October 12, 2017
Before Retiring, Do this Homework
If you don’t know this chart on the Social Security website, you should:
The chart shows the so-called Full Retirement Age (FRA), which is the age at which you’re entitled to your full monthly Social Security benefit, a pension based on your earnings history.
Many boomers see their FRA as the time they ought to retire. But the question they should be asking themselves is: will the monthly benefit I’ll get at my FRA be enough?
At a time when many Americans are in danger of not having enough money for retirement, the answer is frequently no. …Learn More
October 10, 2017
Employer Health Insurance Stabilizes
One thing has gotten lost in the turbulence around the fate of the Affordable Care Act (ACA): the health insurance provided by U.S. employers is relatively stable.
Total premiums increased
3 percent for family plans (to $18,764 for the average, combined premium for employers and employees) and 4 percent for single employees’ coverage in 2017 (to $6,690), according to the Henry J. Kaiser Family Foundation’s annual report on the employer health insurance market. Employees enrolled in family plans pay under one-third of this total premium; single people, less than one-fifth.
In contrast, there was a 20 percent spike in 2017 premiums paid by workers lacking employer health insurance who purchase their policies on the state ACA exchanges – and premiums are expected to increase sharply again in many cities in 2018. While the ACA’s system of mandates and subsidies has pushed the share of Americans covered to record highs, the new challenge clearly is to contain costs.
“It’s really striking how much more stable the group market is than the far smaller marketplaces in the non-group market,” Drew Altman, the Kaiser Foundation’s president, said during a recent webinar. He compared the 20 percent increases and “very high deductibles” typical of ACA plans to modest premium increases and “no real deductible growth this year” for employer health plans.
The rise last year in total employer plan premiums, although somewhat faster than inflation and wages, is an improvement over the 5 percent to 10 percent annual premium growth in the past decade.
No obvious explanation exists for this relative stability, Altman said, especially at a time prescription drug costs are surging and health care providers are consolidating their market power. “I think it’s healthcare’s greatest mystery right now,” he said about the employer market.
That’s not to say everyone can afford their employer medical plans. …Learn More
October 5, 2017
Many Americans Feel Financial Distress
The unemployment rate is an incredibly low 4.4 percent, and a Federal Reserve survey released last week shows that American households’ net worth is increasing.
Yet all is not well.
One in three Americans say they are suffering financial hardships, and another third report they are making it but aren’t exactly thriving. One in five struggles to cover what is most basic: food, housing and medical care. These new findings, which came out of a report by the federal Consumer Financial Protection Bureau (CFPB), aren’t about economists’ traditional, objective measures of security, income and wealth levels. This is about how people are feeling about their financial state of affairs.
The common, everyday financial distress expressed in the report is one marker of the familiar socioeconomic chasm that persists in this country. The CFPB highlights the most significant – and unsurprising – differences separating the secure from the struggling: education and income levels, the presence of health insurance, and how much of one’s budget is consumed by housing costs. “Access to jobs, benefits, sufficient income, and family resources likely play a major role in a person’s financial well-being,” the CFPB said.
But it’s also more complicated than that. For example, some lower-income people might, despite their challenges, be able to find their comfort level, CFPB said, while not all higher-income people do. One thing the survey can’t get at is the extent to which feelings of financial security or insecurity are being influenced by how Americans are doing relative to co-workers or people in their communities.
The agency used answers to its 2016 survey to assign financial well-being scores, ranging from 0 to 100, to nearly 6,400 participants. The findings are summarized in a new report.
Myriad factors influence how individuals feel, sometimes leading to surprising results in the CFPB report: …Learn More
October 3, 2017
Older Americans Handling Work Demands
Older workers face fewer headwinds and better working conditions than their younger co-workers, according to the first analysis of a new survey of 3,900 blue- and white-collar workers between ages 25 and 71.
The U.S. workplace overall is “very physically and emotionally taxing,” according to the study – that’s why they call it “work.” Two out of three workers of all ages reported in the 2015 survey that they are often required to move at high speeds under tight deadlines, feeling intense pressure to accomplish too much in too little time.
But after people pass the age of 50, things get a little easier. Older workers report having more flexible work schedules, more predictable hours, fewer scheduling changes, less stress, and greater ease in arranging time off to take care of personal matters, the analysis found.
Their workplace situation isn’t all rosy. Larger shares of older workers feel under-employed or have unsupportive bosses – this held true whether they had college degrees or not.
The analysis of the new American Working Conditions Survey (AWCS), by researchers led by Nicole Maestas at Harvard Medical School and recently published in an e-book, is an introduction to what will inevitably be more research using this new, publicly available data. The AWCS might, for example, provide new fodder for studying the factors that influence older Americans to continue working or to retire.
The new study found some striking differences between older and younger workers – and among different groups of older workers: …Learn More
September 28, 2017
Medicare Advantage Shopping: 10 Rules
Janet Mills is a veteran in the Medicare Advantage marketplace.
