June 26, 2014
Retiree Health Plans Considered
Retiree health benefits are a luxury item.
In 2013, just 28 percent of government and private-sector employers with more than 200 employees offered health benefits to their retiring workers, down from 66 percent in 1988, according to the Kaiser Family Foundation.
These plans are popular with workers, but their declining prevalence has a silver lining.
A long history of research shows that people who can retain their employer health benefits if they retire tend to retire earlier, confident they’ll be insulated from extraordinary medical expenses that could wipe out their savings.
Here’s the silver lining when retirees lose that coverage: by inducing them to remain in the labor force longer, perhaps until their Medicare starts, it improves their retirement security in other ways. …Learn More
May 22, 2014
1 in 3 Late in Paying Student Debt
About one in three Americans trying to pay down their student loans is 90 days or more late on their payments, according to a new report by the Federal Reserve Bank of New York.
This is up sharply from a decade ago, when one in five people in repayment was that far behind.
The Federal Reserve estimates that 31% was the “effective” delinquency rate in 2012; it applies only to people who have actively been in repayment. The bank said this rate is a more accurate measure of the problem than the widely reported rate for 90-day delinquencies – 17 percent – which includes all borrowers, including current students and those who’ve been granted some type of loan payment deferral.
The report, “Measuring Student Debt and Its Performance,” provides more evidence that college debt is a major financial burden for a growing numbers of Americans. Between 2004 and 2012, the number of people borrowing for college has nearly doubled to about 39 million, and the total debt outstanding has nearly tripled to $1 trillion and now exceeds the nation’s credit card debt.
Delinquencies, by any measure, are higher for student debt than for any other type of U.S. consumer debt, including credit cards. The pace of delinquencies is also accelerating, according to the Federal Reserve.
Other trends highlighted in its report include: …Learn More
May 20, 2014
Medicare Advantage Enrollment Doubles
Enrollment in the Medicare Advantage plans that private insurers offer as an alternative to traditional Medicare coverage has more than doubled over the past decade, the Kaiser Foundation reports.
The share of the Medicare population enrolled in these private plans is 30 percent, up from 13 percent in 2005, the non-profit foundation said.
The reason for this dramatic growth: Medicare Advantage became a better deal for older Americans in the wake of a 2003 increase in federal subsidies to insurance companies offering the plans.
The federal government subsidizes insurers through its reimbursements for the care they cover for older Americans enrolled in Medicare Advantage. Those payments were increased in 2003. Insurers responded by reducing beneficiaries’ copayments and cost-sharing in the plans and by providing medical services not always available to people who enroll directly in Medicare and purchase Medigap policies, said Gretchen Jacobson, an associate director of Kaiser’s Medicare policy program.
The extra services include gym memberships, eye glasses, dental care, and preventive medical care. To rein in their overall medical costs, Medicare Advantage plans restrict the hospitals and doctors that patients can use. …Learn More
May 6, 2014
Half Say Retirement Saving Is Top Goal
Half of all American adults view their top financial goal as making sure they have enough money to retire, finds a survey conducted in early April and released last week by the National Endowment for Financial Education (NEFE).
That’s barely changed from 47 percent who said so in NEFE’s 2011 survey. These figures are unimpressive if one considers that most everyone eventually retires. Further, fewer than one in five U.S. workers has the luxury of a traditional defined benefit plan that will send them a pension check every month.
Saving for retirement hasn’t gotten any easier either: two of three adults in the NEFE survey identified an inability to save enough as a major financial obstacle. That sentiment may be one reason why only about half of private-sector U.S. workers participate in a retirement savings plan at work. …Learn More
March 20, 2014
Money Habits Set Millennials Apart
Millennials, now in their 20s or early 30s, are ethnically more diverse and better educated than any previous generation. They also demonstrate different financial behaviors that may partly reflect new trends in society and in technology.
Millennials’ financial struggles are a natural consequence of being new entrants to the labor force. Two-thirds of them earn less than $50,000 annually, and they are more likely than Generation X (now mostly in their 40s) to spend more than they earn, according to the FINRA Investor Education Foundation’s newly released survey of some 25,000 adults of all ages.
But FINRA’s survey provides clues to the financial habits that may set Millennials apart from previous generations:
- More than one in three has taken on debt for college. The share rises to half of Millennials who are either full-time or part-time students.
- Millennials are slightly more likely than prior generations to be offered financial education and to participate in it. Millennial men have higher financial literacy than their female peers, but this gender gap has shrunk from prior generations. This improvement still might not offset the greater need for financial capability, due to their higher student debt levels. …
March 13, 2014
Stressed Out About Money?
If so, you have a lot of company.
Fully 71 percent of adults identified money concerns as their single biggest source of stress in 2013, according to the American Psychological Association’s annual Stress in America report, derived from surveys by Harris Interactive. The good news is that this money-stress indicator has declined from 76 percent in 2010, in the wake of the Great Recession.
But the runner-up sources of stress are also closely related to money: work caused stress in 69 percent of adults surveyed, and “the economy” was identified by 59 percent.
Women are slightly more stressed than men. Could it be because women earn less, on average? On the other hand, more men than women still have responsibility for being the primary breadwinner. …Learn More
March 4, 2014
New Book Spotlights Behavioral Finance
Did you know that an investor may be more likely to hold on to a money-loser if he bought it himself than if he inherited it? That people born with the “warrior gene” will take more risks? Or that trust is essential to whether individuals prepare for retirement?
A new edited volume, “Investor Behavior: the Psychology of Financial Planning and Investing,” is a thorough tour of the research on these and other aspects of behavioral finance. The book was compiled for financial planners, investment professionals, academics, and finance students and edited by two finance professors, H. Kent Baker of American University’s Kogod School of Business and Victor Ricciardi of Goucher College.
The field of behavioral finance is gaining traction as financial experts increasingly recognize that psychology, sociology, neurology and other fields may have something to say about why people behave the way they do around money.
Traditional theories explaining investor behavior, such as modern portfolio and utility theory, assume that people make “rational” choices. In contrast, the research covered in this new book tries to explain why financial decisions are not always rational, are often infused with emotion, and can be very predictable. Or, as 1978 Nobel laureate Herbert Simon once explained, orthodox finance’s “traditional paradigm did not describe the behavior of real people,” the book says. …Learn More