September 29, 2016
Is There a Senior Housing “Crisis”?
Headlines about how much senior housing the aging baby boom generation is going to require often include the word “crisis.”
But it might be time to rethink our dire assumption that there won’t be enough housing for seniors, since boomers are living longer and are healthier than past generations and are changing what it means to grow old in this country.
One example is the U.S. nursing home population, which has remained fairly stable even though the elderly population is growing, according to a 2010 report by the Stanford Center on Longevity. The center cited better health as a key contributing factor.
Taking trends like these into account, a California real estate services firm has raised the age assumptions it uses to project increases in demand for senior housing, defined as facilities that include some level of care. The firm, Rockwood Pacific, still expects demand to increase over the next decade but at a slower rate. After that, when the oldest boomers are starting to turn 80, demand will continue to rise but also more slowly.
“When I started in this business in the 1990s, everyone talked about the 65-plus population” and its need for senior housing, said co-founder Frank Rockwood. “Now when you go to a senior housing conference, we talk about 75-plus. I’m saying now the time’s come we need to discuss 80-plus, rather than 75-plus.”
Doing so leads to big drops in the number of potential candidates for nursing homes, memory care units, and assisted living and independent living facilities, according to Rockwood’s estimates. (Residents in independent living communities share a central dining room and tend to be healthier than people the same age who reside in assisted living facilities, he said.)
Assuming people largely won’t need senior housing until at least 80, the firm lowered its forecast of demand growth over the next decade to about 2-3 percent annually, down from 3-4 percent under the 75-plus assumption. …Learn More
September 27, 2016
Annuities Have Real Value
The value that annuities can provide to retirees may not be obvious, but it is real.
Annuities are also becoming increasingly valuable as fewer people have that traditional source of reliable retirement income: an employer pension.
Insurance company annuities, like pensions, pay out a monthly income no matter how long you live. These payments come from three sources: 1) the initial amount invested to purchase the policy; 2) the interest earned on the amount that’s invested before it is paid out; and 3) “mortality credits.”
These mortality credits are the essential element that protects retirees from outliving their savings. As a retiree moves through her 80s, a growing share of the other people in the annuity pool die. The funds they leave behind in the pool are used to continue making monthly payments to those who are still living.
This is the starting point for a new summary of academic research on annuities by the Center for Retirement Research at Boston College, which supports this blog. To fully understand the individual studies, it’s necessary to read the report. But here are some takeaways: …Learn More
September 22, 2016
Seniors Enjoy More Disability-Free Years
Persistent increases in U.S. life expectancy are widely recognized. But if we’re living longer, what’s also important is whether those additional years of life are healthy years.
Even using this higher standard, the news is good.
A 65-year-old American today can expect to live to about age 84 – or about one year and four months longer than a 65-year-old in the early 1990s, according to a new study. But there was a bigger increase – one year and 10 months – in the time the elderly enjoy being free of disabling medical conditions that limit their quality of life.
The researchers, a team of economists and biostatisticians at Harvard, pinpointed two conditions that are the dominant reasons the elderly are remaining healthier longer: dramatic declines in cardiovascular conditions in the form of heart disease and stroke, and improved vision, which allows seniors to remain independent and active.
The study used medical data from a Medicare survey that asks a wide range of questions about the respondents’ ability to function and perform basic tasks. The researchers found a decline in the share of seniors reporting they have some sort of disability – to about 42 percent currently – and most of this decline occurred during the final months or years of a person’s life.
They also tried to identify the primary reasons for the health improvements, though they were cautious about these results. Heart attacks and strokes are major causes of death in this country. But cardiovascular disease is being treated aggressively – with statins, beta-blockers, even low-dose aspirin – and the treatments might have reduced mortality and the prevalence of heart attacks. …Learn More
September 20, 2016
Lift SNAP’s Asset Test and People Save
When a low-wage worker has a dental emergency or the car breaks down, it can set off a chain reaction of financial problems. Losing a job due to that car problem is a catastrophe. It’s not an exaggeration to say that having just a little money in a bank account is a lifesaver.
But low-income Americans are discouraged from saving due to the asset limits in joint federal-state assistance programs such as food stamps, Medicaid, and Temporary Assistance to Needy Families. These asset limits create a Catch-22: if the recipient builds up the savings crucial to their financial well-being, they lose their assistance, which is also critical to their well-being.
This illustrates just how difficult it is to design programs to help the poor and low-wage workers. Without asset limits, a relatively well-off person who earns very little would qualify for food stamps. But using asset limits to restrict who qualifies can harm our most financially fragile populations.
