Medicare pays for the bulk of the medical care for Americans over 65, but a lot of their income is still eaten up by medical expenses.
The list of expenses is long. The lion’s share goes toward various insurance premiums – for Medicare Part B coverage, Part D prescription drug coverage, and supplemental insurance, whether Medigap, a Medicare Advantage plan, or employer health insurance for retirees. The remaining costs, for copayments and deductibles, are also significant.
These out-of-pocket costs, when added together, averaged about $4,300 annually per person, finds a new study by researchers Melissa McInerney, Matthew Rutledge, and Sara Ellen King of the Center for Retirement Research.
Out-of-pocket costs consume a third of the amount that retirees receive from Social Security, which is the most significant source of retirement income for a wide swath of the nation’s seniors, including many people in the middle-class. Half of seniors get at least half of all their income from the federal program.
The Medicare Part D prescription drug program has given some relief to retirees. After it became effective in 2006, the share of seniors’ income consumed by out-of-pocket costs declined slightly and then declined again after a follow-up reform of Part D began to close a big gap in drug coverage – known as the donut hole – in 2010. …Learn More
People who have a college education are known to live longer. But could a sunny disposition also help?
Yes, say two researchers, who found that the most optimistic people – levels 4 and 5 on a 5-point optimism scale – live longer than the pessimists.
But this effect works both ways. The biggest declines in optimism have occurred among older generations of Americans who didn’t complete high school at a time when this was far more common. It’s no coincidence, their study concluded, that the white Americans in this less-educated group in particular are also “driving premature mortality trends today.”
The finding adds new perspective to a 2015 study that rocked the economics profession. Two Princeton professors found that, despite improving life expectancy for the nation as a whole, death rates increased for a roughly similar group: white, middle-aged Americans – ages 45-54 – with no more than a high school degree. They suggest that addiction and suicide play some role, both of which have something to do with the deterioration in the manufacturing industry that once provided a good living, especially for white men.
To make the link between mortality and optimism, Kelsey O’Connor at STATEC Research in Luxembourg and Carol Graham at the Brookings Institution examined whether heads of households surveyed back in 1968 through 1975 were still alive four to five decades later. They controlled for demographic characteristics and socioeconomic factors, such as education, which also affect longevity. …Learn More
Education is the fastest ticket to a higher income, more opportunities, and a better quality of life. But four-year college is often a tough road for the pioneering first in their families to attend.
They have at least two big disadvantages – apart from the well-known financial one. Unlike the teenagers of the highly educated professionals who usually take for granted that their children will go to college, first-generation students might not have the benefit of high expectations at home. College is outside their comfort zone, which creates psychological barriers to attending and succeeding.
A second disadvantage is that they aren’t always going to learn, through a sort of parental osmosis, to cope with higher education’s mores and attitudes or be as resilient to its challenges.
UCLA student Violet Salazar says in this video that she used to feel she didn’t fully belong, “because I am first generation or because I am Latina, and also coming from a low socioeconomic background.” She went on to organize an entire dormitory floor specifically for first-generation students to make them feel more at home. …Learn More
Seven years ago this month, this personal finance and retirement blog debuted. How things have changed.
For one thing, back in 2011, a lot more people were reading blogs and newspapers on their clunky desktop computers. In recognition of the now-ubiquitous smart phone – more accurately, a computer that happens to have a phone – we just redesigned how Squared Away looks on phones to enlarge the type and make the articles easier to read. Our older readers will appreciate this update.
Year 7 is also an opportunity to restate the blog’s mission, which, frankly, was not fully refined in the early years. In some ways, our mission has not changed: we continue to emphasize retirement security and personal finance, with a bent toward the evidence-based research that provides a clearer understanding of the financial, economic, and behavioral issues that are critical to a high quality of life.
We regularly report on research by scholars around the country, including studies produced by members of the U.S. Social Security Administration’s Retirement Research Consortium: the NBER Retirement Research Center in Cambridge, Mass., the University of Michigan Retirement Research Center, and the Center for Retirement Research at Boston College, which also is the blog’s home.
But it’s natural for a new publication to find its sweet spot over time, and Squared Away is no different. One theme that has emerged very clearly is that the threads of retirement saving are shot through the fabric of our financial lives.
The predicament of Millennials is an obvious example. Immediately after beginning their careers, 20- and 30-somethings – so much more than their parents and grandparents – are under the gun to save for retirements that no longer are likely to include a pension. …Learn More
It’s a simple concept. Deposit retirees’ Social Security checks right before their big-ticket bills come, especially rent.
The U.S. Social Security Administration’s current schedule for depositing pension checks in bank accounts is based on each retiree’s birth date– it can be the second, third, or fourth Wednesday of each month.
The problem is that cash-strapped, low-income seniors receiving the earlier checks, on the second or third Wednesdays, can fall into a common behavioral trap: they spend the money soon after it comes in and then can’t cover the rent, mortgages or credit cards due at the beginning of the following month.
According to a clever new study, people who get these early monthly checks are at greater risk of resorting to desperate measures like payday loans than are seniors receiving them on the fourth Wednesday.
Such measures of financial distress are occurring “even though the pay schedule is known in advance,” write researchers Brian Baugh and Jialan Wang.
The advantage of Social Security deposits made on the fourth Wednesday is that retirees can get the big expenses out of the way first, forcing them to make do for the rest of the month with the money they have left. Indeed, people with fourth-Wednesday deposits had fewer bounced checks, account overdrafts, and payday loans, the researchers found. …Learn More
Cash-strapped workers understandably are tempted to spend their tax refunds, a sort of financial lifeboat that floats by once a year.
Financial experts see the windfall as something more: an ideal opportunity to sock money away. Yet only about 10 percent of low-income workers save their refunds, even though doing so could prevent the financial dominoes – past due bills, late rent payments, or delayed car repairs – from falling. These are common outcomes when their spending gets out of whack.
Past experiments that tried to encourage cash-strapped low earners to save had modest success. A novel research study looks for clues to what motivates them by examining who spends the refund versus who saves it. The central finding in a Journal of Consumer Affairs article: the people who saved had put some thought into predicting the size of their refunds at the time they filed their taxes. This held true whether their estimates were accurate or not.
The act of estimating in advance “appears to be a form of planning,” said the researchers, University of Rhode Island professor Nilton Porto and Michael Collins, director of the University of Wisconsin’s Center for Financial Security.
Porto said they don’t know the reason estimating leads to saving, but he had one idea. The connection between the two could stem partly from the taxpayer having some advantage, such as financial skill or superior knowledge – in short, they might have higher financial literacy. …Learn More