June 21, 2018
Despite Medicare, Medical Expenses Bite
Medicare pays for the bulk of the medical care for Americans over 65, but a lot of their income is still eaten up by medical expenses.
The list of expenses is long. The lion’s share goes toward various insurance premiums – for Medicare Part B coverage, Part D prescription drug coverage, and supplemental insurance, whether Medigap, a Medicare Advantage plan, or employer health insurance for retirees. The remaining costs, for copayments and deductibles, are also significant.
These out-of-pocket costs, when added together, averaged about $4,300 annually per person, finds a new study by researchers Melissa McInerney, Matthew Rutledge, and Sara Ellen King of the Center for Retirement Research.
Out-of-pocket costs consume a third of the amount that retirees receive from Social Security, which is the most significant source of retirement income for a wide swath of the nation’s seniors, including many people in the middle-class. Half of seniors get at least half of all their income from the federal program.
The Medicare Part D prescription drug program has given some relief to retirees. After it became effective in 2006, the share of seniors’ income consumed by out-of-pocket costs declined slightly and then declined again after a follow-up reform of Part D began to close a big gap in drug coverage – known as the donut hole – in 2010. …Learn More
June 19, 2018
Work-Life Imbalances Spur Retirement
When young people are dissatisfied with a job or feel it intrudes too much on their personal lives, they find a new one. Not so easy for older workers.
Their decision is complicated partly because they have fewer employment options as they age, but also because they must ask themselves whether or not it’s time to retire.
A study out of the University of Michigan’s Retirement Research Center found that people in their 50s, 60s, and 70s often choose to retire when long hours, inflexible schedules, and work responsibilities don’t allow them to do what’s required to help a family member or a sick spouse or to enjoy more leisure time.
Many things are constantly pushing and pulling older workers toward retirement, from lower pay, job stress, or unrealistic job demands to accumulating their required pension credits or having enough money in the bank. But the focus here is on lifestyle.
Marco Angrisani and Erik Meijer at the University of Southern California and Maria Casanova at California State University used a survey of some 6,000 older workers that asks about work-life conflicts and then followed them for nearly a decade to see if such conflicts led to decisions to reduce their hours of work or retire altogether.
The main takeaway was that both older men and older women who’ve had a work-life conflict in the past two years are far more likely to retire. This may not be surprising for women, who are typically the default caregivers for an ailing spouse, parent, or even a grandchild. …Learn More
May 24, 2018
Public Pension Cuts Hit Recruitment
West Virginia teachers started the wave of strikes over pay.
Photo courtesy of Janet Bass, American Federation of Teachers
Teachers’ strikes and walkouts over inadequate pay – in Arizona, Kentucky, Louisiana, North Carolina, Oklahoma, and West Virginia – are making news this spring. In Oklahoma, half the people who’ve left teaching recently said pay was their top reason for moving on.
A wave of reductions in another significant form of compensation – pensions – also appear to be making state and local governments a less appealing place to work, according to researchers Laura Quinby, Geoffrey Sanzenbacher, and Jean-Pierre Aubry at the Center for Retirement Research, which publishes this blog.
Pensions have traditionally been the great equalizer for governments trying to recruit people from the higher-paying private sector. But benefit cuts, which had been fairly uncommon, gained momentum after the 2008 stock market crash that battered pension funds’ already declining finances.
The pace of cost-cutting reforms peaked in 2011, when 134 state and local government plans made some type of cuts that year. They run the gamut from increasing the tenure requirement or retirement age applied to new employees’ future pensions to trimming the cost-of-living adjustment on all pensions. …Learn More
April 17, 2018
Timing of Social Security Checks is Key
It’s a simple concept. Deposit retirees’ Social Security checks right before their big-ticket bills come, especially rent.
The U.S. Social Security Administration’s current schedule for depositing pension checks in bank accounts is based on each retiree’s birth date– it can be the second, third, or fourth Wednesday of each month.
The problem is that cash-strapped, low-income seniors receiving the earlier checks, on the second or third Wednesdays, can fall into a common behavioral trap: they spend the money soon after it comes in and then can’t cover the rent, mortgages or credit cards due at the beginning of the following month.
According to a clever new study, people who get these early monthly checks are at greater risk of resorting to desperate measures like payday loans than are seniors receiving them on the fourth Wednesday.
Such measures of financial distress are occurring “even though the pay schedule is known in advance,” write researchers Brian Baugh and Jialan Wang.
The advantage of Social Security deposits made on the fourth Wednesday is that retirees can get the big expenses out of the way first, forcing them to make do for the rest of the month with the money they have left. Indeed, people with fourth-Wednesday deposits had fewer bounced checks, account overdrafts, and payday loans, the researchers found. …Learn More
March 29, 2018
Future Retirees Financially Fragile
The scary thing about fully retiring is the obvious thing: the ability to earn stops cold.
Most retirees live on what they get from Social Security and what they can spend from their savings, if they have any. So how many older Americans with fixed incomes can accurately be described as being in difficult straits financially?
Only about 10 percent of retired people today are being forced to cut back on food and medications to pay their other bills, concludes a summary of recent studies on retirement income by the Center for Retirement Research (CRR), which supports this blog.
Tomorrow’s retirees have a more troubling outlook, in part because they will be dramatically more reliant on 401(k)s.
The typical middle-income worker in Generation X, who ranges in age from 37 to 53, can expect his savings to supply 42 percent of his total income when he retires. Savings are necessary for just 27 percent of the total income of current retirees born during the Great Depression and World War II, according to one of the studies summarized by CRR and conducted by the Urban Institute and U.S. Social Security Administration. …Learn More
February 20, 2018
What’s New in Retirement Research
Millennials, longevity, Americans’ retirement outlook – these are among the topics economists tackle in five interesting research briefs.
Links to each brief below appear at the end of their titles. (Full disclosure: the researchers are at the Center for Retirement Research at Boston College, which funds this blog.)
- “Will Millennials Be Ready for Retirement?” – They are the most educated generation. Yet they lag previous generations of young adults in their retirement preparedness. Student loan debt is one big reason.
- “National Retirement Risk Index Shows Modest Improvement in 2016” – Rising house prices boosted individuals’ wealth, modestly improving our retirement outlook. But, again, Millennials face significant headwinds.
- “Is Working Longer a Good Prescription for All? – Most households’ retirement plans would benefit from working longer, saving more, and delaying Social Security. Low-income and less-educated workers with the most to gain financially, however have fewer job options for postponing retirement. …
January 23, 2018
Millennial Retirement ‘Discouraging’
Baby boomers have limited time and only a few options to improve their financial prospects when they retire and give up a regular paycheck. Millennials have more time to do something about it.
They should start thinking about it, indicates a study by the Urban Institute’s Richard Johnson, Karen Smith, Damir Cosic, and Claire Xiaozhi Wang.
Their test of a comfortable retirement was set at a 75 percent replacement rate, meaning retirees need 75 cents in monthly income for every dollar earned in their final decade of working. For this analysis, the researchers estimated retirement income at age 70 – an age when most people have already retired – for every individual in the federal data sources used in their analysis.
They found that about a third of boomers and boomers’ parents don’t have enough retirement income to make that 75 percent cutoff. Millennnial households will be significantly worse off at age 70: nearly half are at risk.
The prospects for Millennials are “discouraging,” the researchers said. …Learn More