New research looking into the impact of asset limits among recipients under the Supplemental Nutrition Assistance Program (SNAP) – once known as food stamps – confirms that asset limits inhibit saving.
“Having a policy where people don’t save or draw down their assets before they apply for benefits can really harm long-term economic success for these families,” said Caroline Ratcliffe, a senior fellow at the Urban Institute who conducted the study. …Learn More
September 15, 2016
When a Diamond Isn’t Forever
While student loans are a painful, long-term expense, they are also an investment in one’s career and earnings prospects. But what does lavish spending on a wedding provide?
It can lead to divorce, according to a study by Emory University researchers Andrew Francis and Hugo Mialon. More interesting, they suggest that the stress that comes with wedding debt might be the underlying cause for the unhappy outcomes.
Weddings, which peak in early summer and surge again in the fall, have become more elaborate over the years. Engagement rings usually have diamonds – that wasn’t always the case. The average expense for a wedding and reception in this country is now $30,000.
But the researchers found that women who spend more than $20,000 on a wedding were nearly four times more likely to become divorced than women who spend under $10,000. In the case of men, buying a more expensive engagement ring was linked to a higher divorce rate.
They based these findings on data from their own random survey asking 3,151 adults about their wedding costs and current marital status.They controlled for education, household income, whether the person was employed and other things that play a role in whether a couple stays married.
Stress may be the undercurrent that explains their findings: couples who spend more money are also more likely to report being “stressed about wedding-related debt,” the researchers found.
The links between marriage and money are a perennial topic in academic literature. Other studies have shown that divorce creates financial problems, particularly for people closing in on retirement. It just might be that excessive spending on a wedding – usually a couple’s first major expenditure – gets a marriage off to a bad start.Learn More
September 13, 2016
Parents’ Dilemma: Kids Who Don’t Launch
Karen James and John Kingrey remember very clearly breaking the news to their Millennial son that they would no longer support him.
After struggling through his first year in college, Michael was sitting on his parents’ bed tossing around whether or not he should join the U.S. Navy. “I said, ‘You don’t have to join the Navy, but you’re not living here. And winter’s coming,’ ” Karen James recalled.
And then she thought, but did not say, what many parents before her have thought about the offspring they love: “You’re not living here doing nothing.”
Easing their son out the door in the run-up to the couple’s 2014 retirement “was one of the toughest things we ever did,” John Kingrey said. Their son’s story had a happy ending.
But more parents than ever are being torn between supporting adult children who haven’t yet launched and getting ready for their own fast-approaching retirement. Record numbers of 18- to 34-year-olds are living with their parents, a result of later marriages and a tough job market for that age group.
I am not a parent and am unqualified to write this blog from their perspective. But as a cold financial calculation, supporting a 20-something is problematic for older parents at a time that nearly half of U.S. baby boomers are at risk that their standard of living will decline after they retire.
With little time left to prepare, the most effective thing people in their 50s or early 60s can do is plan on delaying retirement, which sharply increases the size of a monthly Social Security check. But paying down a mortgage faster or putting more money into a 401(k) retirement plan is also a good idea.
“You shouldn’t be helping them if you want to put more money into your retirement,” says Minnesota financial planner Mark Zoril. But he’s quick to add that getting tough on offspring isn’t easy for parents – or their advisers. “It’s a pretty difficult [conversation] to have with your client.” …
September 8, 2016
Women Often Quit Work to Help Parents
Here’s just some of the evidence of the enormity of the challenge of caring for our elderly parents:
- One in three baby boomer women cares for an elderly parent.
- Even if they work, these caregivers devote anywhere from eight to 30 hours per week to that parent.
- The estimated value of informal senior care provided by family members approaches $500 billion in this country – or double the amount spent on formal, paid care.
Caring for an elderly parent is usually done with love or out of a feeling of familial obligation. But there are real costs to taking on this responsibility, which most often lands squarely on a daughter’s shoulders. These costs could come in the form of lost wages and employer health insurance or in sacrifices of future pay raises or promotions. It’s also more difficult for older women to find a new job if they drop out of the labor force to help an ailing parent.
According to preliminary findings in a new study that used 20 years of data, taking care of a parent does significantly reduce the chances that women in their early 50s to early 60s are working. Interestingly, the number of hours devoted to caring for a family member do not seem to affect women’s decisions about whether or not to work (though the researchers plan to revisit this finding).
But Sean Fahle of the State University of New York in Buffalo and Kathleen McGarry of UCLA said caregivers “may simply leave a job in order to provide care.” Their paper was part of a series presented at the National Bureau of Economic Research this summer. …