Author Archives: Annabelle Lee

From Disability to Low Retirement Income

By their early 60s, four out of five workers have chronic health problems. One in four has developed some type of physical or cognitive limitation.

If these problems force them to stop working, they can apply to Social Security for disability. But developing a disability late in a career still has long-term financial consequences. These workers not only give up their steady paychecks. Their preparations for retirement are also derailed at a critical time.

A 2018 study in the Journal of Disability and Policy Studies quantifies the financial fallout. Four groups were compared, each ranging in age from 67 to 69. One started receiving disability benefits sometime between 58 and 62. A second group went on disability between 62 and Social Security’s full retirement age, which is 66 for most boomers. The other two groups claimed their regular retirement benefits. One signed up between the earliest age allowed – 62 – and the full retirement age, and one started their benefits after the full retirement age, which yields a larger monthly check.

Where each of the four groups falls in a ranking of retirement incomes is easy to predict: the earlier a worker starts disability benefits, the less income he’ll have. Healthy retirees, on the other hand, enjoy big rewards from continuing to work, saving in a 401(k), accruing pension credits, and delaying Social Security.

Household income for the last group to retire was $76,000 per year at ages 67 to 69, with Social Security providing only about a third of it, according to researchers at Mathematica who conducted the study for the Disability Research Consortium. Households that claimed a retirement benefit between 62 and the full retirement age had $48,000 in income, with 45 percent supplied by Social Security.


 
The retirees who had been on disability were far worse off in their late 60s. If they started receiving the benefits between 62 and their full retirement age, they had only $36,000 in household income in their late 60s – not even half the income of the late retirees. Social Security retirement benefits were the largest source of income, supplying two-thirds of it. …Learn More

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A Brighter Future for a Graying Workforce

Perceptions of older workers haven’t caught up with the reality of their increasingly prominent role in the labor force.

The federal Administration for Community Living reports that the U.S. population over age 60 has surged nearly 40 percent in just the past decade. By 2030, retirees will outnumber children for the first time in history, the U.S. Census Bureau predicts. The world population is on a similar path.

But in the face of this significant demographic shift, discriminatory views of older people persist in obvious and subtle ways. This discrimination colors coworkers’ beliefs about, among other things, older workers’ mental ability, efficiency, and competence on the job, according to one international review of studies on aging.

When people think about the future, “they fail to appreciate the potential that older workers present as workers and consumers,” Paul Irving, an expert on aging, writes in a special November edition of the Harvard Business Review exploring issues relevant to our aging workforce.

Research backs him up. Older people are living longer than past generations, which gives them more capacity to extend their work lives. They’re also generally healthier and enjoy more disability-free years, thanks to innovations like cataract surgery to restore their vision.

But ageism’s consequences are still apparent in the workplace. An Urban Institute report said that older workers, for a variety of reasons, are frequently pushed or nudged out of a long-term job at some point late in their careers. Some are forced into early retirement. And for those who do find another job, the new opportunities, while less stressful, are often a step down in terms of prestige and pay.

Irving, who is chairman of the Milken Institute’s Center for the Future of Aging, wants to chart a more hopeful path for our graying U.S. workforce, one that views it as an opportunity – rather than a looming crisis. …Learn More

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401k Balances are Far Below Potential

If a 60-year-old baby boomer started saving consistently at the beginning of his career back in the 1980s, he would have some $364,000 in his 401(k)s and IRAs today.

Bar graph showing a 60-year-old worker's 401(k): potential vs. reality

How much does he actually have? One-fourth of that, according to a new study from the Center for Retirement Research at Boston College (CRR).

One obvious explanation for the enormous gap is that the 401(k) system was in its infancy in the 1980s, and it took time for employers to widely adopt the plans and for young adults to get into the habit of saving for retirement.

Another likely reason is the large share of workers who do not have any type of employer-sponsored retirement plan.  This coverage gap, which predates the introduction of 401(k)s, persists today and leaves about half of private-sector workers without a plan at any given point in time.

And this gap isn’t just a problem for baby boomers. A majority of young workers are not saving in a retirement plan, despite their advantage of having entered the labor force after the 401(k) system was more mature. …Learn More

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Most Data Sets Agree on Retiree Income

What kind of financial shape are retirees in?

A 2017 study refocused attention on this old question, and it has taken on greater urgency as more and more baby boomers retire.

The study looked at the accuracy of the U.S. Census Bureau’s Current Population Survey (CPS) and confirmed earlier research showing that it dramatically under-estimates retirees’ income. The under-reporting in the CPS could raise concerns about the accuracy of other surveys that paint a less-than-rosy picture of retirement life.

