We’re kicking off 2019 with our periodic review of the most-read articles over the past year, based on the blog traffic tracked by Google Analytics.
Judging by the comments readers leave at the end of the blog posts, baby boomers are really diving into the nitty-gritty of preparing themselves mentally and financially for retirement. Financial advisers also frequently comment on Squared Away, and we hope some of our web traffic is because they’re sharing our blog with their clients.
Last year, Squared Away received recognition from other media. The Wall Street Journal recommended us to its readers for the blog’s “wonderful mix of topics.” The Los Angeles Times picked up our article, “Why Retirement Inequality is Rising.” MarketWatch published our posts about how pharmacists can help seniors reduce their prescription drug prices and about a Social Security reform to reduce elderly poverty.
The most popular blogs in 2018 fall into five categories:
With more Americans today living into their 80s and beyond, the elderly are becoming more vulnerable to slipping into poverty.
To reduce the poverty risk facing the oldest retirees, some policy experts have proposed increasing Social Security benefits for everyone at age 85. Under one common proposal analyzed by the Center for Retirement Research in a new report, the current benefit at this age would increase by 5 percent.
The poverty rate for people over 85 is 12 percent, compared with 8 percent for new retirees. But more elderly people may actually be living on the edge, because the income levels that define poverty for them are so low: less than $11,757 for a single person and less than $14,817 for couples.
One reason the oldest retirees are especially vulnerable is that their medical expenses are rising as their health is deteriorating, yet they’re too old to defray the expense by working. This is occurring at the same time that the value of their employer pensions – if they have one – has been severely eroded by inflation after many years of retirement.
Further, elderly women are more likely to be poor than men, because wives usually outlive their husbands, which triggers a big drop in income that is generally not fully offset by a drop in their expenses.
Limiting the 5 percent benefit increase to the oldest retirees would ease poverty while containing the cost. …Learn More
It is one of “the most significant labor market trends” in the United States, says Wellesley College researcher Courtney Coile.
She’s referring to big increases since the 1980s and 1990s in the share of older Americans in the labor force, including one in three men in their late 60s.
As for women, the baby boomers were really the first generation to thoroughly embrace full-time employment. Older women’s participation in the labor force hasn’t quite caught up with their male coworkers, but they’ve made impressive strides since the 1980s and have rapidly closed the retirement-age gap.
Given the implications of this trend for retirement security – the longer people work, the better off they’ll be – Coile and many other researchers have investigated what’s driving it. They agree on several things that are changing the retirement calculation.
College. College graduation rates have increased dramatically over the past few decades, and people who’ve spent at least some time in college tend to remain in their jobs longer. This trend has played a big role in the increase in baby boomers’ participation in the labor force, Coile said.
Social Security. Three major reforms to the program have boosted U.S. retirement ages. A 1983 reform is slowly increasing the age at which workers are eligible to receive their full benefits, from 65 for past generations to 67 for workers who were born after 1959. This amounts to a significant benefit cut at any given age that a retiree claims his benefits. Various studies show that this has created an incentive to delay signing up for Social Security in order to increase the size of the monthly benefit checks.
The 1983 legislation also played a role in pulling up the average retirement age by providing larger monthly benefit increases for people who delay Social Security beyond their full retirement age. In 2000, a third reform ended the temporary withholding of some benefits that had been in place for people in their late 60s who worked while simultaneously collecting Social Security.
Employer retirement plans. Two employer benefits that encourage people to retire at relatively young ages have largely gone by the wayside in the private sector. …Learn More
“Seven Up,” a famous British documentary series, interviewed 7-year-old schoolchildren in 1964 and filmed them every seven years after that.
Over the documentary’s 49-year span, viewers watched the children’s lives take shape. A boy at an upper-crust boarding school goes to college and on to teach math at a prestigious private school. A girl educated in a working-class school in London’s East End is just able to make ends meet as an adult. A young equestrian from a wealthy family raises her own privileged children. A boy in an orphanage becomes a bricklayer.
These personal profiles at the heart of “Seven Up” reverberate in a recent, unrelated, academic study that has reached a similar conclusion: parents’ investment in educating their children is the ticket to financial security as an adult.
The researchers estimated that people with the college-educated fathers earned nearly $400,000 more over their lifetimes (at today’s pound-dollar exchange rate) than the people from less-educated families. They analyzed periodic surveys of 9,436 people in England, Scotland, and Wales between ages 7 and 55. …Learn More
When the economy is expanding and more people are working and earning more, they can afford to have more babies.
