September 14, 2017
Moving? Check the State Taxes First
New Jersey’s retirement income exclusion for couples leaped from $20,000 to $100,000 in 2016. Minnesota and South Carolina now have income tax deductions for retired military. And Rhode Island started exempting the first $15,000 of retirees’ income from the state’s income tax.
State taxes are one piece of the financial puzzle to consider when retirees – or Millennials – are thinking about moving to reduce their living costs, find a job or friendlier climate, or be close to the grandchildren.
The Retirement Living Information Center recently compiled a nice summary of tax rates for all 50 states on its website. The information comes from sources like the Federation of Tax Administrators, The Tax Foundation and the National Conference of State Legislatures.
State taxes vary dramatically. Alaska, Florida, and Texas are among the states boasting no personal income taxes, though some offset this with relatively high property or sales taxes. A few states – yes, Alaska again – have no sales taxes. Tax deductions and exemptions for retirement income are the norm, but they vary widely from one state to the next.
Full disclosure: the Retirement Living Center is a company that makes money by referring retirees to senior communities listed on its website or by arranging residents’ reviews of these communities. But the state tax website is free and publicly available.Learn More
August 3, 2017
Reverse Mortgage: Yes or No?
The older people who either consider a reverse mortgage or actually get one don’t have much else to fall back on. Their primary assets – outside of their homes – are a car worth no more than $7,000 and about $2,000 in a checking account.
This was one salient fact unearthed about reverse mortgage users – or people who’ve looked into them – in a 2014-2015 survey led by Stephanie Moulton at Ohio State University. This supports a later study by Moulton that found that people who take out the loans tend to be in worse shape financially than other homeowners. The survey provides a more complete picture of who is turning to reverse mortgages – and why other people find alternatives to solve their financial issues.
Federally insured reverse mortgages, known as Home Equity Conversion Mortgages, or HECMs, allow homeowners over age 62 to borrow against their often-substantial home equity. These loans do not have to be paid back until the older homeowners sell the house or die.
Despite these attractive financial features, reverse mortgages are not popular: fewer than 60,000 were sold in 2015. Many elderly homeowners are appropriately wary of a complex financial product. The fees and interest rates are also higher than on a standard mortgage. But the idea behind HECMs is to allow cash-strapped seniors either to pay off their existing mortgages, eliminating house payments, or to create a readily accessible pool of cash or a new source of monthly income. Either way, they free up money that retirees can use to meet their expenses, emergencies, or medical bills.
The researchers interviewed some 1,800 older households after they had received the counseling required under federal law to apply for a HECM reverse mortgage. About two-thirds of those counseled proceeded with the loans, and one-third decided against it. Here’s what these two groups look like: …Learn More
August 1, 2017
A Day at the Golden Age Senior Center
Chung-Au Loi Tai
Boston – Four mornings a week, a van scoops up Chung-Au Loi Tai and delivers her to the senior center for a full schedule of activities. The 1:30 bingo game is her favorite.
She giggles when she explains why: she likes the Chinese Rice Biscuits that are handed out as prizes.
She is one of 350 mostly low-income clients of the Greater Boston Golden Age Center’s three locations around Boston. Most came to this country from China decades ago and raised families while working in Chinatown or the suburbs. Chung-Au, for example, worked in a shoe factory for nine years, and her late husband cooked in restaurants all over the city.
Now in old age, the Golden Age Center’s community of like-minded people spend their days learning English, new songs, and calligraphy, eating $2 lunches – a “suggested” donation – and getting help with their medical and other needs from the nurse and social workers on staff.
Finding things to do all day might seem trivial to working people – there are barely enough hours in a day. But the center’s carefully planned activities are critical to seniors’ physical and mental health and to their families, who are still out working. One big reason for these daily visits is to prevent the frail or cognitively impaired from becoming too isolated.
The Golden Age Center and similar centers around the country make up a patchwork of often poorly funded non-profit and local-government agencies that quietly fill a big need in the safety net for seniors. These agencies provide an array of services, including transportation, meals, exercise, medical supervision, and cognitive stimulation. The federal Medicaid program pays the Golden Age Center a per-day fee for its low-income clients.
Ruth Moy, the executive director who founded the center in 1972, raises additional money from donations and other federal and local government programs. “There is never enough money,” Moy said. “You just keep plugging away.” …Learn More
June 6, 2017
Slightly More Seniors Living With Family
In the 19th and early 20th centuries, it was not unusual for older Americans to live with their adult children and grandchildren. But more seniors could afford to live on their own after passage of Social Security and then Medicare.
