Posts Tagged "research"
April 29, 2021
Retired People of Color Struggle with Debt
The oldest minority retirees are struggling with debt, a new Urban Institute study finds.
The researchers’ starting point is that people generally reduce their debt as they age. To prepare for retiring, older workers try to pay down their mortgage balances and pay off credit cards. Once retired, their debt continues to shrink.
But on closer inspection, retirees in their 70s and 80s in the nation’s predominantly minority neighborhoods have shed less of their debt than their counterparts in mostly white neighborhoods, who tend to be better off financially.
In a sign of financial distress among the oldest lower-income and minority retirees, 20 percent of their loans go to collections for non-payment – double the rate for higher-income and white retirees. Minority retirees also have lower credit scores and longer spells of poor credit, according to the study, which compared U.S. households with debt in four age groups: 50s, 60s, 70s, and 80s.
The researchers concluded that disadvantaged retirees “may heavily rely on debt to support their standard of living in retirement.”
To get some perspective on this racial disparity, first compare workers in mostly white and mostly minority neighborhoods. White households in their 50s typically owed $43,000 on their credit cards, car loans, and mortgages in 2019, the most recent year of survey data.
But in minority neighborhoods, 50-somethings owe half as much – in large part because financial companies and mortgage lenders extend less credit to lower-income customers.
(These debt levels may seem small, but the analysis included renters, who don’t have a mortgage, which is the single largest debt for most Americans, and homeowners who have whittled down their mortgages or even paid them off entirely).
For retirees, the racial pattern is very different. Borrowers in their 80s in minority neighborhoods typically owed $3,250 in 2019 – more than their white counterparts. And $3,250 is a substantial burden for retirees relying mainly on Social Security. Since they’re more likely to be renters, the debt is concentrated in auto loans and high-rate credit cards, which aren’t backed by an appreciating asset like a house. …Learn More
April 6, 2021
Minimum Wage and Disability Applications
Do applications for federal disability benefits rise, fall, or remain unchanged when the minimum wage increases?
Understanding whether the minimum wage affects disability applications is an important issue as Congress debates an increase in the federal minimum and the states have been very active: 14 states began last year with a higher minimum wage after passing new legislation or ballot initiatives. Another seven states had previously enacted automatic yearly increases in their minimums.
One possibility considered in a new study is that applications to the U.S. Social Security Administration for disability benefits could decline if wages increase enough to make a steady paycheck that much more appealing than a modest monthly disability check. But Syracuse University economist Gary Engelhardt finds that hiking the minimum wage did not reduce applications from 2002 through 2017.
Since applications didn’t go down, could a higher minimum wage increase applications instead? Some economists argue that employers, when faced with a higher mandatory wage, may lay off some of their less-skilled hourly employees or cut back their hours. This might – indirectly – be a motivation to apply for disability.
Engelhardt tested this idea in a second analysis, recognizing that it takes time for employers to make staffing changes in response to a higher wage. Once again, he found no impact on disability applications.
“Changes in the minimum wage are not moving individuals on and off” of disability, the researcher concluded.
February 2, 2021
Wisconsin Finds Owners of Lost Pensions
Some people lose old retirement accounts because they forget about them. Others don’t want the hassle required to retrieve small amounts. And workers who change jobs fairly often can leave a lot of small accounts in their wake.
As a result, millions of dollars of retirement wealth – in pensions, 401(k)s, IRAs, profit-sharing plans, and annuities – sit in state repositories of unclaimed property.
So how can workers and retirees be united with their long-lost money?
To answer this question, a new study contrasts what has happened to unclaimed retirement accounts in two states with vastly different approaches to handling them: Wisconsin and Massachusetts.
Wisconsin in 2015 began to use Social Security numbers to automatically match up and return misplaced retirement accounts to their owners. As long as the account has a Social Security number attached to it, the state can find a resident’s current contact information in Wisconsin’s taxpayer records.
Under this system, two-thirds of the accounts were returned in 2016 and 2017, the researchers found.
Over the same two years in Massachusetts, only 3.4 percent of unclaimed retirement accounts were returned to their owners. Massachusetts takes the same passive approach used in most states: individuals must initiate the process by locating an account in the state’s unclaimed property database and then retrieve it themselves.
The University of Wisconsin study also uncovered an explanation for why some people are motivated to track down accounts on their own. …Learn More
January 28, 2021
Smaller Pensions Don’t Spur More Saving
Most state and local governments provide their employees with traditional pensions, which are nice to have. But not all pensions are equally generous.
The monthly benefits vary from one place to the next, and some governments have cut costs by reducing pensions for their newest hires. Further, one in four public-sector workers aren’t currently covered by Social Security, because their employers never joined the system.
A logical back-up plan for these workers would be to contribute money to the supplemental savings plans that most public-sector employers provide. When the workers retire, they can add the money saved in their accounts – a 401(k), 401(a), 457 or 403(b) – to their pension benefits.
But researchers at the Center for Retirement Research (CRR) find that workers are only slightly more likely to participate in a savings plan if they work for government employers with less generous pensions – a criterion based on how much of the worker’s current income will be replaced by the pension after they retire.