But that time-tested connection between the economy and fertility seems to be broken. During the recovery that followed the 2008-2009 recession and continues today, the U.S. fertility rate has dropped quite a bit.
Lower fertility is of interest to retirement experts because it has serious implications for our aging population. AARP’s Public Policy Institute predicts a decline in the number of family members and friends available in the future to care for the elderly. Fewer babies also mean fewer workers will be paying into Social Security, in the absence of an increase in immigration.
Of course, fertility rates in developed countries like the United States, Germany, and Japan are far below the post-World War II baby boom. But the very recent decline in this country is striking. The total fertility rate, the best measure of current fertility, is 1.76 births per woman. This is well below the rate of 2 births per woman a decade ago.
A study by researchers at the Center for Retirement Research at Boston College identified four structural changes that are pulling the birth rate down. …Learn More
Only about a third of the older people who are working full-time will go straight into retirement. Most take zigzag paths.
These paths include gradually reducing their hours, occasional consulting, or finding a new job or an Uber stint that is only part-time. Other people “unretire,” meaning that they retire temporarily from a full-time job only to decide to return to work for a while.
A new study finds that the paths older workers choose are influenced by their personality and by how well they’re able to hold the line against the natural cognitive decline that accompanies aging.
Researchers at RAND in the United States and a think tank in The Netherlands uncovered interesting connections between retirement and cognitive acuity and, separately, and a variety of personality traits. To do this, they followed older Americans’ work and retirement decisions over 14 years through a survey, which also administered a personality and a cognition test.
Here’s what they found:
Cognitive ability. The people in the study who had higher levels of what’s known as fluid cognitive function – the ability to recall things, learn fast, and think on one’s feet – are much more likely to follow the paths of either working full-time or part-time past age 70.
The probable reason is simply that more job options are available to people with higher cognitive ability – whether fluidity or sheer intelligence – so they have an easier time remaining in the labor force even though they’re getting older. …
A 65-year-old woman in Houston can pay $5,300 a year for Medigap’s Plan C policy or she can buy a policy with exactly the same coverage from another insurance company for $1,700 a year.
A 65-year-old Hartford, Connecticut, man can spend anywhere from $2,900 to $7,400 annually for the most popular and comprehensive Medigap policy – Plan F.
The price disparity for Plan A for a 75-year-old man in Manchester, New Hampshire, is also large: anywhere from $1,820 to $6,301.
These are fairly typical of the enormous differences in the premiums that consumers across the country are paying for their Medigap policies.
The price disparities are “extraordinary and unable to be justified purely by the coverage that they’re offering,” said Gavin Magor, director of ratings for Weiss Ratings Inc., a consumer-oriented company that assesses insurance companies’ financial stability.
A nationwide analysis by Weiss shows that the premiums vary widely within each group of plans – Medigap Plans A, B, C through N – despite the fact that the coverage in each group is dictated by the federal government and does not change from one insurer to the next. Every company selling a Plan F policy, for example, must offer exactly the same coverage. (The exceptions are Massachusetts, Wisconsin, and Minnesota, where the states regulate their Medigap plans.)
If two people are buying a Chevrolet Camaro in Houston, “you would not expect one person to pay two or three times more than the other one,” Magor said.
Medigap is an added layer of insurance to supplement Medicare for people over 65. The additional coverage helps them with the copayments, deductibles, skilled nursing, and other charges that Medicare does not pay for.
Weiss supplied the data for this article by comparing Medigap premiums sold in each zip code and separately for men and women and for different age groups. The company based the analysis on premiums at more than 170 insurance companies.
There are a few viable explanations for the disparity in premiums. Urban and rural zip codes in the same state may be priced differently, in part because medical costs tend to be higher in the cities. And some insurers might be able to offer lower premiums, either because they are more efficient or are trying to be more price competitive to gain market share.
But Magor said that none of these explanations can fully account for the enormous price differences within zip codes. Many insurers are overcharging for their Medigap policies, he said.
A spokeswoman for America’s Health Insurance Plans, which represents health insurers, said she could not comment on Weiss’ information without the organization doing its own analysis of the data.
Paying too much for a Medigap plan can have a material impact on a retiree’s life. … Learn More