Posts Tagged "poor"

Middle Class Gets the Most from Medicare

width=This is a fact of retirement life: older Americans haven’t paid as much into Medicare and Medicaid as government spends on their healthcare and nursing home stays.

But it is middle-class retirees who get the most out of the system, according to a new study.

Middle-income households receive about $230,000 to $260,000 more in Medicare and Medicaid benefits, on average, during their retirement years than the total amount they’ve paid in. Their contributions consist of the Medicare payroll and income taxes deducted from workers’ paychecks, the portion of their federal and state income taxes devoted to Medicare and Medicaid, and the Medicare Part B and D premiums they are paying in retirement.

The net benefit of the programs to the middle class dwarfs the $153,000 in average net benefits for retired households in the top fifth of the lifetime earnings distribution, and it also exceeds the $196,000 gain for the bottom fifth.

The middle class is defined as the second, third, and fourth of the five earnings groups the researchers analyzed in this study. The annual data used to calculate the health spending and payment estimates for this analysis are adjusted for inflation.

width=Americans over 65 receive a third of all the medical care provided in this country. This new research, funded by the U.S. Social Security Administration, uses government administrative data to compare the benefits of Medicare and its smaller companion program, Medicaid, for each earnings group.

There are two reasons the middle class gets the most from the system. First, although the top earners live the longest and receive the most medical care, the middle class lives almost as long and ends up receiving a significant amount of care. …Learn More

Low-Income Retiree Gets Financial Coach

Every state should have what Delaware has: a program that helps low- and moderate-income seniors find a financial survival strategy.

Stand by me logoSince it opened in 2013, the program, Stand by Me 50+, has connected more than 2,300 older residents – mostly retirees – with federal and state aid programs, advised them of Social Security’s rules, and helped them pay medical bills or eliminate debt. The services are free.

Kathleen Rupert, a financial coach and head of the organization, helped one man in his 70s pay off $13,000 in debt. Another retiree doubled his income from Social Security after she determined that he was eligible for his late wife’s $1,700 benefit. About 44 percent of the program’s clients have monthly income of $1,500 or less.

“We go wherever the need is – to senior housing, senior centers, community centers, libraries,” she said. “We set up appointments at Panera Bread or Hardee’s – wherever they’re available.”

Squared Away interviewed three clients who said the financial solutions they got from the program have given them peace of mind. Here is the first client’s account of how Stand by Me 50+ helped her.

Peggy Grasty with great granddaughters, Aaliyah Gale and Quamiylah Sease.Peggy Grasty with great granddaughters, Aaliyah Gale and Quamiylah Sease.

Peggy Grasty retired in 2010 after two decades at Elwyn, a non-profit social services agency where she was a supervisor and worked with people with mental disabilities. She continues to help people – voluntarily. The 71-year-old takes other retirees under her wing who need assistance because they have trouble walking or aren’t as capable as her.

She initially contacted Stand by Me because she couldn’t make ends meet. She has a comfortable, federally subsidized apartment in Wilmington, Delaware. But her income is limited to a $1,500 Social Security check and a $53 pension from a job long ago waxing floors and driving a bus for a Pennsylvania middle school.

Stand by Me got help for Grasty through two programs: federal SNAP food stamps and a Delaware non-profit that pays low-income residents’ medical bills. By doing this type of work, the program addresses a real need. Although myriad financial assistance programs are available for low-income workers and retirees, they are frequently unaware of the programs, assume they don’t qualify, or may need help navigating the application process. …Learn More

Low-income Spend Tax Credit on Food, Rent

The fate of the recent expansion of the federal child tax credit is uncertain in the ongoing budget negotiations in Congress. What is clear is that poor and low-income families are putting the increased assistance to good use.

Low-income families figureNine out of 10 families earning less than $35,000 are spending the money on one or more essential living expenses, which include food, utilities, housing, clothing or education needs like books and after-school programs, according to an analysis of U.S. Census data by the Center on Budget and Policy Priorities.

The American Rescue Plan passed in March temporarily increased the credit from $2,000 to $3,600 per year per child for kids under age 6 and to $3,000 for older kids and teenagers. In another temporary provision in the legislation, the IRS sends the credit to families every month in the form of a monthly payment.

The child tax credit is also now fully refundable, which means that low-income people are eligible for the full credit even if they pay little or no income taxes. If the budget negotiations make this a permanent feature of the credit, the IRS would extend the federal assistance to 27 million more children in low-income families.

Unfortunately, the center estimates, there are some 4 million children in families with very low incomes that aren’t receiving the monthly payments, either because they didn’t file taxes in 2019 and 2020 or didn’t receive an economic relief check from the federal government. The IRS has created an online tool for parents to sign up and start receiving the credit.

The Center on Budget and Policy Priorities asked the people it surveyed about their specific uses for the monthly cash payments. Six out of 10 families earning under $35,000 said they are spending the money on food. About half are paying their utilities or housing expenses. Even the non-essential expenses seem like good uses for the extra funds, including car payments, childcare, and paying down debt.

Higher-income families also buy necessities with the extra cash. But low-income families struggle more to pay for their basic living expenses, and the center said they are using more of the money from the tax credit to pay for them. …Learn More

Federal Aid May Help Kids Later in Life

Handicapped student in the library President Biden has said he wants to increase the benefits in a federal program for low-income children and adults with disabilities. But a long-running debate about the program is whether the direct cash assistance helps children when they grow up.

