February 21, 2023

Burden of High Rents Surged during COVID

As the bad first two years of the pandemic recede in the rear-view mirror, a new report reminds us how tough things got for renters.

In 2021, a record 21.6 million U.S. families were paying more than 30 percent of their income on rent, which is the real estate industry’s benchmark for people whose housing costs have become a financial burden. That amounts to just under half of all renter households who were struggling during COVID – very close to the high reached during the Great Recession.

And the vast majority of the 1.2 million increase from 2020’s level was in the group that struggles the most: families who pay more than 50 percent of their income to rent a house or apartment.

Two things were going on that have increased the burden on renters, according to a rent report by Harvard’s Joint Center for Housing Studies. First, rents rose unabated throughout the pandemic and are 25 percent higher than they were at the end of 2019.

But the housing center points to a second factor that added to the burden: renters, who tend to have lower earnings, lost income during the pandemic. The downward shift in their earnings illustrates that. The number of renter households earning less than $30,000 increased by 223,000 in 2021, while the number earning more than $75,000 dropped by 280,000.

The change in the renter population marked “a shift towards households that are much more likely to experience cost burdens,” the report said. …Learn More

January 12, 2023

Falling Math Scores May Cut Future Earnings

Scores on 8th grade standardized math tests dropped during the pandemic, reversing a large part of the gains students had made since the 1990s. U.S. Secretary of Education Miguel Cardona called the news last October “appalling.”

But declining scores only confirmed for many parents what they had witnessed as their children struggled to engage in classes conducted over Zoom when the schools were closed down.

Now comes some of the fallout. The decline in math scores between 2019 and 2022 is expected to reduce the lifetime earnings for the average student by nearly 2 percent, or $19,400 in today’s dollars, according to a new study.

This may not sound like a lot spread out over a decades-long career. But think about it this way: after years of rising test scores and incomes, recent 8th graders may lose several hundred dollars a year in income just because they grew up during a pandemic.

And the impact of being competent in mathematics goes beyond lost earnings. Lower test scores lead to lower graduation rates, fewer kids in college, and more teen pregnancies, arrests and incarceration. So, it’s important to make sure these kids make up for lost time by improving their test scores during high school. …Learn More

November 29, 2022

The Cost of Having a Disability in COVID

In COVID’s early months, millions of workers’ incomes dried up as the unemployment rate skyrocketed. But older Americans were somewhat shielded from the downturn.

That’s because they either are over 62 and on Social Security or receive federal disability benefits every month at higher rates than young adults. And just like everybody else, they got relief checks from Congress to soften the blow from the pandemic.

Yet, despite the reliability of a government check, older Americans with disabilities suffered from “acute financial insecurity,” according to a new study that seeks to understand why.

During the pandemic, people over the age of 50 with disabilities reported having much more difficulty paying for food than people without a disability. They also showed more signs of financial distress, including missing a payment on a credit card, utility, or medical bill, researcher Zachary Morris found.

But the heart of his analysis of household financial data was confirmation of his suspicion that a loss of income was not the primary reason that financial insecurity increased for people with disabilities during the pandemic.

Much of the strain came from higher spending likely resulting from rising costs for disability-related items such as prescription drugs like insulin, assistive technologies, and personal protective equipment to protect themselves during the stay-at-home orders. A 12 percent increase last year in the cost of home health aides was a prime example that hit people with disabilities particularly hard. …Learn More

October 4, 2022

Social Security Información – en Español

Alrededor del 14 por ciento de trabajadores y trabajadoras aquí hablan español. El Seguro Social tiene un sitio web para usted.

Translation: About 14 percent of the working-age population here speaks Spanish. Social Security has a website for you.

It’s critical that workers who speak only Spanish or are more comfortable with the language have a clear understanding of how Social Security benefits work. It’s estimated that Americans 65 and over receive just under a third of their income from the benefits, and lower-income people rely on it for much more than that.

Social Security’s Spanish-language website, which has been around in some form since the mid-1990s, provides general information about the program and also addresses issues especially relevant to this population. One example is an employer’s responsibility to report income for the one in four domestic workers in this country who are Latina.

Below are some of the general topics, as described on the website:

• Cómo funcionan los beneficios por jubilación. (How retirement benefits work.)
• Decidir cuándo comenzar los beneficios. (Deciding when to start the benefits.)
• Qué cosas adicionales puede afectar sus beneficios por jubilación. (Things that may affect benefits.)
• Lista de verificación para su jubilación. (Retirement checklist.)

If you know someone who could use this information, please pass on the link! ….Learn More

June 30, 2022

The Many Facets of Retirement Inequality

Retirement inequality is a thread running through several articles that have appeared here this year.

