January 2022

Wandering into Retirement Worked for Him

Howard Gantman didn’t exactly have a plan for retirement. Rather, he wandered into it during the early months of COVID chaos.

Nevertheless, retirement is going better than he’d expected. Gantman, who read comic books and science fiction voraciously as a child, has rediscovered his passion. He joined a writing group on Zoom and is working on a science fiction novel of his own. (And no, he’s not disclosing the plot yet.)

“I’m happier doing this than I would’ve been if I’d continued to work. I really was ready for a change,” the Washington, D.C., resident said in a recent interview. “Aside from a gruesome virus that keeps on whacking us on the head, I feel more in control of my life.”

Howard Gantman

Howard Gantman

Retirement experts often warn baby boomers that planning for lifestyle changes before retiring is just as important as making certain one’s finances are in order. That’s the ideal. But not everyone who’s making the transition has a well-developed plan or takes a straight route to where they wind up.

Gantman, a former journalist and government and communications professional, had anticipated working until he was about 72. In March 2019, at age 67, he left his job at the Motion Picture Association during a staffing transition and started focusing on consulting and volunteer work while searching for a new job. In December, he had to go into the hospital for surgery to repair an aortic aneurysm and replace an aortic valve.

After the surgery, while he was recovering and doing some light consulting, COVID hit and his employment opportunities dried up.

He decided to get back into creative writing, something he had only dabbled in as a young, workaholic journalist and then government official. At first, he blogged about aging and thought about writing a memoir centered on his late-life transition. But that topic no longer seemed to strike the right tone with so many lives suddenly in turmoil around COVID.

That’s when his love of science fiction and fantasy pulled him back in. “I decided that’s it. That’s what I want to do,” he said about writing a novel. …Learn More

Downturns Attract Healthier DI Applicants

A theory – untested until now – about why more people apply for federal disability during recessions is that the depression, stress, or unhealthy behaviors caused by unemployment worsen their health and spur them to apply.

This explanation is largely ruled out in a new study out of Cornell University and the University of Illinois.

For each percentage point increase in local unemployment rates, more people with disabilities join the roles – about 45,000 more across the country. This finding, covering a period of 25 years, confirms what the existing research says about the connection between the economy and disability. Disability benefits, which average just under $1,300 per month, look more appealing when employment opportunities are scarcer.

When the researchers investigated why caseloads increased, they found evidence that seemed to contradict the hypothesis that people who apply during downturns are not as healthy.  Once they get on the disability rolls and become eligible for Medicare, annual Medicare spending on these new beneficiaries was slightly less than spending on the people who were already in the program.

Still, the researchers weren’t convinced the recession applicants tend to be healthier. Needing more evidence, they looked at Medicare spending for the disability beneficiaries who had applied to the program at 50. At that age, Social Security loosens the eligibility rules, making it easier to qualify.

The logic behind this part of the analysis is that the 50-year-old applies not because his medical condition or disability suddenly deteriorates after his birthday but in direct response to unfavorable economic conditions. Individuals pulled into the disability insurance program by the laxer rules are actually healthier: Medicare spends about $1,000 less per year on them compared to those who applied at 49.

The 50-year-old applicants are also more sensitive to a sluggish job market: for every percentage point rise in unemployment, the increase in new beneficiaries who’d applied at 50 was about five times more than it was for the 49-year-olds. …Learn More

Save money sticky note

2 Options in an Emergency: Savings or Family

The pandemic was a crash course in the importance of having some money in the bank for an emergency.

When COVID started to spread, jobs vanished, mothers abruptly stopped working to care for children who weren’t in school, and, for the unlucky people who became ill, the medical bills rolled in.

Congress took extraordinary measures during these extraordinary times and approved three rounds of relief payments totaling several thousand dollars per household in 2020 and 2021. But the federal payments, along with extra unemployment benefits and an increase in the child tax credit, weren’t enough to keep everyone afloat.

That left the people who didn’t have any savings with one other fallback option to get them through the tough times: borrowing from a family member.

The non-savers resorted to borrowing from family at three times the rate of people who did have savings – 15 versus just 5 percent, according to surveys conducted in 2020 and 2021 by the financial services company, BlackRock.

But borrowing from family to ease financial strains causes another problem: the people who got help from family said it stressed them out, the survey found.

Right now, the economy is doing pretty well, and jobs are plentiful. It might be time to think about a New Year’s Resolution. Many workers are still barely getting by, and it can be difficult to save. But at least give it a try.

The next time you have a financial emergency, Congress probably won’t be there to bail you out.

Read more blog posts in our ongoing coverage of COVID-19.Learn More

How Long Can Low Wages Outrun Inflation?

Waitress serving family after the COVID reopeningFederal labor officials are giving Amazon employees in Alabama a second shot at forming a union, and their coworkers in Staten Island are seeking clearance to hold a vote. Americans, more confident of their employment prospects, are leaving their jobs in record numbers, with much of the activity in low-wage industries like hospitality.

Employers, having taken note, are combatting high quit rates and staff shortages by raising pay at the bottom of the wage scale. Also fueling the hikes has been a series of increases in state minimum wages, including automatic annual cost-of-living increases in a growing number of states.