The Supplemental Security Income program, or SSI, clearly has immediate benefits. SSI provides nearly $800 in monthly cash payments and Medicaid health insurance to help parents care for their children and teenagers and manage their physical, cognitive, or behavioral disabilities. However, policy experts disagree on the program’s long-term effects.

Critics say it creates a negative dynamic if it causes poor parents, consciously or unconsciously, to lower their expectations for a child in order to preserve the payments. If the child has a relatively mild disability, the stigma might discourage educational achievements that would ultimately boost his earnings potential as an adult.

However, one analysis in a new study found no evidence that the future earning power of children receiving SSI was affected. This analysis compared kids whose benefits started before and after a 2001 administrative change that led to more benefit terminations.

A second analysis supported the argument made by SSI’s proponents that the program has broader long-term benefits for children. The additional financial resources enable parents to provide more of the educational experiences, nutritious meals, or stable home life that can improve their children’s future prospects.

To assess the merits of this long-term benefits story, the researcher used a different, more indirect approach. This approach was based on a medical exam for 18-year-old SSI recipients that was introduced in 1996 to determine whether their benefits would continue. The researcher compared the future earnings of the younger siblings in poor families in which the 18-year-olds did and did not lose their benefits.

When the 18-year-olds retained their SSI benefits, their younger siblings earned more as adults than the younger siblings in families that had lost benefits. This pattern held true both for the younger siblings who received SSI themselves and for the siblings who did not receive SSI. …Learn More

Bars of gold

Billionaires Got Much Richer in Pandemic

In the COVID-19 downturn, this blog has had a steady supply of stories and statistics about the damage being done to low-income and middle-class families.

That’s one perspective on the pandemic. The growing billionaire class is another one.

Top 10 US billionairesSince last March, the nation’s 660 billionaires have added more than $1 trillion to their wealth – a 39 percent increase. Their combined net worth is now $4 trillion, which is nearly double the $2 trillion held by the 165 million Americans in the bottom half, according to the Institute for Policy Studies’ new report.

“It’s a troubling sign that too much of society’s wealth and income is flowing upwards to that small group of people,” Chuck Collins of the Institute for Policy Studies said during an interview on NPR’s Fresh Air.

The institute’s report is based on Forbes magazine’s annual estimates of the net worth of the world’s richest people.

Inequality has always been with us, but economists say it has grown as billionaires’ wealth has hit stratospheric levels.

To be sure, inequality would’ve been worse without the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The $500 billion in direct assistance to families last spring prevented a surge in poverty, and the relief bill passed in late December is sending more aid to unemployed and under-employed people who need it.

The billionaires are getting richer for a couple reasons, starting with a surprisingly strong stock market in 2020. Despite the worst public health crisis in a century and a struggling economy, the Standard & Poor’s 500 stock index shot up 18 percent.

But some billionaires were also in the right place at the right time – a pandemic. …Learn More

Cash from Kids Slows After Parents Retire

Family laughingIt’s not unusual for workers who grew up in lower-income households to help their parents out financially.

But a new study uncovers a twist in this familiar story: once the parents are old enough to collect Social Security, the money flowing from adult child to parent slows down. And when this occurs, the offspring are able to start saving money.

Social Security, by reducing disadvantaged parents’ reliance on their children, “may be able to interrupt the cycle of poverty between generations,” Howard University researcher Andria Smythe concluded from her analysis.

To chart changes over time in cash transfers within families, Smythe followed U.S. households’ finances between 1999 and 2017 using survey data from the Panel Study of Income Dynamics.

She found that the financial support going to parents in the bottom half of the U.S. income distribution was substantial. These parents received about $8,000 from their offspring over time. In contrast, among the higher-income families, money consistently flowed in the opposite direction – from parent to child.

After the lower-income parents turned 62 and started their Social Security, the likelihood the adult children would continue to support them declined, according to the study, which was conducted for the Retirement and Disability Research Consortium.

This, in turn, had a positive effect on the adult children’s wealth. People who grew up in lower-income families saw the biggest bump in wealth, adding about $13,000 in the years after their parents turned 62.

Social Security benefits, Smythe concludes, “may contribute to wealth-building among the adult children’s generation.”

To read this study, authored by Andria Smythe, see “The Impact of Social Security Eligibility on Transfers to Elderly Parents and Wealth-building among Adult Children.”Learn More

Art of a light bulb

Electric Bills and Financial Survival

Timing is everything for low-income people who rely on federal benefits to survive.

For example, retirees who receive their Social Security checks early in the month and spend the money before the bills come in are more prone to fill the gap with high-cost payday loans than people who get their checks a few weeks later, a 2018 study found. New research in a similar vein shows that timing also matters for individuals who receive food aid under the federal Supplemental Nutrition Assistance Program, or SNAP.

SNAP program logoWhen the electricity bill arrives on or within a day of the monthly SNAP benefit, the lowest-income customers in this study were much less likely to have a past due bill or to have their power cut off than customers whose bills arrive well after their benefits.

The timing is crucial, because SNAP supplies between 10 percent and 25 percent of household incomes up to 35 percent above the federal poverty level. When the government loads each month’s food benefit onto the card, it frees up money for high-priority bills coming due at the same time, including utilities.

This study took place in an unidentified New England state where recipients’ SNAP debit cards are refilled on the first day of every month.

After following the SNAP recipients for a full year, the researchers also found that the unpaid balances they had accumulated after 12 months were smaller if the bills coincided with the SNAP-card deposits. The advantages of a well-timed electricity bill were greatest in the poorest neighborhoods, the researchers said. …
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