May 16, 2019
Social, Economic Inequities Grow with Age
Retirement, as portrayed in TV commercials, is the time to indulge a passion, whether tennis, enjoying more time with a spouse, frequent socializing, or civic engagement.
Boston University sociologist Deborah Carr isn’t buying this idealized picture of aging.
“This gilded existence is not within the grasp of all older adults,” she argues in “Golden Years? Social Inequality in Later Life.” “For those on the lower rungs of the ladder,” she writes, retirement is “marked by daily struggle, physical health challenges and economic scarcity.”
Her book, which mines multidisciplinary research on aging, reaches the distressing conclusion that economic inequality not only exists but that it becomes more pronounced as people age and become vulnerable. And this problem will grow and affect more people as the population gets older.
Poverty has actually declined among retirees since the 1960s. But by every measure – health, money, social and family relationships, mental well-being – seniors who have a lower socioeconomic status are at a big disadvantage. They have more financial problems, which creates stress, and they are more isolated and die younger.
Throughout the book, Carr documents the myriad ways the disparities, which begin at birth, reinforce each other as people grow up and grow old.
“Advantage begets further advantage, and disadvantage begets further disadvantage,” Carr concludes. For the less fortunate, “old age can be the worst of times,” she said. …Learn More
May 14, 2019
20,000 Savers So Far in New Oregon IRA
About a third of retired households end up relying almost exclusively on Social Security, because they didn’t save for retirement. Social Security is not likely to be enough.
To get Oregon workers better prepared, the state took the initiative in 2017 and started rolling out a program of individual IRA accounts for workers without a 401(k) on the job. The program, OregonSaves, was designed to ensure that employees, mainly at small businesses, can save and invest safely.
Employers are required to enroll all their employees and deduct 5 percent from their paychecks to send to their state-sponsored IRAs –1 million people are potentially eligible for OregonSaves. But the onus to save ultimately falls on the individual who, once enrolled, is allowed to opt out of the program.
More than 60 percent of the workers so far are sticking with the program. As of last November, about 20,000 of them had accumulated more than $10 million in their IRAs. And the vast majority also stayed with the 5 percent initial contribution, even though they could reduce the rate. This year, the early participants’ contributions will start to increase automatically by 1 percent annually.
The employees who have decided against saving cited three reasons: they can’t afford it; they prefer not to save with their current employer; or they or their spouses already have a personal IRA or a 401(k) from a previous employer. Indeed, baby boomers are the most likely to have other retirement plans, and they participate in Oregon’s auto-IRA at a lower rate than younger workers.
Despite workers’ progress, the road to retirement security will be rocky. Two-thirds of the roughly 1,800 employers that have registered for OregonSaves are still getting their systems in place and haven’t taken the next step: sending payroll deductions to the IRA accounts.
The next question for the program will be: What impact will saving in the IRA have on workers’ long-term finances? …Learn More
May 9, 2019
ROMEOs: Retired Old Men Eating Out
Every Thursday morning, five, six, seven of them meet for a hearty breakfast and freewheeling conversation at the Sunrise Bistro in Summerville, South Carolina.
The retirees’ talk careens from Tammany Hall and texting while driving to their military experiences and the aches and pains of old age. Several of the men had technical careers, so they recently dived deep into analyzing why a Coast Guard cutter carrying Zulu royalty crashed into a New Orleans dock.
“We talk about man things,” said Bob Orenstein, an 83-year-old Korean War veteran who is retired from a Wall Street computer firm. “Men are mainly loners frankly, but everybody has found something to identify with in the group.”
The truth is that the ROMEOs – retired old men eating out – get much more than that from their weekly assemblies. “I think it’s just the friendship, the camaraderie,” said Paul Brustowicz, 74, a former jack-of-all-trades for an insurance company.
Friendship is the best antidote to isolation, which is dangerous for older Americans because it can lead to depression, poor health habits, and other problems. Most of the men in the breakfast club are South Carolina transplants, and their meetings have led to socializing and phone calls outside the group. Two of the men go deep-sea fishing together for redfish, and others share memories of growing up in New York or the tricks of the trade for constructing sailboat and railroad models. …Learn More
May 7, 2019
Social Security Benefits Stump Workers
A majority of workers do not know a crucial piece of information about their retirement: how much married couples can expect to receive from Social Security.
