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
September 12, 2017
Livestream: Financial Empowerment
Today, an ambitious financial education program operated by Delaware state government and the United Way of Delaware is bringing a message of financial empowerment for working people to a national stage.
The organizations have partnered with Ted Talk in Wilmington, Delaware, to film 15 financial education videos. The videos will be livestreamed on Sept. 12 starting at 10:30 a.m. Eastern time.
Since 2011, the state program, known as Stand by Me, has provided one-on-one financial coaching to some 16,000 Delaware residents, said Mary DuPont, who runs it. Today’s Ted videos grew out of DuPont’s 2016 presentation for Ted-X Wilmington.
The videos feature various proponents of financial education, including Javier Torrijos, chair of the Delaware Hispanic Commission, who will tell his personal story about the trials and aspirations of growing up as a child of Columbian immigrants, DuPont said.
Kevin Gilmore, executive director of Habitat for Humanity in Delaware’s Sussex County, will speak about his realization that preparing people financially to buy homes is just as important as building the physical structures. And “Why a Steady Job is No Longer Enough to Feel Financially Secure” is the title of a talk by New York University professor Jonathan Morduch, who has been featured on this blog.
The 15 videos will be archived on the Ted website and on standbyme.org, probably in November. If you don’t want to wait, here’s the livestream. …Learn More
September 7, 2017
Why Many Retirees Choose Medigap
The Medicare open enrollment period starting Oct. 15 applies only to two specific insurance plans: Part D prescription drug coverage and Medicare Advantage plans.
But before choosing among various plans sold in the insurance market, the first – and bigger – decision facing people just turning 65 is whether to hitch their wagons to Medicare-plus-Medigap or Medicare Advantage. Squared Away spoke with insurance broker Garrett Ball, owner of Secure Medicare Solutions in North Carolina, who sells both. Most of his clients buy Medigap, and he explains why.
In a second blog post, we’ll interview a broker who deals mainly in Advantage plans. Another source of information about Medigap and Advantage plans are the State Health Insurance Assistance Programs.
Q: Let’s start with explaining to readers what your company does.
We’re an independent Medicare insurance broker that works with some 2,000 clients on Medicare annually who are shopping for supplemental plans. My company began in 2007, then in 2015 I launched a website tailored to people just turning 65 to answer the questions I get every day. We’re not contractually obligated to just one insurance company. When we work with someone, we survey the marketplace where they live, assess their needs, and help them pick a plan. We get paid by the insurance companies when someone signs up for a plan. Different states have different commission levels, and there is more variation state-by-state than company-by-company. Insurers typically pay fees of $200-300 per person per year.
Q: What share of your clients buy Medigap policies, rather than Medicare Advantage plans?
Approximately 10 percent of my clients end up with Medicare Advantage vs 90 percent with Medigap. Some states have a higher percentage in Medicare Advantage. I do business in 42 states, so this depends on the insurance markets in individual states.
Q: Why do you sell more Medigap plans? …Learn More
August 22, 2017
The U.S. Labor Participation Problem
The superlatives come fast and furious in the spate of reports coming out on the dwindling participation in the labor force by Americans still in their prime working years.
- The fall in men’s participation in the United States has been going on for decades but has been steeper here than in all but two advanced economies (Israel and Italy) in recent years. “We have won the race to the bottom,” says Nicholas Eberstadt, an American Enterprise Institute scholar and author of “Men Without Work: America’s Invisible Crisis.”
- A more recent drop in labor force participation for American women is “unique” – in the rest of the developed world, women’s participation continues to rise, according to a Brookings Institution report.
- Men with no more than a high school degree make up 40 percent of workers but 60 percent of those who have dropped out of the U.S. labor force.
- The decline in participation has been steepest among men without a high school education, particularly black men.
Economists count not only working people as being in the labor force but also people who are trying to find a job. Something is amiss when millions of Americans in their prime – between ages 25 and 54 – are doing neither, especially in a strong economy like the United States is experiencing now.
This issue is not new, but the election has brought it front and center. Also, the prolonged decline in men’s labor force participation had been partly masked by increasing women’s participation, which pulled up the aggregate figures. Now that women have begun withdrawing, the trend has become increasingly obvious – and ominous.
