September 14, 2017
Moving? Check the State Taxes First
New Jersey’s retirement income exclusion for couples leaped from $20,000 to $100,000 in 2016. Minnesota and South Carolina now have income tax deductions for retired military. And Rhode Island started exempting the first $15,000 of retirees’ income from the state’s income tax.
State taxes are one piece of the financial puzzle to consider when retirees – or Millennials – are thinking about moving to reduce their living costs, find a job or friendlier climate, or be close to the grandchildren.
The Retirement Living Information Center recently compiled a nice summary of tax rates for all 50 states on its website. The information comes from sources like the Federation of Tax Administrators, The Tax Foundation and the National Conference of State Legislatures.
State taxes vary dramatically. Alaska, Florida, and Texas are among the states boasting no personal income taxes, though some offset this with relatively high property or sales taxes. A few states – yes, Alaska again – have no sales taxes. Tax deductions and exemptions for retirement income are the norm, but they vary widely from one state to the next.
Full disclosure: the Retirement Living Center is a company that makes money by referring retirees to senior communities listed on its website or by arranging residents’ reviews of these communities. But the state tax website is free and publicly available.Learn More
September 5, 2017
Senior Hunger in Decline but Still High
Saturday morning at a Boston-area farmers market.
While hunger has eased among older Americans, millions still worry about having enough to eat from day to day.
A new report by two non-profits – Feeding America and the National Foundation to End Senior Hunger – found that food insecurity among people 60 and older declined by a meaningful amount between 2014 and 2015, the latest year of data available. This marked the first decline since the Great Recession.
Nevertheless, the percentage of the older population fitting the various definitions of being food insecure used in the report is much higher than in 2001. In 2015, 15 percent of older Americans felt threatened by hunger – the broadest definition – compared with 11 percent in 2001. And hunger is not isolated to the poor, said James P. Ziliak, founding director of the Center for Poverty at the University of Kentucky and co-author of the new report.
A big reason for rising food insecurity among seniors is that only 40 percent of those with low incomes who are eligible for federal food stamp assistance are actually enrolled in the Supplemental Nutrition Assistance Program, or SNAP, he said. This compares with 80 percent of the eligible population as a whole enrolled in SNAP. …Learn More
August 31, 2017
Impact of Stocks on Retirement System
U.S. stock market performance has implications for our entire retirement system – not just your 401(k).
Three studies addressing the big-picture relationships between the market and retirees’ financial security were produced in 2017 by the Center for Retirement Research, which sponsors this blog. Here are summaries of each one:
- State and Local Pension Plan Funding Sputters in FY2016 – Public pension plan returns were very weak in fiscal year 2016. But even though stock market performance improved in 2017, it will be difficult to compensate for the plans’ funding shortfalls over the long-term: “To achieve more meaningful progress,” the researchers concluded, state and local governments “need to establish contribution levels that will actually reduce unfunded liabilities.”
- How Will More Retirees Affect Investment Returns? – This interesting paper reviews the effect of the competing demographic forces driving investment returns. This is an extremely complex economic calculation, but the upshot is that our retirement accounts are receiving less interest and dividend income per dollar invested.
- What are the Costs and Benefits of Social Security Investing in Equities? – Young adults are told to throw their 401(k) contributions into the stock market and forget about them for a few decades. That’s because stocks are riskier but generally outperform bonds. The Social Security Trust Fund, which currently invests only in bonds, is just another long-term investor, and projections show that its finances would also benefit from investing in stocks.
August 17, 2017
Behind Asian-Americans’ Wealth Divide
When it comes to wealth, Asian-Americans aren’t much different than whites. The typical household’s net worth is around $133,000 in each group, and about 10 percent have no wealth at all.
And like white America, Asian-American inequality is high and rising. Asian-Americans ranking in the top 10 percent (in terms of their wealth levels) have $1.45 million in savings and home equity – about 170 times more than those in the bottom 20 percent. In the 1990s, the top 10 percent had 75 times more wealth.
Given this high concentration of wealth, “many Asian Americans, especially Asian American seniors who need to live off of their savings, live in an economically precarious situation,” according to a Center for American Progress study in December. The Urban Institute in a newer study concluded that “Asian American seniors are often left out of the national conversation on poverty.”
A deeper analysis reveals the dynamics at work in this rapidly growing and diverse socioeconomic group.
The timing of immigration is key to socioeconomic status. The Japanese, who came to this country in large numbers in the early 1900s, have had plenty of time to improve their lot. A new report by the Federal Reserve Bank of San Francisco, focused on the Los Angeles area, found that people of Japanese descent are, by far, the wealthiest segment of the Asian community there. Remarkably, the median household’s net worth approached $600,000 in 2014.
Immigration from Korea, by contrast, didn’t pick up steam until the 1980s and 1990s. Not surprisingly, the typical Korean household lags behind, with about $25,000 in wealth. But that could be changing: one in five Koreans owns a business, the highest rate of business ownership for Asians in the Los Angeles area.
