Getting or keeping health insurance is central to many of the major decisions that working Americans make.
Canadian and European governments provide universal health care to their citizens, but this country has relied heavily on employers for health insurance, and only about two-thirds of them provide it. It’ll be fascinating to see how health care reform changes our decisions about work, starting a business, college, and individual finances when more Americans have access to coverage in 2014.
Research years ago established the influence of employer health insurance on the workplace. When employees are covered at work, job turnover is lower – workers know health care is a big thing to give up. There’s also newer evidence that people on the disability rolls, who receive health care as part of that federal benefit, are more likely to go back to work if they live in a state with better access to health insurance in the private market.
Retirement is another big decision driven by one’s health insurance options. Medicare eligibility at age 65 can trigger the decision, new research shows: people working for employers without any health benefits for their retirees are more likely to retire at 65, according to a paper by economists Norma Coe of the University of Washington’s School of Public Health and Matt Rutledge of the Center for Retirement Research at Boston College, which supports this blog.
“We interpret this finding as evidence that Medicare eligibility persuades people to retire, because they can begin receiving federal health coverage,” Coe and Rutledge write. …Learn More
As I sat in an orthopedist’s office last week watching the doctor poke and prod my mother’s legs – an irritated nerve may be causing her severe pain – this thought struck me: long-term care is often an unspoken topic but one of enormous magnitude.
I’ve always taken for granted that my active mother, who plays a killer game of bridge, wouldn’t need much medical attention for another 15 years. I have evidence of this, I’d convince myself: her mother lived to age 92 and some uncles lived even longer. The pain makes it difficult for my mother to walk her dog, though she gamely hobbles through her day and even insists on league bowling on Wednesdays.
It’s so much easier to shove aside worries about long-term care for the elderly – our own or our parents’ – than it is to contemplate the financial and deeply emotional issues required to care for an aging parent. The video below tells a true story about what happens when the requirements of care slam us hard, as they often do.
Violet Garcia is a single mother of Filipino descent living in Kodiak, Alaska, which is situated on an enormous island south of Anchorage. The public school worker cares for her elderly mother, who can’t be left alone. Garcia aspires to send her middle son away to college soon, but that will create a problem on Sundays, when he takes care of his grandmother so his mother can run errands. …
More than half of baby boomers and Generation Xers do not realize how much they are likely to pay out of their own pockets for medical bills after they retire.
Many “were seriously underestimating the amount of savings they would need to accumulate in order to cover health in retirement,” according to what may be the first comprehensive survey and analysis of what Americans expect to pay – and how far off their estimates are.
The good news is that Medicare pays roughly 60 percent of retirees’ total costs. The bad news is that they have to somehow cover the other 40 percent, which is particularly expensive for those who live longer (read women).
If this new study carries one big message, it is that boomers need to learn more about what will certainly be one of their biggest retirement expenses. For example, by 2020, the range of out-of-pocket spending is expected to vary from $2,453 per year for a typical person with low health care needs to $7,272 for the typical high spender. Boomers also may not be aware that the bite that Medicare premiums take out of their monthly Social Security checks will increase sharply by 2020.
The new analysis of the disparity between future retirees’ expectations and what they’re facing was conducted by law professors Allison Hoffman at the UCLA School of Law and Howell Jackson at the Harvard Law School. …Learn More
Rich and poor retire at vastly different ages – nine years in the most extreme case.
A rich man in excellent health works three years longer than a poor man in excellent health – that’s a fairly long time when one is talking about the decision to retire. But if both men are unhealthy, the difference is much larger. The rich man works nine years longer than his low-earning counterpart.
This complex interplay between one’s financial and physical conditions can be seen in the above chart, which shows retirement ages for American households in five income groups, rich to poor. Among financial planners and prospective retirees, as well as academics, any discussion about the retirement decision is typically dominated by how much a person earns and saves during his or her lifetime. Health and medical expenses are usually a given.
That is “too simplistic,” said Ananth Seshadri, an economist at the University of Wisconsin in Madison.
The chart, taken from a paper by Seshadri and his Wisconsin colleague, John Karl Scholz, for the Retirement Research Consortium, also dramatizes the complex impacts on various groups that would occur if Congress were to raise the eligibility age for Medicare, which it is considering among dozens of other deficit-reduction proposals.
Think about the working man in heavy industry. Research has shown that men in physically demanding jobs, such as aluminum workers, often are forced to retire earlier out of poor health or sheer exhaustion.
But as a wealthy man ages, he is able to pay for good medical care for his heart or hip problem, which enables him to delay retiring. Some people, not entirely consciously, also may choose higher-paying employment – or they may save more – in anticipation that they will have big medical bills when they’re older, Seshadri said.
“People get earnings shocks, but more importantly people get health shocks,” he said. “Medical expenses are a big deal later in life.”
And a primary consideration when one is thinking ahead about when to retire.
Click here for another research paper by the Retirement Research Consortium showing that access to Medicare is a primary consideration when one is thinking ahead about when to retire.
Full disclosure: The research cited in this post was funded by a grant from the U.S. Social Security Administration (SSA) through the Retirement Research Consortium, which also funds this blog. The opinions and conclusions expressed are solely those of the blog’s author and do not represent the opinions or policy of SSA or any agency of the federal government. Learn More
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? … Learn More
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
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