The program will one day be the most important source of income for millions of Americans. But they showed their lack of understanding of how benefits work in a recent survey by researchers at RAND.
A previous blog covering the same survey reported on workers’ poor knowledge of the survivor benefit for widows. This blog focuses on the other benefit for couples: the spousal benefit.
Social Security works a little differently for a married couple than for a single worker, whose future benefit check will simply be determined by his or her earnings history.
For the highest-earning spouse in a working couple – usually the husband – the size of his monthly check is also based on his past earnings. But his wife’s benefit is complicated. If she didn’t work, the rules entitle her to a spousal benefit equal to half of her retired husband’s benefit. If she did work, her benefit is based on her work history – with an exception. If her benefit is less than half of her husband’s, Social Security increases her monthly check to half of his check.
Only one in three of the people surveyed understood how this works, probably partly because of the complexity.
Most workers also had misconceptions about other aspects of the program. For example, only about one in four knew that a couple must be married for more than a year for the lower-paid person to receive the spousal benefit. If a couple has divorced, the lower-earning ex-spouse gets the spousal benefit only if the marriage lasted more than 10 years. Again, just one in four workers knew this important rule.
Couples of all ages should know the rules about a program they will rely on – no retirement plan is complete without this information. …Learn More
May 2, 2019
Retiring Can Strain Food Budgets
More than 10 percent of the nation’s retirees struggle with hunger.
New research offers one explanation: when people retire and give up a regular paycheck, they sometimes adjust to having less income by reducing their food intake.
After retiring, the men in the study ate 17 percent less protein, which becomes more important as people age. Their total calorie intake also dropped 19 percent, and their Vitamin E consumption fell 16 percent, on average, according to researchers at the University of Michigan and University of Delaware. The retirees also cut back on several other nutrients.
This contradicts previous studies, which had failed to uncover a link between diet and retirement income. Skeptical of the findings, the researchers did an exhaustive study that used various types of analyses and several datasets to follow male heads of households from employment through retirement. They controlled for race, education, household size, and health.
They consistently found, across several data sources, that a drop in income reduces food intake. In fact, the effect was so large that it exceeded the impact of another dramatic financial event: unemployment among working-age people.
Although a small minority of seniors are threatened by hunger, it’s a serious problem. …Learn More
April 30, 2019
Medical Costs Slam a Minority of Seniors
As retirees’ health declines, their medical costs go up. These costs include both everyday healthcare expenses and long-term care costs.
The everyday expenses that Medicare does not cover – Part B and Part D premiums, copayments, eyeglasses, and dental care – consume about 20 percent of the incomes of households ages 75 and over. While not exactly good news, 20 percent is “perhaps manageable” for most, concluded researchers at the Center for Retirement Research in a summary of various studies in this area.
The real problem comes for the unlucky minority – about 5 percent of seniors – who spend more than half of their income out of their own pockets for healthcare.
Turning to long-term care, these services are less frequently required but can be very costly. For example, while many nursing home stays are relatively short, a lengthy stay is a potentially crippling expense. One common trigger for a long-term stay is dementia.
The retirees facing the greatest financial risk from health care expenses tend to be those who earned enough to buy a house and put money away in their employer’s retirement plan. They have more to lose if their wealth is eaten up by exorbitant medical costs. The poor, in contrast, are covered by Medicaid, which often pays for Medicare premiums and long-term care. …Learn More
April 25, 2019
Do Couples Save Enough for Two?
Since only about half of all private sector workers currently have access to an employer 401(k) plan, it’s not at all unusual for spouses who are both working to have only one saver in the family.
When that’s the case, is the person who is contributing to the employer retirement plan saving for two? The answer is definitely not, concludes a new study by the Center for Retirement Research.
The challenge for couples living on two paychecks is that they have to save more money to maintain their current lifestyle after they retire. But households with two earners and only one saver end up saving less than others – only about 5 percent of the couple’s combined incomes, compared with more than 9 percent when both spouses are working and saving, the study found.
Couples who rely on a lone saver need that person to pick up the slack. Employers could help them if they considered the employee’s family situation when setting a 401(k) contribution rate in plans that automatically enroll workers. …Learn More