December 1, 2015
What Derails a Planned Retirement Date
Workers are feeling very ambitious these days: one in three plans to retire after age 65. In the 1990s, just one in 10 did.
In reality, though, many older Americans today are retiring before they’d planned, resulting in lower monthly Social Security checks, slimmer 401(k) accounts, and more golden years to pay for.
There’s no shortage of research looking into what derails these plans. But, for the first time, a new study ran a statistical horse race among the various reasons known to impact older workers’ decisions. Health issues finished first in the race, followed by layoffs, and a spouse’s early retirement.
In an ideal world, eliminating these major shocks, along with a few less prevalent shocks that were also analyzed, would reduce the share of older workers retiring earlier than planned, from 37 percent to 27 percent. [The remaining factors that were still unaccounted for in this analysis could be anything from not liking one’s job to financial or health events that went undetected by the survey.] …Learn More
November 24, 2015
Social Security Delay: the Value to You
What matters most in retirement is how much money comes in the door every single month. That’s why this blog – and its sponsor, the Center for Retirement Research – hammers away at the wisdom of delaying when you sign up for Social Security in order to increase the size of your monthly checks.
So here’s a very quick project for the long Thanksgiving weekend: insert your birthday and earnings into this new online tool to get an anonymous, back-of-the-envelope estimate of how much a delay is worth to you.
The age you claim your benefits is crucial, because two out of three households rely on Social Security benefits for more than half of their retirement income. Yet the majority of people still sign up before they’re eligible for their full benefit, which is age 66 for most baby boomers. Monthly benefits are increased for every year of delay, up to age 70.
The cool part of the tool, released last week by the Consumer Financial Protection Bureau and the Social Security Administration, is the sliding feature. It shows how much monthly benefits rise if you change your claiming age from 62 to 66 to 70. Click here to try the tool. …Learn More
November 19, 2015
Listen to Your Elders Please
People do not like to hear advice from their “elders.” But shouldn’t retirement be an obvious exception?
The options for what most workers can do to salvage their retirement finances rapidly narrow as they get closer to retiring. After 50 or so, it’s also tough to find a better job, and only so much can be saved in short bursts – retirement saving requires years of diligence.
If you’re still listening, the following is sage advice drawn from two recent New York Life surveys of older workers on the cusp of retirement and octogenarians.
- Workers in their 50s and early 60s said they started saving too late for retirement. They put the “magic age” at around 26.
- Automatic savings vehicles such as 401(k)s (or even insurance or paying down a mortgage) turned out to be crucial to the sense of how secure pre-retirees feel about their futures. This was particularly true when children were living at home. …
November 17, 2015
Long-term Care Policyholders Who Lapse
In an upside-down aspect of long-term care insurance, about one in four older people with a policy who eventually go into a nursing home had let that policy lapse sometime in the previous four years, forfeiting coverage that would’ve paid for their care.
The questions are who does this and why.
New research by the Center for Retirement Research (CRR) finds two explanations for why: a scarcity of financial resources and cognitive impairment, which limits the elderly’s ability to properly manage their finances, including their long-term care policies.
The researchers found no support for what they call “strategic lapsing” – a deliberate decision to quit paying the premiums by healthy older individuals who, upon reconsideration, conclude that their risk of needing care in the future is low. …Learn More
November 10, 2015
Men Save More – Women Save Better
This will not surprise you: men have more money saved for retirement than women.
Men averaged $123,262 in their defined contribution plans, compared with $79,572 for women, according to a new report by Vanguard based on its 2014 recordkeeping data.
But these figures hide a larger truth: women are actually better at saving for retirement.
“Overall, women are better at this but men earn more money so they have higher wealth accumulation,” says Vanguard researcher Jean Young, author of the new report, “Women versus Men in DC Plans.”
Young’s research found that women are 14 percent more likely to enroll in a voluntary workplace retirement savings plan. Women save 7 percent of pay, compared with 6.8 percent for men, controlling for wages, job tenure, and plan design. They also save at higher rates than men at every income level.
Her findings also refute the old wive’s tale that women don’t like risky investing. …Learn More
October 22, 2015
Polishing the EITC on its 40th Birthday
The Earned Income Tax Credit is a critical lifeline that lifts some 9 million low-income Americans out of poverty – half of them children.
But the federal tax refund program isn’t perfect. The large refunds come just once a year, in the spring tax filing season. A cash crunch is a year-round problem for working families with low or erratic incomes who can’t always pay their bills.
A new study by the Center for Economic Progress identified additional financial benefits from the Earned Income Tax Credit (EITC) when participants in a Chicago pilot project received smaller, regular EITC payments throughout the year.
For example, workers who received the quarterly payments – in May, August, October, and December – were much less likely to have high-rate payday loans than people whose EITCs came all at once, helping program participants to avoid expensive late fees on payday loans. There was also evidence that workers in the EITC pilot accumulated less total debt, though the sample size was small.
The participants surveyed overwhelmingly said they preferred the periodic payments, and they reported lower stress levels than the control group. Shirley Floyd explained why in a previous blog post:
When Floyd receives a one-time tax refund in February, “the entire thing is gone” by March. But each payment she received in the pilot program, she said, allowed her “to do what you need to do.”
The program was run by the Center for Economic Progress, which provides financial services to low-income families. David Marzahl, president, was disappointed that about one-third dropped out of the research pilot, leaving only 217 participants who saw it through to the end. Nevertheless, he feels the pilot confirmed the concept’s potential to help low-income working persons with children and would like to see it expanded into a nationwide program, administered by the IRS. …Learn More
October 15, 2015
High-deductible Health Plans on the Rise
Health insurance is really starting to hurt.
Premium increases and deductible creep, documented in the Kaiser Family Foundation’s comprehensive annual survey of employer health benefits, are eye-popping figures. Although there has been a slowdown in medical inflation and health care spending overall, the growing prominence of high-deductible plans is evidence that more of these costs are shifting to employees.
- One in four workers today is enrolled in a health insurance plan with a high deductible – up from 4 percent a decade ago – exposing them to larger out-of-pocket expenses than traditional health plans if they become ill. [Kaiser’s definition of high-deductible plans is that they are accompanied by a tax-preferred savings plan to help workers pay their medical bills.]
- These deductibles average around $2,000 for single coverage, but they exceed $3,000 for about 20 percent of single workers. Deductibles average $4,350 for a family plan, but nearly 20 percent face deductibles exceeding $6,000.
- Average annual premiums for single workers in these plans range from $773 to $1,021, while family plan premiums are $3,660 to $4,407.
- Everyone’s deductibles are rising much faster than premiums. For example, the share of the annual premium paid by all single workers with health coverage has increased 19 percent since 2010, to $1,071. But their deductibles have risen 67 percent, to $1,077.
- Retiree health care trends, in contrast, might be stabilizing. Since 2009, the share of larger companies offering the coverage to retirees has bounced around between 23 percent and 28 percent.
Employers are also paying more for annual premiums, according to Kaiser – about $1,000 more per single worker than they paid in 2010 and about $2,800 more for a family plan.
But it’s clear from the data that this shared burden falls heavily on employees.
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