This lackluster response may not be surprising. Workers can see what’s deducted from their paychecks every week but don’t necessarily understand how these deductions – combined with their employer’s contributions – will translate to a pension.
Public-sector workers are probably more aware of whether their employers are part of the Social Security system. But apparently workers don’t consider that either. …Learn More
January 26, 2021
ACA Eased the Financial Burden on Families
The Affordable Care Act (ACA) has reduced families’ medical costs significantly.
The ACA’s main goal was to provide coverage for the first time to workers who lack employer health insurance. But the expansion of free or subsidized health care to millions of parents with low and modest incomes has improved their financial stability and freed up money for their families’ other critical needs, concluded a new University of California at Davis study.
The main way the ACA expanded coverage was by giving states the option of providing Medicaid to workers earning up to 138 percent of the federal poverty level. The law also increased the number of children with health insurance, because federal and state outreach during the Medicaid expansion raised parents’ awareness of two separate insurance programs that had long been available to children: Medicaid and the Children’s Health Insurance Program. To help families with modest incomes, the health care law put a cap on their annual medical spending.
Prior to the ACA’s passage, out-of-pocket medical costs were a high financial burden for 15 percent of U.S. families. That has fallen to about 10 percent of families in the years since passage, the researchers said.
What qualifies as a high cost burden depends on the family’s income. One example: the researchers determined that a family earning $75,000 had a high cost burden if they paid more than 8.35 percent of their income for out-of-pocket deductibles and copayments.
However, the study is not a current picture of the situation, because it was based on data from health care spending surveys in 2000 through 2017, prior to the pandemic. During the past year, millions of people were laid off and lost their employer health insurance when they may need it most.
But the ACA’s benefits are clear, the researchers said. Another aspect of the reform was to allow workers who earn too much to qualify for Medicaid to purchase subsidized private health insurance on the state exchanges. The law capped the total that workers spend on health care – once they reach the cap, their care is fully covered. …Learn More
January 5, 2021
Our Popular Blogs in the Year of COVID
2020 was a year like no other.
But despite the pandemic, most baby boomers’ finances emerged unscathed. The stock market rebounded smartly from its March nosedive. And the economy has improved, though it remains on shaky ground.
Our readers, having largely ridden out last spring’s disruptions, returned to a perennial issue of interest to them: retirement planning.
One of their favorite articles last year was “Unexpected Retirement Costs Can be Big.” So was “Changing Social Security: Who’s Affected,” which was about the toll that increasing the program’s earliest retirement age could take on blue-collar workers in physical jobs who don’t have the luxury of delaying retirement.
COVID-19 in the nation’s nursing homes has caused incomprehensible tragedy. A nursing home advocate explained how this happened in “How COVID-19 Spreads in Nursing Homes.” And the mounting death toll in nursing homes surely confirmed a longstanding preference among baby boomers – as documented in “Most Older Americans Age in their Homes.”
Despite the economy’s halting recovery, layoffs due to COVID-19 still “may be contributing to the jump in boomer retirements,” the Pew Research Center said. Pew estimates that 3.2 million more boomers retired last year than in 2019, far outpacing the increases in recent years.
The layoffs have no doubt forced some boomers to start their Social Security earlier than planned, as explained in “Social Security: Tapped more in Downturn” and “A Laid-off Boomer’s Retirement Plan 2.0.” But unemployed older workers who are still too young for retirement benefits might apply for disability insurance, according to a study described in “Disability Applications Spike in Recession.”
Baby boomers hoping to ease into retirement on their own terms liked a pair of articles about ongoing research by Harvard Business School professor Teresa Amabile: “Mapping Out a Fulfilling Retirement” and “Retirement is Liberating – and Hard Work.”
Other 2020 articles popular with our readers included: …Learn More
December 1, 2020
Caring for a Parent Can Take Financial Toll
Last spring, as COVID-19 tore through the nation’s nursing homes, many people agonized over whether to pull their elderly parents out and assume responsibility for the care.
The fall surge in the virus is no doubt causing more handwringing as adult children again weigh the challenges of home care against concerns about their parents’ physical and mental well-being.
One practical consideration is the impact on the work lives of parental caregivers, who are overwhelmingly women. Recent research has found that “there are long-term costs associated with caregiving reflected in [lower] earnings even long after caregiving has taken place.”
The research involved women in their 50s and 60s with at least one living parent or in-law, though they generally provided care to a parent rather than an in-law.
Workers sometimes downshift their careers in the years prior to retiring, but caregiving can affect whether older women work at all, the researchers found. Among the caregivers they followed, the share who were working fell by nearly 2 percentage points, to about 56 percent, after their duties began. And the caregivers who remained employed worked fewer hours after taking on a parent’s care.
Women also earned less over the long-term if they had spent time as a caregiver. They saw about a 15 percent decline in their earnings by the age of 65 – or nearly $1,800 per year, on average – according to an update of a study initially funded by the Social Security Administration with subsequent funding from the Sloan Foundation. …Learn More