June 1, 2017
At 62, You’re a ‘Senior’ at National Parks
Wolf pups are born in late spring and early summer in Denali National Park in Alaska.
No better time than retirement to take in our national parks at the leisurely pace they deserve.
At age 62, Americans can purchase a $10 park pass that is a life-time ticket to the magnificence of Glacier National Park, bison calves grazing with their mothers at Yellowstone, or peregrine falcons nesting at Acadia. But get the pass soon, though, because AARP reports the price will increase to $80.
Many people don’t learn the pass exists until they visit a national park where a ranger might or might not offer one. The passes, which are issued by the National Park Service, include free access to the holder, a spouse and others riding in their car. The pass sometimes includes discounts of 50 percent at camping facilities.
It’s possible to purchase the life passes online for $20. The Park Service advises travelers planning a trip to contact a park in advance to make sure the $10 passes are available for purchase at that specific location.
While it’s generally not wise to claim your Social Security at 62, it’d be silly not to take advantage of this federal benefit.Learn More
May 23, 2017
Paying Medical Bills is a Herculean Task
Hercules sculpture, Florence, Italy.
Medical bills are leaving “a lasting imprint on families’ balance sheets,” JP Morgan Chase concludes from its recent analysis of the anonymous checking and credit card account activity of some 250,000 bank customers.
With little available cash on hand, 53 percent of these families prepare to pay large, one-time medical expenses by waiting for an uptick in their income. Nevertheless, a year after the bill is paid, they are still struggling to patch the hole blown in their household budgets, according to the report, “Coping with Costs: Big Data on Expense Volatility and Medical Payments.”
The 2013-2015 account data show that family incomes tend to be 4 percent higher, on average, in the month a medical bill is paid. This doesn’t mean that people suddenly become Uber drivers or work more overtime hours. What is probably going on, the bank said, is that people “have delayed either receipt of medical treatment or payment of their medical bill until they were able to pay” – when the extra income arrives.
Tax refunds are one clear source of this income for paying large one-time medical bills. These payments were the most frequent around tax time, JP Morgan’s customer data show. But the $163 average increase in monthly income, mostly from tax returns, was small relative to the average $2,000 medical bill.
The damage done to family finances was apparent even a year after such bills were paid. Credit card balances, which had been reduced prior to paying the medical bill, rose for at least a year following a payment. Meanwhile, spending on non-medical purchases, as well as the amount of cash on hand, decline in the aftermath as the families struggle to repair their household finances.
This dry but compelling report is a window into the Herculean feat of paying medical bills for some families. It helps to explain why two out of three Republicans and Democrats in a Kaiser Family Foundation poll said that lowering their health care costs should be a top priority for any reform.
To read the full J.P. Morgan report, click here.Learn More
May 18, 2017
Women Get a Bigger Social Security Bump
The magic number is 35.
That’s how many years of earnings the U.S. Social Security Administration (SSA) uses to calculate every worker’s pension benefit. But 35 years can be a tall order for the many boomer women who took time off or cut back on their hours to raise their children. Nearly half of 62-year-old working women today didn’t make any money for at least one year in their earnings history on record with SSA.
But this also means they have more to gain financially than men from working longer, because each additional year of work substitutes for a zero- or low-earning year during motherhood in the benefit calculation, according to research by Matt Rutledge and John Lindner at the Center for Retirement Research, which sponsors this blog.
Beefing up one’s earnings record is actually one of the two ways that working longer raises monthly benefits. The other, more familiar way is a benefit increase from delaying collecting Social Security.
Delaying claiming compresses the time period over which workers will receive benefits. The resulting increase when they finally do start is known as Social Security’s “actuarial adjustment.” Take the most extreme example: both men and women who begin their Social Security at age 70 receive 76 percent more per month from this adjustment than they would’ve gotten had they started at 62.
But it is women who generally gain much more from additional years in the labor force.
By working to 70, rather than retiring at 62, the average woman can increase her monthly Social Security check by 12 percent, the researchers found. Adding this to the standard actuarial adjustment produces an 88-percent increase, from roughly $1,112 per month at 62 to $2,090 at age 70.
The earnings bump that 62-year-old men get from working to 70 is half as big – about 6 percent – because men typically already have had more years of higher earnings during their working lives.
A woman doesn’t have to work all the way to 70 either to benefit. Any period of delay will increase monthly benefits – and that will help. …Learn More
April 18, 2017
The Picture of Investment Diversity
Most people see multicolored chaos in the chart below, which is a visual representation of the returns each year to various types of investments.
Morningstar Inc.’s director of quantitative research, Timothy Strauts, sees something else: the need for a diverse portfolio.
Strauts, like most investment professionals, knows the Callan Periodic Table of Investment Returns. It has been around for 20 years and was just updated with 2016’s returns. Here’s how to read it. A colored square is assigned to each type of stock- and bond-market index. For example, the Bloomberg Barclay’s Aggregate (Agg) bond index is bright green, and the Standard & Poor’s 500 stock index is khaki green – the boxes also give each index’s return for each year. …Learn More
April 13, 2017
Hispanic Retirees: Low Saving, Long Life
Just one in three native-born and immigrant Hispanics working in this country has a retirement plan through their employers. If they do have one, three out of four save money in their plans, which is somewhat less than their coworkers.
One reason for the first abysmal statistic is that many Hispanics and Latinos, recent immigrants in particular, hold down part-time restaurant or hotel jobs at very low wages. But even among Hispanics working full-time, access to an employer savings plan is still much lower (44 percent) than it is for their white and black counterparts (more than 60 percent).
Low rates of saving are compounded by the fact that elderly Hispanics and Latinos will need more money over their longer-than-average retirements. A 65-year-old Hispanic man can expect to live 16 months longer than a white, non-Hispanic man in this country, and Hispanic women live 11 months longer. [One theory is that less healthy immigrants are more likely to return to their home countries, so the U.S. immigrant population that remains is healthier.]
“Longevity is a big issue, but there is little awareness of this” in the Hispanic population, said retirement consultant Manuel Carvallo, a Chilean immigrant to the United States. …Learn More
April 11, 2017
Blood for Student Loans
Illustration by: Kjell Reigstad
Interest in the student loan problem from the media and politicians seems to be ebbing.
The issue does not go away for Joshua Roiland. Every day, money worries grind him down – him and millions of other young adults working through the emotional fallout and shattered relationships caused by debt.
Roiland owes $200,000-plus and earns only $52,000 as a newly minted University of Maine journalism professor. He begins his article on Longreads by describing a 340-mile round-trip drive to a clinic in Lewiston, Maine, that pays him $50 for a pint of his youthful blood. …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