Our Financial Status: Race Really Matters

Racial differences in workers’ finances are nothing less than shocking: whites have roughly six times more wealth than Latinos and black-Americans and double the income.

These age-old disparities will be as familiar to readers as they are to economists. But a clear and updated picture of their magnitude was presented in a recent study.

In 2016, U.S. household wealth, regardless of race, still had not rebounded to 2007 levels. But whites made a lot more progress climbing out of the hole created by the plunging stock market and housing crash that ushered in the 2008 recession.

The researchers examined changes in each group’s net worth over a decade. Pre-recession, white households had five times more wealth than blacks; this ratio grew to 7-to-1 in 2016. The white-Latino wealth ratio doubled from 3-to-1 to nearly 6-to-1.

 
The 2016 data are the most recent from the Federal Reserve’s triennial survey of American households’ personal finances.

The earnings picture isn’t as dire but the gap is still large. White households are earning slightly more than they did in 2007, and blacks and Latinos are not. In 2016, white Americans had two times more income than either minority group.

Many factors, notably education, influence how well someone does. But, clearly, race does matter. …
 Learn More

Doctor: Why Medical Costs Keep Going Up

“We are rapidly approaching the point where we will simply be unable to afford medical care,” says Dr. Edward Hoffer. This is no exaggeration, according to the Henry J. Kaiser Family Foundation: health insurance deductibles and copayments are rising so fast that a significant share of working families have great difficulty paying for their care.

“We as a society have to decide whether healthcare is a right or a privilege,” Dr. Hoffer said. “I happen to think it’s a right. We can’t all drive a Mercedes but every American deserves to have access to healthcare.”

His book, “Prescription for Bankruptcy,” provides his insider’s view of why healthcare costs keep going up. For 46 years, he has worked in Massachusetts as a cardiologist, public health official, and hospital and private practice administrator.

Dr. Edward Hoffer

Question: How do U.S. medical costs compare with other countries?

Dr. Hoffer: The U.S. spends roughly twice as much per capita on healthcare as most other countries. Switzerland is nowhere near us, and they’re more expensive than the rest of Europe. Canada, Germany, France – they all have excellent healthcare systems and spend about half per capita what we do.

Q: What does this have to do with patient care?

A family policy costs the employer roughly $20,000 per employee per year, and many employers have been reacting by increasing employees’ deductibles and copays.  If you’re the line worker who’s making $50,000 and you’re faced with a $5,000 deductible, you behave like somebody who doesn’t have insurance. You skip your preventive care or you avoid a medication because all of this comes out of your pocket. Women are deciding not to get a mammography or someone who has a colonoscopy recommended to them looks at the prices and says, ‘Maybe I’ll put it off.’

Q: You criticize high pay for hospital administrators. You once visited a Boston hospital CEO whose office was so large that you “could barely see him at the far end.” But aren’t administrators crucial to the system?Learn More

False teeth

Retirees Ration or Forgo Dental Care

In April, Trudy Schuett will have a procedure to save a tooth, which she estimates a dentist would charge $3,000 to $5,000 to do.

But Schuett, who lacks dental insurance, will pay about $1,000, because the procedure will be performed by dental students at Midwestern University Clinics in Glendale, Arizona. Her cleanings at the school are affordable too.

Regular clinic visits have saved “buckets of money,” she said.

She is one of those resourceful retirees who always finds a way. But two out of three people over 65 do not have dental insurance, according to the Henry J. Kaiser Foundation, often because they lose the coverage when they leave their employer. Medicare does not pay for routine dental expenses, though it sometimes covers care for medical procedures considered integral to a retiree’s health, such as jaw reconstruction or heart surgery; some Medicare Advantage plans offer dental insurance.

Bar graph showing percentage of people over 65 who haven't seen a dentist in at least a yearBut retirees who lack dental insurance are often forced to forgo care or limit their visits to the dentist. Half of seniors haven’t been to a dentist in over a year, Kaiser said. When they do see a dentist, they spend an average $922 out of pocket. For the half of Medicare beneficiaries trying to live on $26,200 or less, dental care consumes, at minimum, 3.5 percent of their income.

Poor dental care also causes health problems. Dry mouth, a side effect of some medications, can cause teeth to loosen or fall out. Tooth loss makes it more difficult to eat. For a variety of reasons, 15 percent of retirees have lost all of their natural teeth – in West Virginia, a low-income state, 30 percent of retirees have no teeth, Kaiser said.

Schuett, who is 67, is working five hours a week for extra income, but she would rather not spend it on expensive dental care. By saving money at the university clinic, she gets to “blow some cash on the grandkids.”

Squared Away writer Kim Blanton invites you to follow us on Twitter @SquaredAwayBC. To stay current on our blog, please join our free email list. You’ll receive just one email each week – with links to the two new posts for that week – when you sign up here. This blog is supported by the Center for Retirement Research at Boston College.Learn More

High Drug Prices Erode Part D Coverage

Medicare Part D, passed in 2003, has significantly reduced seniors’ spending on prescription drugs. But the coverage hasn’t protected Leslie Ross from near calamity.