At Florida’s SHINE program for 13 years, Mills has provided unbiased counseling to thousands of seniors trying to make difficult choices about their Medicare coverage. Now an area coordinator, she also fields questions from volunteer counselors at SHINE – the Serving the Health Insurance Needs of Elders program – in Pinellas and Pasco counties, which include St. Petersburg and Clearwater.
It can be difficult for retirees with multiple Medicare Advantage options to distinguish one plan’s benefits from another plan’s and pull the right one off the shelf. But based on her experience, Mills said, the decision retirees make during open enrollment for Medicare Advantage plans is crucial to controlling their health care costs. One in three Medicare beneficiaries is now enrolled in an Advantage plan, according to the Henry J. Kaiser Family Foundation. Their growing appeal centers on premiums that are lower than Medigap premiums. But retirees in Advantage plans also face the potential for up to $6,700 in out-of-pocket costs annually, the legal maximum allowed in the plans. The out-of-pocket U.S. average is $5,219, according to Kaiser.
“You really don’t want to sleep through the annual enrollment period,” Mills said.
Here are her pearls of wisdom for those preparing to launch into their comparison shopping for Medicare Advantage plans, which go on sale Oct. 15: …
September 26, 2017
Help Navigating the College Debt Jungle
A new report laying out loan data per student at more than 1,000 U.S. colleges can be useful to parents and future students.
From the California Institute of Technology and the California Institute of the Arts to the Massachusetts Institute of Technology and Bridgewater State University (also in Massachusetts) – data on debt levels for the 2016 graduating class at public and non-profit institutions are contained in a newly released report by the Institute for College Access & Success (TICAS).
TICAS has put together a handy interactive map summarizing the data. An individual college’s data can be found by clicking the state where it’s located and scrolling through the colleges in that state. Not all colleges are presented, because very few for-profit colleges report their students’ debt data.
Diane Cheng, associate research director of TICAS, walked through the most important things to look for when considering where to attend. But the bottom line is, “When students see colleges where a large share of students borrow, and they take out a lot of debt, that can be a red flag,” she said.
It’s virtually impossible to generalize about how much a prospective student will have to borrow, because every student has a unique combination of academic accomplishment and socioeconomic status. Also factoring into borrowing is each college’s sticker price and unique tuition policy. Tuition at public colleges is also affected by state funding, which remains 16 percent lower than before the recession, Cheng said.
She recommends starting with the following four indicators in the map:
- Average dollars of debt after graduation: Click on a specific state or states on the map where the teenager is looking at colleges. Scroll through the colleges displayed for each state.
What to look for in the data: Compare the average dollar debt level per student for each of the colleges your teenager is considering. If eight colleges are in the mix, compare average debt for all eight. Parents might even want to make a spreadsheet comparing average debt levels and the other data below for each institution of interest. …
September 21, 2017
The 411 on Roth vs Regular 401ks
Traditional 401(k) or Roth 401(k)?
Workers usually don’t know the difference. Yet employers increasingly are asking them to choose. Nearly two-thirds of private-sector employers with Vanguard plans today offer both a traditional and a Roth 401(k) in their employee benefits. Just four years ago, fewer than half did.
For tips on navigating the traditional-vs-Roth decision, we interviewed two members of the American Institute of CPAs: Monica Sonnier is an investment adviser in the Salt Lake City, Utah, area; and Sean Stein Smith is an assistant professor in the economics and business department at Lehman College in New York.
The difference in the two types of plans is the timing of federal income taxes:
- In a traditional 401(k), a worker who contributes to his or her account will see taxable income reduced by the dollar amount of the contribution. For example, contributing 6 percent of a $30,000 annual salary ($1,800 per year) means the worker pays federal income taxes on just $28,200. The taxes will be paid decades later, when the IRS will require the retiree to pay income taxes on the amounts withdrawn from the traditional 401(k).
- In a Roth, a worker pays income taxes on his or her full $30,000 salary, as usual. The 6 percent is an after-tax contribution that does not reduce the tax bill. The benefit will come decades later, because a Roth does not require the retiree to pay income taxes when the savings – including the Roth account’s investment earnings – are withdrawn.
If a retiree is taxed at the same rate as he was taxed as a worker, there is no difference in the after-tax retirement income the two 401(k) plans provide. However, traditional 401(k)s have generally been viewed as more advantageous, because people typically have lower incomes – and lower tax rates – in retirement than when they were working.
But things might also be changing. Over the long-term, increasing federal deficits due to increased spending pressures from popular programs to support aging baby boomers are expected to push up individual income tax rates. When that occurs, many retirees might be better off with a Roth so they won’t be taxed when they withdraw their savings.
Of course, each individual’s or couple’s tax situation is unique. Given all these caveats, here are the accountants’ rules of thumb for deciding between a traditional and Roth 401(k): …Learn More