Author Archives: amy

What if Medicare Paid Your Dentist?

Bar chart showing why retirees over 65 haven't seen a dentist in the last yearTwo out of three U.S. retirees do not have dental insurance. Their basic choice is paying their dentist bills directly or, if they can’t afford it, forgoing care.

A new report analyzes the pros and cons of one potential solution to this pervasive problem: adding dental coverage to Medicare. Several bills that have circulated in Congress, including the Seniors Have Eyes, Ears, and Teeth Act of 2019, would do just that.

This approach recognizes that teeth and gums have everything to do with one’s health, said Meredith Freed, a policy analyst for the Kaiser Family Foundation’s Medicare policy program. Elderly people with loose or missing teeth have difficulty eating nutritious but hard-to-chew foods. Gum disease, left untreated, increases the risk of cardiovascular disease, and diabetes, which is increasingly prevalent, makes people far more prone to gum disease.

Oral health care “has a significant impact on people’s happiness and financial well-being,” Freed said. Dental coverage under Medicare would “improve their quality of life.”

But a proposal to do this would face an uphill climb in Congress. Medicare is already under-funded. Dental care would only add to the program’s rising costs. Retirees do have another option: about two-thirds of the Medicare Advantage plans sold by insurance companies offer dental benefits. …Learn More

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Does Increased Debt Offset 401k Savings?

Roughly half of U.S. employers with a 401(k) plan enroll their workers automatically, deducting money from their paychecks for retirement unless they explicitly opt out of this arrangement. This strategy is widely viewed as a good way to get people to save.

But auto-enrollment might not be as effective as it seems, if individuals are compensating for a smaller paycheck by borrowing more.

A new study of civilian employees of the U.S. Army used credit and payroll data to gauge whether debt increased for employees who were automatically enrolled in the federal government’s retirement savings plan. The researchers compared changes in debt levels for people hired after the government’s 2010 adoption of auto-enrollment with hires prior to 2010.

The good news is that since the broadest debt category, which includes high-rate credit cards, did not increase, it did not offset the employees’ accumulated contributions. Their credit reports showed no increase in financial distress either, the study concluded.

However, the findings for car and home loans were ambiguous, so auto-enrollment “may raise these latter types of debt,” said the researchers, who are affiliated with NBER’s Retirement and Disability Research Center.

If workers are, in fact, borrowing more, the question, again, is whether the new debt is offsetting the additional savings under auto-enrollment. Auto and home loans – in contrast to credit cards – are used to finance an asset that has long-term value. Whether these forms of debt improve or erode net worth depends on the asset’s value and whether the value rises (say, a house in a growing city) or falls (a car after it’s driven off the lot).

The researchers did not have access to data on federal workers’ assets, which they would need to see what’s happening to their net worth. This remains an important question for future research. …Learn More

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The Secret to Feeling Younger

You’re as young as you feel!

This cliché is meant to be uplifting to older people. But it really just begs the question: what, exactly, is it that makes a person feel young?

Having a sense of control over the events in one’s life is the answer that emerged from a 2019 study of 60- to 90-year-olds in the Journal of Gerontology. “[B]elieving that your daily efforts can result in desired outcomes” lines up nicely with what the researchers call “a younger subjective age.”

This makes a lot of sense. Feeling in control becomes important as we age, because it counteracts our growing vulnerabilities – we can’t move as fast, hear as well, or remember as much. Wresting back some control can rejuvenate older people, instill optimism, and improve memory and even longevity, various studies have found. …Learn More

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Many Demands on Middle Class Paychecks

Ask middle-class Americans how they’re doing, and you’ll often get the same answer: there are still too many demands on my paycheck.

Several recent surveys reach this conclusion, even though wages have been rising consistently at a time of low inflation.

Student loans trump 401(k)s. Two top financial priorities are in conflict: student loan payments, which people described as a “burden,” and saving for retirement, which they viewed as “important” in a TIAA-MIT AgeLab survey.

The debt seems to be winning: three out of four adults paying off student loans say they would like to increase how much they save for retirement but can’t do it until their loans are paid off – and that can take years. One woman described her loans as “draining” her finances.

A promising sign on the horizon is that some employers are finding creative ways to help employees pay down college debt, giving them more leeway to save money in their 401(k)s. But these efforts impact a small number of workers, and the amount of debt continues to rise year after year for every age group, from new graduates to baby boomers who helped send their children and grandchildren to college, a Prudential study found.  

Buying a house isn’t an option. The good news is that about half of Millennials already own a home. Most of the others want to buy a house but can’t afford it, 20- and 30-somethings told LendEdu in a survey. Their top reasons were student loan and credit card payments and a lack of savings, which is the flip side of having too much debt.

