenWorth Financial next year will charge 40 percent more to women who buy individual policies. Why?
A: Among the major carriers, private long-term care insurers have either limited what they’re doing or backed out of the market entirely. You’d have to get GenWorth’s actuarial people [to explain], but let me venture a guess. I’ve had private long-term care insurance for 12 to 15 years, but my wife couldn’t get it. She’s got some kind of flaw in the gene pool, and she was denied coverage. She may be the bigger risk, because I’m more likely to stroke out and die, but she’s more likely to live with two to three conditions for a long period of time.
Q: Your wife wasn’t healthy enough to get coverage? …
November 13, 2012
Women Don’t Ask
Why do men earn more than women? Attitude!
Last week on Squared Away, Francine Blau, a Cornell University labor economist, discussed the economic and other external reasons behind why women earn less than men. But there’s another way to look at it: women’s behavior differs from men’s – and that plays a role in how much they’re paid.
A woman earns 77 cents for every dollar that a man earns. This disparity undermines women’s well-being, reducing their standard of living and affecting everyone’s retirement – including their husband’s.
The following is an excerpt from a June 2003 article I wrote as a Boston Globe a reporter about an experiment by researcher Lisa Barron, a professor of organizational behavior at the Graduate School of Management at the University of California, Irvine. It involved 38 future MBAs – 21 men and 17 women – who participated in mock job interviews with a fictitious employer.
In the mock interviews, the students were offered $61,000 for a new position. Here’s what I wrote about the differences in men’s and women’s approaches to their pay negotiations:
Men, responding to the salary offer, asked for $68,556, on average, while women requested $67,000 for the same job.
More revealing were differences in fundamental beliefs men and women expressed about themselves when Barron questioned them: 70 percent of the men’s remarks indicated they felt entitled to earn more than others, while 71 percent of women’s remarks showed they felt they should earn the same as everyone else. Also, 85 percent of men’s remarks asserted they knew their worth, while 83 percent of women’s remarks indicated they were unsure. …Learn More
November 6, 2012
Dicey Retirement: The Long Ride Down
No one really needs confirmation of how tough the Great Recession was. But the Center for Retirement Research at Boston College has quantified the decline – and it’s brutal.
Investment losses and falling home prices placed 53 percent of U.S. households in danger of a decline in their standard of living after they quit working and retire, reports the Center, which funds this blog. That’s up sharply from 45 percent in 2004, prior to the financial boom, which created a strong – albeit fleeting – increase in Americans’ wealth.
The longer-term erosion in Americans’ retirement prospects is even more troubling and reflects deeper issues. The Great Recession just hammered the point home.
In 1989, just under one-third of Americans faced such dicey retirement prospects. The steady erosion since then coincides with the near-extinction of traditional employer pensions that guaranteed retirees a fixed level of income. It turns out that the DIY system that replaced them, a system reliant on Americans’ ability to save in their 401(k)s, is not working.
Older baby boomer households with 401(k)s have just $120,000 saved for retirement, according to the Center. That’s not even enough to pay estimated medical costs not covered by Medicare. Retirement savings for all older boomer households is a paltry $42,000 – that means a lot of people have no savings…Learn More
October 11, 2012
Boomer Moms, Here’s A Radical Idea
Research shows that when children leave the nest, married couples spend 50 percent more on discretionary spending like eating out and vacations. But whether you’re ready or not, retirement is bearing down hardest on women.
Here’s a radical concept for moms whose children have suddenly grown up: focus on your own financial needs. Women usually out-live their husbands and need to be on top of the situation. So getting a handle on your financial priorities should be at the top of your list.
Squared Away interviewed financial experts to come up with five priorities for baby boomer women whose kids have flown the coop.
Get Smart. If you haven’t had time to pay attention to the household finances, start simple. Financial expert Wendy Weiss, on her blog, Hot Flash Financial, said the first thing to do is track down and inventory the types of accounts and the financial institutions that hold your money: savings, retirement plans, insurance documents, your and your husband’s latest Social Security statements – add them up and determine what you’ve got. Then get a handle on the size of the credit card debts and mortgage.
“Just find out what you have,” Weiss says. “There are questions you can ask later.”
Talk to Your Kids. You’ve poured your heart into nurturing your offspring. So turn the tables and ask them to have a conversation about your needs once you retire.
Financial advisers swear by these wide-ranging discussions, the content of which reflects the diversity in families. The children will be reassured if you’ve saved enough or will share your concern if you haven’t. Perhaps they’ll have opinions about whether you should purchase long-term care insurance. They should also know the beneficiaries on your financial and pension accounts and insurance…Learn More
October 4, 2012
The Long-Term Care Insurance Gamble
A good friend in Houston recently emailed me to ask whether she should buy long-term care insurance. Let me be very clear about my answer: I have no idea.
This writer is like baby boomers everywhere trying to get a grip on this long-term care stuff. Where to start?
First, let’s look at the prices for long-term care. Squared Away used data from Genworth, one of the nation’s largest insurers in this market, to generate a U.S. map with the median cost in each state of a semi-private room in a nursing care facility.
Genworth’s goal is obviously to sell insurance. But I ran its data by a few people, and it held up well, with a few observations and caveats discussed later…Learn More
September 20, 2012
Social Security: There is a Better Way
Married couples have up to 567 options for deciding when and how to file for their Social Security benefits. Yes, 567!
“They are faced with a bewildering array” of choices, said David Freitag, vice president of Impact Technologies Group Inc. in Charlotte, North Carolina, which just released a spiffy, user-friendly Social Security calculator to help.
No wonder people just throw up their hands and claim their benefits at 62, when they first become eligible. But in the midst of the baby boomer retirement tsunami, oodles of calculators are coming online to simplify the decision for couples. Impact is offering a 14-day free trial to anyone who wants to test its calculator.
Couples’ strategies have become more complex, because today’s boomer wives have spent a lifetime working and because they may earn wages rivaling or exceeding their husband’s, said Jim Blankenship, a financial planner in New Berlin in central Illinois. There is also more money at stake in making the right decision, he said.
“Before, it was much easier to have a rule of thumb to go by,” he said. “The decisions are different than what they used to be.” …Learn More
September 6, 2012
Campaign Discourse Misses Major Issue
Retirement-income security is receiving little attention as the presidential campaign heats up, despite a mound of evidence that Americans’ retirement prospects are stagnating – or worse.
While Medicare has been at the center of the debate, there has been little emphasis on the broader topic of income security for what remains the largest demographic bulge in U.S. history – the baby boomer generation – and now the largest block of retirees.
In the retirement community, however, debate swirls constantly about how bad the situation really is. These debates are slicing the onion awfully thin when one research paper or report after another contains a new aspect of the troubling fallout from the final years of a transition from secure, employer-guaranteed pensions to DIY retirement. Sometimes it seems that Wall Street’s collapse in 2008 was just the kickoff for the bad news on the retirement front.
A new report from Boston College’s Center for Retirement Research, which funds this blog, finds that just 42 percent of workers in the private sector had pension coverage in their current jobs in 2010 – that’s coverage of any kind, including the defined-contribution plans that now dominate. Yikes!…Learn More