Author Archives: amy

Adult Foster Care a Solution in Oregon

Nursing homes are usually at the bottom of people’s list of places for their parents. A workable and little-known alternative is available in many states: adult foster care.

This PBS video about Oregon’s program features a suburban Portland woman, Carmel Durano, who provides 24-hour care in her home for five elderly people, including her mother. Durano has been a good solution for Steve Larrence’s 99-year-old mother. He feels comfortable with Durano and lives in the same neighborhood, so he can walk over anytime to talk to his mother.

“You don’t feel like you’re in an institution. You feel like you’re living with a family,” Larrence said in the video.

Durano is part of a network of more than 1,500 adult foster care programs in Oregon. Many of them care for more than one senior. Durano, a Filipina immigrant, got involved 30 years ago, because she had three young boys at the time and wanted to stay home for them.

Foster care is much cheaper than nursing homes. And, like nursing homes, state Medicaid programs often pay for the at-home caregivers. But though adult foster care is not immune to cases of abuse, Paula Carder, an expert on aging and dementia at Portland State University, said the Oregon program generally delivers “a high level of care.”

State regulations require caregivers to be certified annually, pass background screenings, and submit to surprise home safety checks and interviews with the adults in their care.

This may be at least a partial solution to the growing problem of an aging population. …Learn More

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Self-employed Lose Some Social Security

Self-employed and gig workers who fail to report all of their earnings to the federal government will pay a price: a smaller monthly Social Security check when they retire.

Gauging the magnitude of this problem is tricky since the IRS doesn’t know how much is not being reported by a group of workers not easily identified in the available data. As a first step, new research derived estimates of the unpaid self-employment taxes that result from the under-reporting, using a combination of U.S. Census data on the workers’ incomes and past studies on the prevalence of the problem.

Specifically, the researchers found that more than 3 million self-employed people – construction contractors, small business owners, and other independent contractors – did not disclose some or all of their earnings to the IRS in 2014. This under-reporting translated to unpaid self-employment taxes of $3.9 billion to Social Security and another $900 million to Medicare.

An additional 2.3 million Americans sell goods and services on platforms like Airbnb, Lyft, and Etsy every month. A large share of these gig workers are not reporting all of their income either. Their under-reporting resulted in an estimated non-payment of $2 billion to Social Security and $500 million to Medicare in 2014.

In fact, the estimates are conservative, and the true level of the missing payroll taxes is probably larger, said the study’s authors, a tax expert at American University and a private policy consultant.

Independent contractors are most likely to be baby boomers over 55, while Generation Xers are more common on the online platforms. Self-employed people fail to disclose earnings for a couple of reasons: they are confused about the tax law or they want to increase their disposable income. But responsibility also falls on the platform companies that process payments for their workers and sellers, the researchers said, because the companies are not required to file 1099 earnings forms with the IRS for a majority of their workers.

Whatever the reasons for the underreporting, self-employed workers will one day get less from Social Security. This study raises an obvious question for future research: how much less? …Learn More

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Class of 2019: Low Rent Key to Survival

The first and arguably most important decision a new graduate will make is how much to pay for rent.

If it’s too high, the rent – on top of those annoying student loans – will push out other priorities necessary to prevent financial trouble down the road.

Rick Epple, a certified financial planner in Minnesota’s Twin Cities area, counsels his daughter’s friends and clients’ children entering the labor force to keep their rent at around 20 percent of their income.

“Nobody ever talks about what they should spend,” he said. He worries about young adults who pay a third of their income – the standard recommendation – for an apartment. If the rent blows a hole in the budget, paying student loans every month and on time becomes a much bigger challenge.

A paycheck, Epple said, “just goes quick.”

A manageable rental payment also leaves room to prepare for the inevitable unexpected expense – and, yes, retirement. …Learn More

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Husbands Ignore Future Widow’s Needs

The amount of money a widow receives from Social Security can mean the difference between comfort and hardship.

Husbands have a lot of control over how this will turn out. Each additional year they postpone collecting their own Social Security adds another 7.3 percent to the amount a future widow will receive every month from the program’s survivor benefit.

But husbands can be a stubborn lot.

Previous research has shown that a large minority fail to take their wives into account when deciding to start their Social Security. A new study confirms this in an online experiment designed to raise husbands’ awareness of the financial impact their claiming age could have on a spouse. The men’s ages ranged from 45 to 62.

In the experiment, the researchers displayed Social Security’s benefit information to the men three different ways. In the first format, a control group saw the basic information: the husband’s full retirement benefit, and then a link to a second page displaying his benefits for various claiming ages. A second format also displayed his full benefit, but the link went to a page with estimates of his widow’s survivor benefits, based on the husband’s various claiming ages – the later he files, the more she would receive. The third format had the same information as the second format, but it was presented on a single web page.