Millennials are also putting off other goals until they get a house – marriage, children, even pets. “It’s quite obvious that this uphill battle” and debt “is having secondary effects,” said LendEdu’s Michael Brown.

Medical debt looms large. Americans borrowed $88 billion last year to pay their hospital, doctor, and lab bills. That debt fell hardest on the 3 million people who owe more than $10,000, according to an estimate by the Gallup polling company and a group of healthcare non-profits. …Learn More

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Social Casinos: Stay Far, Far Away

This report about online casinos is incredible.

The PBS Newshour reports that these gambling websites – for poker, roulette and slots – are able to target people who are the most vulnerable to gambling addiction. The video features a site that assigns VIP status to encourage vulnerable customers to keep playing.

That’s not the only problem. Customers pay real money to buy chips to gamble or cover their losses on the gambling site. But when the customer wins, the website “do[es]n’t pay real money. They only…give you virtual chips to continue to play on their apps,” said a Dallas woman who said she lost $400,000 while gambling online.

Only 1 percent of Americans are gambling addicts, so the problem, while very serious for them, is not widespread. However, in the video, Keith S. Whyte of the National Council on Problem Gambling said that online social casinos are far more addictive than brick-and-mortar casinos.

Whyte said these social casinos are not regulated. The social casino profiled in the video said that it strives “to comply with all applicable standards, rules and requirements.” …Learn More

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Social Security: the ‘Break-even’ Debate

Our recent blog post about the merits of delaying Social Security to improve one’s retirement outlook sparked a raft of comments, pro and con.

In the example in the article, a 65-year-old who is slated to receive $12,000 a year from Social Security could, by waiting until 66 to sign up for benefits, get $12,860 a year instead. By comparison, it would cost quite a bit more – about $13,500 – to buy an equivalent, inflation-adjusted annuity in the private insurance market that pays that additional $860 a year.

The strategy of delaying Social Security “is the best deal in town,” said a retirement expert quoted in the article.

Aaron Smith, a reader, doesn’t agree. “It will take 14 years to make that ($12,000) up. Sorry but I’ll take the $12k when I’m in my early 60s and can actually enjoy it,” he said in a comment on the blog.

Smith is making what is known as the “break-even” argument, which is behind a lot of people’s decisions about when to start collecting their Social Security.

But other readers point out that the decision isn’t a simple win-loss calculation. The benefit of getting a few extra dollars in each Social Security check – between 7 and 8 percent for each year they delay – is that it would help retirees pay their bills month after month.

This is a critical consideration for people who won’t have enough income from Social Security and savings to maintain their current standard of living after they stop working – and 44 percent of workers between 50 and 59 are at risk of falling short of that goal.

One big advantage of Social Security is that it’s effectively an annuity, because it provides insurance against the risk of living a long time. So the larger check that comes with delaying also “lasts the rest of your life,” said Chuck Miller, another reader. …Learn More

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Second Careers Late in Life Extend Work

Moving into a new job late in life involves some big tradeoffs.

What do older people look for when considering a change? Work that they enjoy, fewer hours, more flexibility, and less stress. What could they be giving up? Pensions, employer health insurance, some pay, and even prestige.

Faced with such consequential tradeoffs, many older people who move into second careers are making “strategic decisions to trade earnings for flexibility,” concluded a review of past studies examining the prevalence and nature of late-life career changes.

The authors, who conducted the study for the University of Michigan’s Retirement and Disability Research Center, define a second career as a substantial change in an older worker’s full-time occupation or industry. They also stress that second careers involve retraining and a substantial time commitment – a minimum of five years.

The advantage of second careers is that they provide a way for people in their late 40s, 50s, or early 60s who might be facing burnout or who have physically taxing jobs to extend their careers by finding more satisfying or enjoyable work.

Here’s what the authors learned from the patchwork of research examining late-life job changes:

People who are highly motivated are more likely to voluntarily leave one job to pursue more education or a position in a completely different field, one study found. But older workers who are under pressure to leave an employer tend to make less dramatic changes.

One seminal study, by the Urban Institute, that followed people over time estimated that 27 percent of full-time workers in their early 50s at some point moved into a new occupation – say from a lawyer to a university lecturer. However, the research review concluded that second careers are more common than that, because the Urban Institute did not consider another way people transition to a new career: making a big change within an occupation – say from a critical care to neonatal nurse. “Unretiring” is also an avenue for moving into a second career.

What is clear from the existing studies is that older workers’ job changes may involve financial sacrifices, mainly in the form of lower pay or a significant loss of employer health insurance. But they generally get something in return: more flexibility. …Learn More

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