By the 1990s, fewer than 10 percent of people over age 65 lived with relatives, usually offspring. This number has crept back up to around 12 percent in recent years, according to an analysis by the Center for Retirement Research.
Economic disadvantage is the common thread among older people living in these multigenerational households, a new study finds. This held true whether the seniors moved in with their adult children and grandchildren or the offspring moved into their parents’ homes.
“Experiencing economic distress increased the odds of a senior forming a multigenerational household,” concluded researchers from Arizona State University and George Mason University.
Here are their main findings, based on an analysis of U.S. Census data for more than 49,000 people who were 65 or older between 1996 and 2008: …Learn More
April 25, 2017
Long-term Care Insurance Goes Uptown
Is long-term care insurance a luxury product?
Today, most policies covering home care and assisted living and nursing care facilities for the elderly are purchased by people with relatively high earnings, according to a new survey.
Long-term care used to be insurance that the middle class would buy – either individually or through an employer, union, or affinity group – when it was more affordable. But the market, which has contracted dramatically, also seems to be shifting, according to retirement experts and new data from LifePlans, a long-term care research firm.
In LifePlans’ survey, 82 percent of the people who purchased long-term care policies in 2015 earned more than $50,000 per year. In comparison, only half of the general older population surveyed separately by LifePlans falls into this income bracket. An Urban Institute study supports this too, finding that the market is dominated by households with more than $500,000 in net wealth.
Eileen J. Tell, who consults on aging and long-term care issues, said the slant toward the higher end reflects the fact that the coverage being sold is more comprehensive – and more costly. Most policies purchased now cover all levels of care, from home care to assisted living and long-term care facilities. This reflects a desire for people to age in their homes, Tell said. Back in 1995, just two out of three policies had this comprehensive coverage. Another feature that’s more common – and costs more – is inflation protection. …Learn More
April 6, 2017
Retirees Don’t Touch Home Equity
Remarkably, middle-class Americans have at least as much money tied up in their homes as they have in all their retirement plans, bank accounts, and other financial assets combined.
A hefty share of older U.S. homeowners are even better off: 41 percent between ages 65-74, and 63 percent over 74, have paid off their mortgages and own their homes free and clear.
But only one in five retirees would be willing to use their home equity to generate income in a new survey by the National Council on Aging (NCOA). This reluctance seems to be on a collision course with financial reality for working baby boomers, when so many are at risk that they won’t be able to maintain their living standards when they retire.
Retirees can get at their home equity to improve their finances a couple of ways. One is to sell, say, the three-bedroom family home on Long Island for a pretty penny and buy a condo on Long Island or a cheaper house in Florida. Yet only a tiny sliver of older Americans actually downsize to reduce their living expenses, according to a new report by the Center for Retirement Research at Boston College, “Is Home Equity an Underutilized Retirement Asset?”
Another avenue is available to people over 62 who don’t want to move: a reverse mortgage. While these loans against home equity are not for everybody, they’re one option if retirees want to pay off the original mortgage or withdraw funds when they’re needed. But only about 58,000 homeowners took out federally insured Home Equity Conversation Mortgage (HECMs) in 2015, according to the U.S. Department of Housing and Urban Development.
The NCOA’s survey, which was funded by Reverse Mortgage Funding, a lender, uncovered one reason for the lack of interest: retirees are not clear about how reverse mortgages work and how they differ from a standard home equity line of credit. …Learn More
April 4, 2017
Why Parents’ Home is the Millennial Crib
A couple years ago, Daniel Cooper noticed something at the commuter rail station near his home in suburban Boston. A lot of parents were dropping off their adult children every morning to catch the train into the city.
This fit with something he’d been thinking about as a Federal Reserve senior economist and policy adviser interested in macroeconomic issues like the housing market. Are millennials living with their parents longer than previous generations? And, if so, why?
His suspicion was confirmed in recent research with his colleague at the Boston Federal Reserve, María Luengo-Prado. They found that, on average, 16 percent of baby boomers born in the late 1950s and early 1960s lived with their parents when they were between 23 and 33 years old. That jumps to 23 percent of the millennial generation born in the 1980s. These young adults are also more likely to return home after living independently for a spell.
The economists landed on two primary explanations for the big shift. One is that young adults today earn less relative to rents in their area. Second, higher state unemployment rates impact millennials more. In short, young adults often live with their parents for the simple reason they can’t afford to live on their own. …Learn More