Posts Tagged "income"

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

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

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

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

Boomers Will Struggle with Care in Old Age

Granddaughter and grandmotherThe 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

Marriage Plays a Part in Income Inequality

In the madcap 1960 movie, “Where the Boys Are,” a college student named Tuggle (played by Paula Prentiss) is forthright about why she’s going to Ft. Lauderdale for spring break: to find a husband.

Women have come a long way, and two out of three married women today choose to work, rather than go Tuggle’s presumed route and become a full-time housewife. Yet there’s a 21st century corollary to Tuggle’s experience. College is important in determining who people marry.

We tend to marry others who are like us, and education has become central to this. College graduates gravitate to other college graduates. People who complete their formal education at high school graduation tend to marry other high school grads. Further, this trend of marrying someone with a similar education is growing over time.

“People are increasingly marrying other individuals with the same level of education,” says Boston College economist Geoffrey Sanzenbacher. Sanzenbacher and other economists say the growing trend of college graduates pairing off with other graduates has increased income inequality.

The importance of college goes much deeper. Among graduates, the specific college one attends is more important in determining who one marries than one’s field of interest or personal attributes like SAT scores or a parent’s income.

For example, graduates of a specific college are very likely to marry someone who went to that same institution – even if they are in different fields, according to a new research study that connected the data in Norway’s centralized college admissions system with marriage data. Or consider two graduates of the same law school. They have a good chance of getting married – not because they are both lawyers but because they attended the same school. …Learn More

Pandemic Puts More Retirements at Risk

Worsening Retirement Outlook figureAmericans’ retirement outlook has gone from bleak to bleaker.

The unemployment caused by COVID-19 has pushed up the share of working-age households not able to afford their current standard of living in retirement from 50 percent to 55 percent, according to a new analysis by the Center for Retirement Research, which sponsors this blog.

The analysis updates a previous estimate, based on 2016 data, to include the harmful effects of surging unemployment. The researchers estimate that perhaps 30 percent of workers – far more than is reflected in the monthly jobless rate – could be affected by layoffs now and in the future. They did not factor in the recession’s impact on the housing and financial markets, which could make things worse.

Unemployment hurts retirement in a variety of ways. Laid-off workers’ paychecks vanish immediately, but they may also earn less in the next job. The depressed earnings, over months or years, reduce the money flowing into their 401(k)s, and the amount they’ll receive in pensions and future Social Security benefits. It may also force some to spend down savings that, had they not lost their jobs, would’ve been preserved for retirement.

Interestingly, the impact on low-income workers is mixed. In one way, they’re protected by Social Security’s progressive benefit formula, which will replace a higher percentage of their earnings as their lifetime earnings decline. But low-income workers have had more layoffs, which widens the gap in their retirement savings – between what they can save and what they should be saving – more than for higher-income people.

The 2020 recession will impact retirement “in a very different way” than the Great Recession, the researchers said. This time, “the destruction is occurring more through widespread unemployment and less through a collapse in the value of financial assets and housing.” However, the lessons of the previous recession can’t be dismissed either. …Learn More