Regardless of the way the survivor benefits were displayed, the men weren’t persuaded to postpone their own benefits to one day help their widows. Potential explanations include their feelings about work, existing health issues, and whether they will get a defined benefit pension from an employer.

Whatever their motivation, simply educating husbands on the financial impact of choosing a claiming age “is unlikely to improve widows’ economic outcomes,” concluded the study by the Center for Retirement Research at Boston College.

The impact of widowhood is often significant. An average widow’s total income drops 35 percent when a husband passes away, the researchers estimated from financial data for married men who had retired. The earlier the husband had started his benefits, the larger the drop in the widow’s income after the couple’s second Social Security check stops coming in. …Learn More

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Retirement Dates Don’t Always Fit Plan

Today, half of U.S. workers say they want to work past age 65 – in the 1990s, only 16 percent did.

Apparently, people are getting the message that, if they want to be comfortable in retirement, they will need to work as long as possible.  However, good intentions don’t pan out for more a third of workers closing in on retirement age. And the older the age they had planned to retire, the more they fall short of the goal.

Researchers at the Center for Retirement Research, which sponsors this blog, wanted to uncover why people do not follow through. Their study was based on a survey that asked people in their late 50s when they planned to retire and then watched them over the next several years to see what they did and why.

Two factors – the researchers call them shocks – play important roles in pushing people to retire early. The big factor is health. One health-related reason is intuitive: when older people develop a new condition, they become more likely to retire earlier than they’d planned. A second reason is that, when setting a date, they over-estimate how long they’ll be able to work if they have already developed health conditions like arthritis, heart disease, or emphysema. …Learn More

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Social, Economic Inequities Grow with Age

Retirement, as portrayed in TV commercials, is the time to indulge a passion, whether tennis, enjoying more time with a spouse, frequent socializing, or civic engagement.

Boston University sociologist Deborah Carr isn’t buying this idealized picture of aging.

Golden Years book jacket“This gilded existence is not within the grasp of all older adults,” she argues in “Golden Years? Social Inequality in Later Life.” “For those on the lower rungs of the ladder,” she writes, retirement is “marked by daily struggle, physical health challenges and economic scarcity.”

Her book, which mines multidisciplinary research on aging, reaches the distressing conclusion that economic inequality not only exists but that it becomes more pronounced as people age and become vulnerable. And this problem will grow and affect more people as the population gets older.

Poverty has actually declined among retirees since the 1960s. But by every measure – health, money, social and family relationships, mental well-being – seniors who have a lower socioeconomic status are at a big disadvantage. They have more financial problems, which creates stress, and they are more isolated and die younger.

Throughout the book, Carr documents the myriad ways the disparities, which begin at birth, reinforce each other as people grow up and grow old.

“Advantage begets further advantage, and disadvantage begets further disadvantage,” Carr concludes. For the less fortunate, “old age can be the worst of times,” she said. …Learn More

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20,000 Savers So Far in New Oregon IRA

About a third of retired households end up relying almost exclusively on Social Security, because they didn’t save for retirement. Social Security is not likely to be enough.

OregonSaves logoTo get Oregon workers better prepared, the state took the initiative in 2017 and started rolling out a program of individual IRA accounts for workers without a 401(k) on the job. The program, OregonSaves, was designed to ensure that employees, mainly at small businesses, can save and invest safely.

Employers are required to enroll all their employees and deduct 5 percent from their paychecks to send to their state-sponsored IRAs –1 million people are potentially eligible for OregonSaves. But the onus to save ultimately falls on the individual who, once enrolled, is allowed to opt out of the program.

More than 60 percent of the workers so far are sticking with the program. As of last November, about 20,000 of them had accumulated more than $10 million in their IRAs. And the vast majority also stayed with the 5 percent initial contribution, even though they could reduce the rate. This year, the early participants’ contributions will start to increase automatically by 1 percent annually.

The employees who have decided against saving cited three reasons: they can’t afford it; they prefer not to save with their current employer; or they or their spouses already have a personal IRA or a 401(k) from a previous employer. Indeed, baby boomers are the most likely to have other retirement plans, and they participate in Oregon’s auto-IRA at a lower rate than younger workers.

Despite workers’ progress, the road to retirement security will be rocky. Two-thirds of the roughly 1,800 employers that have registered for OregonSaves are still getting their systems in place and haven’t taken the next step: sending payroll deductions to the IRA accounts.

The next question for the program will be: What impact will saving in the IRA have on workers’ long-term finances? …Learn More

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