Various economists, using different data sources, have reached a similar conclusion about these recent developments: pay for low-income workers – the same people who suffered the highest unemployment rates during the pandemic – is currently outpacing inflation.

It’s unclear whether that trend will continue in 2022, if, as some economists now predict, inflation becomes more persistent. The government will report December’s inflation rate tomorrow.

But between the third quarters of 2020 and 2021, Arindrajit Dube, at the University of Massachusetts at Amherst, estimated that wage increases for workers in the bottom 30 percent of the pay scale outpaced inflation. Another economist, Geoffrey Sanzenbacher at Boston College, reached a similar finding: inflation-adjusted pay for people with earnings in the bottom 25 percent of all earnings rose last year while workers in the top 10 percent saw a decline.

When inflation first started picking up, economists said it would be a temporary blip that would ease when the goods piled up at West Coast ports started moving onto store shelves. But some economists are changing their tune and worry that high inflation will last longer than they’d predicted.

This would especially be a problem for low-wage workers, who spend most of their income on necessities. Rental housing is a good example. In a recent Federal Reserve survey, consumers estimated their rents would rise by 10 percent over the next year. An increase of this size would mark a new high for low-wage workers’ largest single expense – rent consumes more than half of their monthly income. …Learn More

Opioids

Opioids are in the Disability Community Too

Opioids fueled a record of nearly 100,000 drug overdose deaths in the United States last year.

The biggest cause of overdose deaths was dangerous synthetic opioids, such as fentanyl. But the epidemic involving illegal chemicals grew out of the abuse of highly addictive prescription opioids. A spate of new research reveals that the use and abuse of these prescription drugs have plagued people with disabilities, who often start taking them to treat painful musculoskeletal conditions such as arthritis or a bad back.

A 2017 analysis featured in this blog provided the first estimate of opioid use among people who have disabilities that limit their ability to work. The researchers found that about one in four people applying for federal disability benefits used the medications – a much higher rate than in the U.S. population overall.

Painkillers often do more harm than good because they can increase society’s dependence on disability benefits by impairing lung function, aggravating existing conditions like rheumatoid arthritis, or causing addiction. According to 2021 research by RAND that followed older workers over several years, the opioid users in the study were much more likely to wind up on disability than their counterparts who did not take them.

“Although the pain relief is an important health goal,” the researchers concluded, “the consequences to workers and social programs of powerful prescription painkillers are substantial and long-lasting.”

The isolation and stresses caused by the pandemic are believed to have fueled the dramatic rise in overdose deaths last year. But a long-running cause, prior to COVID, was the decline in U.S. manufacturing employment. Research reported in this blog directly tied the movement of robots onto factory floors to the rise in deaths of despair – from drug addiction, alcoholism, and suicide – among men between ages 30 and 54. The study found that automation accounts for nearly one in five overdose deaths in manufacturing counties, which are concentrated in the heavily industrialized Midwest. The researchers said the rate of applications for disability benefits is also higher in these counties.

Opioid abuse in the disability community is happening for the same reason it is pervasive in society: an ample supply of the addictive drugs. …Learn More

Readers’ Favorite Retirement Blogs in 2021

For the baby boomers who are looking down the road to retirement, generalities will no longer suffice. They are diving into the nitty gritty.

Their keen interest in retirement issues, based on reader traffic last year, range from why the adjustments to Social Security’s monthly benefits are outdated to how it’s still possible for boomers, even at this late hour, to rescue their retirement.

First, and most important, there is hope for the unprepared. In “No-benefit Jobs Better than Retiring Early,” readers who want to retire but can’t afford it learned that they can dramatically improve their finances by finding a new job – ideally a less stressful or physically demanding one. Even if the job doesn’t have employee benefits, working longer will increase their Social Security benefits and allow them to save a little more.

The most popular article tackled a complex issue: “Social Security: Time for an Update?” The article explained the program’s actuarial adjustments, which are based on the age someone signs up for their benefits and factors into how much they’ll get. The adjustments, set decades ago, are no longer accurate, due to both increasing life spans that affect how much retirees receive from the program over their lifetimes and persistently low interest rates.

If these factors were taken into account, the researchers estimate that the average person who starts Social Security at age 62 would get more in their monthly checks, and the average person who holds out until 70 would get less.

However, not everyone is average. High-income workers tend to live longer and retire – and claim Social Security – later, while low-income workers have shorter lifespans and disproportionately start Social Security at 62.  The researchers conclude that the inequities “are not a problem that can be solved by tinkering with the actuarial adjustment.” A true fix would “would require a reassessment of the benefit structure.”

A major issue facing boomers in their late 50s and early 60s is that households with 401(k)s typically have saved only about $144,000 for retirement in their 401(k)s and IRAs. The reasons for insufficient savings – explained in “Here’s Why People Don’t Save Enough” – boil down to things that are largely beyond their control, including disruptions in their employment, a lack of access to employer retirement plans, lower earnings than they’d hoped for, bad investments, unanticipated premature retirements, and health problems.

However, workers can do something to gauge how they’re doing: make sure they know how much they’ll get from Social Security. …Learn More