Squared Away Blog

Research

July 12, 2022

The economic turmoil in the early months of the pandemic – a plunging stock market and soaring unemployment – posed a real threat to state and local government pension funds and the workers who rely on them.

One group was particularly vulnerable: public-sector workers who aren’t covered by Social Security and lack the backstop of the federal government if their employer pension plans get into trouble.

The Center for Retirement Research has some good news for these 5 million noncovered workers living in 20 states. Their pension plans got through the first two years of the pandemic unscathed.

In dollar terms, government contributions to these defined benefit pension plans actually increased during COVID. That and a roaring stock market in 2021 significantly improved their financial condition. Of course, this sunny report is clouded by what is happening to the stock market now – it has reversed course and dropped 20 percent this year.

But the researchers’ assessment is that COVID was not the financial disaster many had feared for the public-sector workers who aren’t covered by Social Security.

The 59 noncovered plans in the study vary in size from small local pension plans like the Pittsburgh Police Relief and Pension Fund to the nation’s largest state plan, the California Public Employees Retirement System.

Congress’ financial support during COVID played an important role in stabilizing state and local governments’ finances. They received hundreds of billions in pandemic relief from the CARES Act in March 2020 and, a year later, the American Rescue Plan. The federal relief checks to families and businesses also added billions to state and local tax bases. Importantly, tax revenues snapped back after a brief drop in 2020, because high-income workers, who pay more in taxes, didn’t suffer the dramatic layoffs experienced by low-income workers.

The federal support provided the fiscal breathing room for governments to make their pension contributions on schedule. In fact, some of the states with the most poorly funded plans – namely New Jersey and Connecticut – took advantage of the fiscal windfall to make historically large contributions in 2022. …Learn More

Research

July 5, 2022

COVID has created perils that go beyond just the threats to our health. Reports to the FTC of financial fraud and identity theft shot up 68 percent in the first two years of the pandemic – double the pace during the previous five years combined.

Older adults with fading memories and declining cognition have always been especially susceptible to fraud. But the pandemic, by forcing them into isolation, may have worsened their vulnerabilities.

That’s one takeaway from a new study showing that older Americans who report feeling lonely or suffering a loss of well-being are more susceptible to fraud. The study, based on pre-pandemic surveys of people over 65, is also highly relevant post-pandemic and indicates that interventions to reduce social isolation might be effective in blunting their vulnerability.

For retirees with “high life satisfaction and fulfilled social needs,” the researchers said, “fraudulent opportunities promising wealth, status or social connection may be less appealing.”

The analysis relied on the Rush Memory and Aging Project, which monitors retired Chicago-area residents for signs of cognitive decline and its aftereffects. The periodic surveys include questions such as “If a telemarketer calls me, I usually listen to what they have to say” and “If something sounds too good to be true, it usually is.”

The surveys also measure loneliness, asking participants to agree or disagree with statements like “I miss having a really close friend” or “I often feel abandoned.” Well-being was determined by whether the individuals had a sense of self-acceptance and purpose, autonomy, mastery of their surroundings, and personal growth. …Learn More

June 21, 2022

Mental illness, obesity, smoking, chronic disease – researchers have been able to connect the dots between an array of stresses early in life and how people will fare as they age.

New research zeroes in on the adversities experienced by children and young adults that ultimately contribute to a premature retirement due to a disability.

The basic finding is not terribly surprising – that life’s financial and social circumstances can lead to disabling conditions that will either nudge, or force, older workers to leave the labor force early.

More remarkable is the exhaustive list of past experiences that can increase that risk.

For example, childhood financial adversity in this study took many forms – an unemployed father, family relocations for financial reasons, or even having few books in the house. People whose families struggled financially when they were children were the most likely to retire prematurely.

The study was based on surveys asking older working people born during the Baby Boom, the Depression, and World War II about stressful or traumatic events experienced in childhood and middle age. The researchers followed them through several years of surveys to determine who retired before turning 62. The early retirees were asked whether a medical condition or chronic disability was either an important reason for leaving the labor force or prevented them from continuing to work altogether.

Added to the childhood traumas are a range of social adversities faced by young and middle-aged adults – the death of a spouse, natural disasters, combat duty, divorce, violence, or having a child addicted to drugs – that also increased the likelihood of early retirements. …Learn More

Research

June 14, 2022

Economists have long thought that if employees have disability insurance on the job, they might never migrate over to the government’s disability rolls. A new study finds just the opposite.

In Canada, the existence of short-term disability in the private sector increased the number of people going into the national government’s program by 18,300 in 2015 and increased program spending by 5 percent, according to a researcher at the University of Toronto.

The logic behind this is that enrollment rises in the government program, which provides long-term benefits, because a negative incentive is at play. If employees with a disability or workplace injury have short-term coverage at work, they will have a regular source of income to tide them over while they apply for government benefits and wait for a response.

The Canadian study has implications for the United States, because the two countries’ programs are similar. The connection between U.S. government and employer disability is also of interest because some policymakers here would like to see mandates for employer disability become more widespread. Ten U.S. states and the District of Columbia currently require employers to provide the coverage for serious medical conditions.