To get to the bottom of things, the Center for Retirement Research (CRR) dug into other standard sources of survey data on retired households so they could be compared with CPS data. They found that the income estimates in the CPS were much lower than the others and clearly the outlier – the other four data sets roughly agreed on how much income retirees have.

The CRR researchers then selected one of the reliable sources of income data – the Health and Retirement Study (HRS) – to assess how retirees are faring. They concluded that around half of over-65 households may be experiencing difficulty maintaining the standard of living they enjoyed while they were working. The researchers based this on the rule of thumb that they need about 75 percent of their past employment earnings.

To be sure, every survey has its strengths and shortcomings, because they rely on what people say they are getting from their Social Security, retirement plans, and investments. …Learn More

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What’s Driving the Longevity Gap

The decline in U.S. life expectancy is unlike anything we’ve seen  

Bombshell headlines like this popped up in major news outlets last November after the government reported that life expectancy in 2017 fell for the third year in a row.

This is a troubling break from the steady improvements in lifespans since 1900, which were powered by a combination of medical breakthroughs and healthcare policy. Early in the 20th century, antibiotics dramatically increased infant lifespans. Later, new treatments like statins and stents, as well as expanded access to healthcare through Medicare and Medicaid, increased life expectancy across the age range.

But there’s another story behind this story: life expectancy very much depends on where one falls on the economic ladder.

Between 1979 and 2011 – prior to the very recent fall in longevity – the increase in lifespans was much larger for more educated, higher-earning Americans than the gains for people with less education and lower incomes, according to a study by the Center for Retirement Research (CRR).

Smoking is an important factor in this socioeconomic divide. The decline in smoking and cardiovascular disease greatly contributed to rising longevity in the latter half of the 20th century. But while all Americans are smoking less today, those in lower socioeconomic groups still smoke much more. Today, one in four of them is a smoker, compared with just one smoker for every 10 people who attended college, the CRR found.

Looking ahead, education will remain a clear dividing line, and life expectancy will continue to depend crucially on the future prevalence and impact of smoking, as well as obesity, CRR predicted. …Learn More

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Medicaid is Crucial to Rural Hospitals

Rural hospital closings can be a matter of life or death.

Residents in these remote locations may have to drive 100 miles or more for emergency medical care. One new study found that hospital closings increase mortality in rural areas by 6 percent. No such impact occurred in urban areas with multiple medical centers.

Both urban and rural hospitals serving poor and low-income patients face myriad financial pressures, led by Medicare and Medicaid’s relatively low reimbursement rates for their disproportionate numbers of older and sicker patients. The 2013 federal budget, which cut Medicare reimbursements for hospitals and physicians by 2 percent, compounded the problems.

But what has become increasingly clear in rural areas is that the option given to states under the Affordable Care Act (ACA) to expand their Medicaid-covered populations of high-need patients has created a dividing line between the most vulnerable hospitals and the survivors, said Brock Slabach, senior vice president of the National Rural Health Association, a hospital trade group.

With closures accelerating across the country over the past decade, 24 of the 31 rural hospitals that closed in 2018 and 2019 were located in the minority of states (14) that have not expanded their Medicaid programs, according to the Sheps Center for Health Services Research at the University of North Carolina, which tracks hospital closures.

In contrast, the ACA has bolstered rural hospitals in expansion states by cutting their uninsured populations roughly in half by bringing in a fresh supply of federal and state revenues to insure more patients under Medicaid. …Learn More

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Financial Survival of Low-Income Disabled

A monthly disability check from the federal government is a lifeline for poor and low-income persons with disabilities, but they still face a daily struggle to meet their basic needs and cover their expenses.

In in-depth interviews, 35 low-income people in Worcester, Massachusetts, described how they make ends meet on the disability benefit they get from Social Security, which averages $912 a month and is their largest source of income. Another $300 comes from other forms of public assistance, family support, or minimum-wage jobs, according to a new issue brief by Mathematica’s Center for Studying Disability Policy.

The daily struggles that each individual faces are as unique as they are. Here are a few excerpts from the study:

“My rent is subsidized. Plus I work 20 hours a week which is pretty good. I bring home more than one hundred something dollars a week and I get a few dollars in food stamps. So it’s okay.”

“I’m stringing it, managing it, and just barely staying above water. I’ve been treading that water for a long time.”

“My situation is challenging. I sometimes just don’t have enough coming in to make what’s going out.”

Three out of four people in the study told interviewers that they find it very difficult to pay for their housing, food and other basic expenses. A bright spot is that people on federal disability insurance (DI) are also covered by Medicare and/or Medicaid and spend very little on medical care.  “I’m getting everything I need,” one individual said about her healthcare. …Learn More

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