One blog that was particularly popular with our readers distinguishes retirees who have enough wealth to maintain the same spending levels throughout retirement from those who will, over time, have to cut back and reduce their standard of living.

The research behind the article – “Health and Wealth Drive Retirees’ Spending” – makes clear that wealth is just one component of a satisfying lifestyle. Even retirees who can afford to maintain their living standard may not be healthy enough to enjoy their money to the fullest. The retirees who have both – health and wealth – are best equipped to maintain their pre-retirement lifestyle.

Homeownership also marks a dividing line between the haves and have-nots. A home is one of retirees’ largest sources of wealth. Although most are hesitant to withdraw home equity, the ones who have equity and tap it to pay medical bills see large, positive health benefits, according to “Using Home Equity Improves Retirees’ Health.”

Pensions are another dividing line. “Retirees with Pensions Slower to Spend 401(k)s” shows the value of having guaranteed income from defined benefit pensions, which are all but extinct outside the public sector. …Learn More

January 4, 2022

Readers’ Favorite Retirement Blogs in 2021

For the baby boomers who are looking down the road to retirement, generalities will no longer suffice. They are diving into the nitty gritty.

Their keen interest in retirement issues, based on reader traffic last year, range from why the adjustments to Social Security’s monthly benefits are outdated to how it’s still possible for boomers, even at this late hour, to rescue their retirement.

First, and most important, there is hope for the unprepared. In “No-benefit Jobs Better than Retiring Early,” readers who want to retire but can’t afford it learned that they can dramatically improve their finances by finding a new job – ideally a less stressful or physically demanding one. Even if the job doesn’t have employee benefits, working longer will increase their Social Security benefits and allow them to save a little more.

The most popular article tackled a complex issue: “Social Security: Time for an Update?” The article explained the program’s actuarial adjustments, which are based on the age someone signs up for their benefits and factors into how much they’ll get. The adjustments, set decades ago, are no longer accurate, due to both increasing life spans that affect how much retirees receive from the program over their lifetimes and persistently low interest rates.

If these factors were taken into account, the researchers estimate that the average person who starts Social Security at age 62 would get more in their monthly checks, and the average person who holds out until 70 would get less.

However, not everyone is average. High-income workers tend to live longer and retire – and claim Social Security – later, while low-income workers have shorter lifespans and disproportionately start Social Security at 62.  The researchers conclude that the inequities “are not a problem that can be solved by tinkering with the actuarial adjustment.” A true fix would “would require a reassessment of the benefit structure.”

A major issue facing boomers in their late 50s and early 60s is that households with 401(k)s typically have saved only about $144,000 for retirement in their 401(k)s and IRAs. The reasons for insufficient savings – explained in “Here’s Why People Don’t Save Enough” – boil down to things that are largely beyond their control, including disruptions in their employment, a lack of access to employer retirement plans, lower earnings than they’d hoped for, bad investments, unanticipated premature retirements, and health problems.

However, workers can do something to gauge how they’re doing: make sure they know how much they’ll get from Social Security. …Learn More

October 28, 2021

Boomers Will Struggle with Care in Old Age

The bulk of care for the nation’s elderly is informally provided by spouses, adult children, and other family members. But if family can’t fill the need, will retirees be able to hire an in-home caregiver or pay for a nursing home in the future?

Just one in five 65-year-olds has enough family and financial resources combined to provide the support they would require in the event they develop the most severe care needs as they age, according to new research by the Center for Retirement Research. At the other extreme, more than one in three will have insufficient resources to cover even a minimal amount of care.

The study builds on previous report showing that most retirees will eventually need some care, though only one in four is predicted to have severe needs. And one in five will not need any care. The new study used data from a national survey of older Americans to determine how many total hours of care are required for three different levels of need – minimal, moderate and severe.

For example, 924 hours of family or professional care per year are used by the typical person who gets minimal assistance, such as housekeeping or cooking for a few weeks or months. But people with severe needs receive nearly 2,300 hours of care per year – with half supplied by family members. This would add up to more than 11,000 hours over a five-year period, which is the length of time the researchers used to define severe care needs.

Next, the researchers calculated how many hours of care could be covered informally by family and how many hours of formal care the retirees could purchase with their income and any financial assets. If the total hours of care they can cover with their resources fall short of what is required for a given level of need, then retirees have insufficient resources to meet that need.

Unmarried women are in the toughest position, because they lack not only a spouse to take care of them in old age but also the financial advantages enjoyed by married couples, who tend to be wealthier than single people. Over half of unmarried women will not be able to cover even minimal care needs. In contrast, only a third of couples could not provide for any future care.

There are also big disparities by race: nearly half of older Black Americans and two-thirds of Hispanics do not have the family and financial resources to provide at least minimal care, compared with only a third of whites. …Learn More