The Brookings and AEI scholars offer myriad, often overlapping, explanations for why this is happening: …Learn More
August 15, 2017
Women Spending Fewer Years in Marriage
It took months for one girlfriend’s suitor to persuade her to get married. Another of my friends skipped marriage entirely and had two children on her own. Others married, had kids, and divorced, a status that seems unlikely to change for some as they age. I married for the first time at 56.
These anecdotes, about a random group of baby boomer women in the Boston area, illustrate some of the ways that women over the past half century have dramatically reduced the time they spend as part of a married couple.
A new study being released today by the Center for Retirement Research at Boston College finds that “middle boomer” women born in the late 1950s can expect to spend no more than half of their adult lives (starting at age 20) in marriage. That share was closer to three-fourths for the mothers of baby boomers.
The researchers measured this dramatic change and its underlying causes – namely delayed wedlock, permanent singlehood, and divorce – across four cohorts of women who participated in a survey of older Americans.
Between the oldest group (born in 1931-41) and the youngest group (born in 1954-59), the average age of first marriage has increased by nearly three years, while the share of women who have never married tripled to 12 percent. The share who’ve divorced also rose, from one-third to one half, according to the center, which sponsors this blog.
The change has been even starker for black women: the share of their adult lives spent in marriage declined from 54 percent of the oldest group to just 32 percent of middle boomers. Divorce is a contributing factor, but the primary reason is that black women are much more likely to fall into the “not married” category than in the past. In fact, the not married group is now larger than the married group.
This trend has many implications, not the least of which are financial. …
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
July 27, 2017
How Your Data Get into the Wrong Hands
Chris Vickery, director of cyber-risk research for UpGuard in California, warned NPR listeners recently about a situation in which another high-technology company allowed 198 million voters’ personal information to become publicly accessible online.
When our non-financial information gets loose on the Internet, it can cause financial damage: “If a bad guy has your phone number and can get your PIN, they can, at 3 in the morning, get a code sent to your phone, listen to your voicemails, log in to your bank account and drain all your money,” Vickery said. “Phone numbers are more important than people realize.”
Squared Away asked him to expand on what occurs when we freely hand over our personal data to retailers, financial institutions, and credit rating agencies, which then sell it to other companies or “data brokers” that buy and resell data.
Q. Is the dangerous situation you mentioned involving voters’ personal information still present, and has any financial fraud resulted from its release?
Vickery. I don’t know of any specific frauds that came out of that situation, but voter data in general – the more we make it available, the more fraud that is bound to come of it. It’s not a good idea.
Q. It has become routine to share our email address, as we’re required to do when we conduct business or buy things online. Is this a bad idea?
Vickery. Knowing that you use a particular email can be very useful to a bad guy. But the fact of the matter is there are a lot of people being careless with their emails. Getting mad at your best friend who gives your email address to an airline to share your arrival time might be a little unreasonable, but I don’t think it’s unreasonable to expect the companies to treat them more carefully than they have been. Companies that buy and sell your data create risks for you. For example, have you heard of the concept of a “data base of ruin”? That is the concept whereby a dataset is created – maybe not all in one place – a healthcare breach here, a supermarket breach there – and this is all being brought together in one form where a malicious actor can search anybody and, based on one email address that you have authenticated, can get everything on everybody. This data base of ruin is starting to emerge. There are people seeking to do this, and there are already data sets commercially available that are scary in the level of detail they go into. The more we can protect data and make those things unlikely to be used, the better off we will be.
Q. A 2013 Senate report found that data brokers buying and selling personal information sort people into various categories based on their financial circumstance – in essence there is a profile of every one of us, and it can be used for fraudulent purposes. How do these profiles get compiled?
Vickery. The roots of this stuff probably existed before I was born in 1984. I can’t tell you exactly where it all came from, but things like voter data bases get rolled into these commercial purposes. Everything you buy at the grocery store with your special discount card gets rolled into these data bases. Anybody you provide data to is turning around and selling it to somebody. …Learn More