The 72-year-old diabetic needs insulin to stay alive. The prices of these drugs have skyrocketed, forcing her to supplement her long-lasting insulin, Lantus, with more frequent use of a less-expensive insulin. This one remains in her body only four hours, requiring more vigilance to control her blood sugar.

To cut her Lantus bills – nearly $1,700 this year – she has sometimes resorted to buying unused supplies from other diabetics on eBay. “You take your chances when you do stuff like that,” she said. “I checked that the vial hasn’t been opened. It still had the lavender cap on it.” She also reuses syringes.

The issue facing retirees like Ross is an erosion of financial protections under their Part D prescription drug coverage because of spiraling drug prices. New medications are hitting the market at very high initial prices, and the cost of older, once-affordable drugs increase year after year, said Juliette Cubanski, director of Medicare policy for the Henry J. Kaiser Family Foundation.

“A fundamental problem when it comes to people’s ability to afford their prescription drugs is the high prices charged for many of these medications,” she said.

Part D has no annual cap on how much retirees have to pay out of their own pockets for prescriptions. A new Kaiser report finds that retirees’ spending on specialty drugs – defined as costing more than $670 per month – can range from $2,700 to $16,500 per year. Specialty drugs include Lantus, Zepatier for hepatitis C, Humira for rheumatoid arthritis, and cancer drugs like Idhifa, which treats leukemia.

They “can be a real retirement savings drainer,” especially for very sick seniors, said Mary Johnson of the Seniors Citizens League, a non-profit advocacy group. …Learn More

Women’s Wealth Gap Exceeds Pay Gap

If the difference in men and women’s pay is a gap, then the wealth difference can only be described as a chasm.

Women earn 80 cents for each dollar a man earns. But a woman has 32 cents of net worth to a man’s dollar.

One byproduct of the #MeToo movement is the fresh light it has put on the age-old women’s issues of unequal professional status and pay.  But Elena Chavez Quezada, senior director of the San Francisco Foundation, explains in this video that wealth – home equity and financial assets minus debts – provides a more accurate picture of financial stability over the long-term.

A 2018 report found that net worth for older women, adjusted for inflation, has actually declined over the past two decades.

“If we are going to build women’s economic security, we have to talk about income and wealth inequality,” said Quezada, whose foundation promotes economic security for women and minorities.

Of course, wealth can’t be separated from pay. Women are able to save less, because they earn less and are more likely to have part-time jobs. A smaller share of them have a retirement plan at work than men, and the typical female worker saves 6 percent of her pay, compared with 10 percent for men, according to the Transamerica Center for Retirement Studies.

Although single women have slightly higher rates of homeownership than single men, if a woman can’t afford as large a down payment as a man, she starts out with less home equity.

Older women of color saw the largest decline in their net worth, according to the 2018 report, which was conducted by the University of Pennsylvania’s School of Social Work and the non-profit Asset Funders Network. …Learn More

A Taste of How the 1 Percent Lives

The dramatic increase in U.S. inequality is due almost entirely to the expanding fortunes of the
1 percent. They have tripled their share of the nation’s total wealth to 21 percent since the 1970s.

Such extreme concentrations of wealth are of growing concern to economists and even one Wall Street firm. They argue that it hurts the economy for everyone.

The public’s reaction couldn’t be more different. Their preferred solution to barely coping financially is to become rich themselves. Two out of three Americans told Gallup they aspire to being rich and say that the super-wealthy are good for the country. Democrats and Republicans are equally enamored of the rich.

Mansion in Naples, FLWhat it means to be in the top 1 percent is, for most of us, an abstraction since the wealthy largely keep to their own. But the crew of the Double Sunshine tour boat are happy to show tourists the lifestyles of Florida’s rich and famous during daily tours of the dolphins and multimillion-dollar mansions on Naples Bay.

During my Christmastime tour of the bay, the crew pointed out one property where the new owner had demolished a $49 million house to build a new one. “Tear-downs are on a tear,” says The Naples Daily News, which closely follows the real estate transactions of celebrities and chief executives.

In property after property, royal palms sway over lawns that tumble into the bay. Every house has a yacht or an empty boat slip with a full crew awaiting the owner’s return, said Greg Dyer, the tour boat company’s assistant operations director. One homeowner pays nearly $600,000 a year in property taxes. No wonder Naples has such great bike paths. …Learn More

baby

From NYC to Boise, Babies are Pricey

If a new baby is in the works for the new year, prepare yourself now.

Despite the pure joy of having a child, the fact of the matter is that the basics – daycare plus a second bedroom, extra health insurance, food and personal items – are expensive even in Little Rock, Arkansas, which is at the bottom of Magnify Money’s new ranking of the cost of adding a family member in 100 U.S. major cities. Monthly expenses for an infant exceed $700 a month in Little Rock, or nearly $8,500 a year.

ranking list of most and least expensive cities

The big budget buster everywhere is day care, which is a financial shock for most new parents. The bills can easily reach or exceed $1,000 a month, and day care represents 70 percent to 80 percent of the money spent on a baby, whether the parents live in New York City, Birmingham, Alabama, or Boise, Idaho.

Magnify Money’s estimates do not even include the college savings parents should start socking away immediately. They do include the federal tax credits for children.

Click here to get a rough idea of what your new baby will cost where you live. …Learn More

12345...1020...