This research adds a new voice to a lively debate on both sides of the U.S.-Canada border. Others have argued that when companies offer short-term disability, they prevent some people from going onto the government rolls by giving them time off to recover from an illness or injury before it becomes chronic. Employers also have an incentive to control their insurance costs by preventing injuries or accommodating employees with disabilities so they can keep working. …Learn More

Research

June 2, 2022

In the pandemic’s early days, the unraveling of economic life was breathtaking. Some 3.3 million Americans filed for jobless benefits in the second week of March 2020. A record 6.6 million joined them the following week.

By April, government checks were starting to land in workers’ bank accounts, bringing the urgent relief Congress intended. The unemployed used the often-substantial assistance – up to $3,400 for a family of four – to cover basic expenses, and the people who were holding on to their jobs saved for possibly difficult days ahead.

New research shows that the benefits of this assistance disproportionately went to those who needed it most: low-income workers and people who had financial problems before COVID hit.

The relief checks “have been more of a lifeline for individuals who were struggling,” the study concluded. “Rather than simply help prevent widening inequality,” the relief “may have helped close the gap.”

Consider the workers who either had great difficulty paying their debts in 2019 or had been spending more than they earned. Thanks to the first round of relief distributed in 2020, both groups saw improvement in three major areas, according to the Dornsife Center for Economic and Social Research at the University of Southern California.

The disadvantaged workers experienced the largest reductions in financial stress and felt more satisfied with their finances. They also felt less financially fragile, reporting that it was easier to come up with $400 in cash for an emergency like a car repair. And their ability to save increased.

The researchers said they couldn’t directly credit the relief checks for these improvements. Another important factor – the enhanced unemployment benefit of $600 per week – was also simultaneously at play. But one analysis in this study did find that the people who had received the checks saw more gains than the workers who were still waiting for their checks when they participated in the Internet survey in April 2020 that the researchers used.

As was widely acknowledged at the time, lower-paid hourly workers suffered the brunt of the pandemic-related layoffs. The researchers found that $60,000 in yearly income was a sort of dividing line: households that earned less benefited more from the government assistance than households that earned over $60,000. The lower-income households were more likely to build up their checking and savings account balances. …Learn More

April 19, 2022

When older workers are laid off, the timing of the career disruption could not be worse – when they should keep working and saving for retirement. Their situation is even more precarious if a parent or spouse is in need of care.

A new study shows that people who become unemployed mid-to-late career are more vulnerable to being pulled into the demands of caregiving, which can derail their efforts to find another job.

Intensive caregiving spells usually kick in about four months after a job loss and can continue for up to 12 months – and possibly longer – according to the research, which was based on U.S. Census surveys of the unemployed prior to the pandemic.

“Family caregiving needs have the potential to turn short-term employment shocks into longer-run decreases in labor force participation, impacting the economic security” of future retirees, concluded Yulya Truskinovsky at Wayne State University.

But she also uncovered another factor in workers’ calculations: the generosity of unemployment benefits, which vary dramatically from state to state. The federal and state governments share the cost of the benefits, but states set the minimum and maximum benefit levels. During the pandemic, for example, the weekly maximum in Massachusetts was 3 1/2 times more than Mississippi’s, far exceeding the difference in the two states’ cost of living.

More generous unemployment benefits could cut one of two ways. They might give the worker enough income to support being a caregiver rather than returning to the labor force right away. The downside of taking so much time off is that it could be harder to eventually find a new job.

But the researcher finds that the opposite occurs: more generous benefits sharply reduce the likelihood that someone takes on caregiving duties after losing a job. Benefits that replace more of a worker’s earnings may make it easier to hire a professional caregiver or continue paying an existing one so the worker can focus on a job search. …Learn More

March 31, 2022

Retirees spend $1,500 more per year, on average, for medical care after a diagnosis of a serious condition like lung disease or diabetes.

Often, the solution for individuals who can’t afford such big bills is to scrimp on care or avoid the doctor altogether. But older homeowners can get access to extra cash if they withdraw some of the home equity they’ve built up over the years.

While the money clearly provides financial relief for retirees, a new study out of Ohio State University finds that it is also good for their health. Every $10,000 that Medicare beneficiaries extracted from their homes greatly improved their success in controlling a chronic or serious disease.

Among the retirees who had hypertension or heart disease, for example, one standard used to determine whether the condition was under control was whether blood pressure levels stayed below 140/90, which the medical profession deems an acceptable level. The people who tapped their home equity were more likely to stay below these levels than those who did not.

This is one of several studies in recent years to tie financial security to home equity, a resource many retirees are reluctant to tap. A study in 2020 found that older homeowners were less likely to skip medications due to cost after they had extracted equity through a refinancing, home equity loan, or reverse mortgage.

But this new research is the first attempt to connect the strategy to retirees’ actual health. The analysis followed the health of more than 4,000 homeowners for up to 15 years after they were diagnosed with one of four conditions – lung disease, diabetes, heart conditions, or cancer. …Learn More