Inequality also emerges between generations in upwardly mobile Asian-American families. …
August 15, 2017
Women Spending Fewer Years in Marriage
It took months for one girlfriend’s suitor to persuade her to get married. Another of my friends skipped marriage entirely and had two children on her own. Others married, had kids, and divorced, a status that seems unlikely to change for some as they age. I married for the first time at 56.
These anecdotes, about a random group of baby boomer women in the Boston area, illustrate some of the ways that women over the past half century have dramatically reduced the time they spend as part of a married couple.
A new study being released today by the Center for Retirement Research at Boston College finds that “middle boomer” women born in the late 1950s can expect to spend no more than half of their adult lives (starting at age 20) in marriage. That share was closer to three-fourths for the mothers of baby boomers.
The researchers measured this dramatic change and its underlying causes – namely delayed wedlock, permanent singlehood, and divorce – across four cohorts of women who participated in a survey of older Americans.
Between the oldest group (born in 1931-41) and the youngest group (born in 1954-59), the average age of first marriage has increased by nearly three years, while the share of women who have never married tripled to 12 percent. The share who’ve divorced also rose, from one-third to one half, according to the center, which sponsors this blog.
The change has been even starker for black women: the share of their adult lives spent in marriage declined from 54 percent of the oldest group to just 32 percent of middle boomers. Divorce is a contributing factor, but the primary reason is that black women are much more likely to fall into the “not married” category than in the past. In fact, the not married group is now larger than the married group.
This trend has many implications, not the least of which are financial. …
August 10, 2017
Beach Reads for and about Old Folks
Who wants to spend their beach vacation reading about growing older? These recommendations just might surprise you.
“The Accomplished Guest” by Ann Beattie
Ann Beattie’s 1983 book of short stories, “The Burning House,” explored the drift, emotional detachment, and cynicism of boomers, whose worldview was darkened by Watergate. That book made Beattie’s reputation, and she has been prolific ever since, including regular appearances in The New Yorker. Her 2017 short story volume, “The Accomplished Guest,” is, for now, a bookend to “The Burning House” (Beattie is only 69 and no doubt has more books in her). While baby boom skepticism remains a central theme, her characters have developed a little heart and sentimentality over the years. I particularly liked “Company,” about an older couple entertaining newlyweds at their Maine summer house (one advantage of getting older). All night, Henry ruminates about his death. But as this glorious summer evening draws to a close, he finds reason to celebrate his friendship with the much younger Jackson. Jackson is still decades away from facing his own mortality, but tonight, they are “just two men – you know, any two men – passing time on the back porch.”
“Can’t We Talk About Something More Pleasant?” by Roz Chast
For months, I ignored raving recommendations about Roz Chast’s book on how she navigated her parents’ old age. I should not have. This book by the long-time New Yorker cartoonist is a poignant, laugh-out-loud funny examination of the guilt, love, memories, regrets, anger, and tenderness that churn inside adult children carrying their parents through the final stages of their lives. …Learn More
August 8, 2017
401k Saving Harder at Lower Incomes
Our 401(k) retirement system doesn’t work as well for lower- and middle-income workers as it does for those at the top.
That’s because they face more severe headwinds in pursuit of their retirement goals, concludes a new study.
Consider what happens when a worker’s earnings drop 10 percent or he experiences a bout of unemployment. These episodes are more common among lower-paid workers, and when they hit, they hit their 401(k)s harder than the 401(k)s of people who earn more, according to the study, “Defined Contribution Wealth Inequality.”
In theory, 401(k)s could work for everyone – if everyone had access to an employer savings plan (which they don’t). And while people who earn more money obviously have more to sock away in their retirement plans at work, smaller paychecks aren’t necessarily a problem either.
The key to retirement for any worker is whether he or she has saved enough, along with Social Security, to cover about 75 percent of what they earned at work during the years leading up to their retirement. It’s true that lower-paid workers can’t save as much, but less could still be enough to reach their more modest retirement goals.
But earnings declines, unemployment, smaller employer contributions, and unwise investment choices – these “barely affect earners in the top 10 percent of the earnings distribution but are associated with less DC [defined contribution] wealth accumulation for those at the bottom,” concluded the researchers, Joelle Saad-Lessler at the Stevens Institute of Technology and Teresa Ghilarducci and Gayle Reznik at the New School for Social Research.
This disparity, they argue, has increased the retirement wealth gap in this country. In the post-recession period 2009-2011, for example, more high-income workers saw their DC account balances increase than did workers in the bottom half.
The researchers tracked the same people over time in two groups – the bottom 55 percent of the earnings ladder and the top 10 percent. They were able to more precisely compare each group’s ability to save for retirement by using the actual earnings and employer contributions to individual workers’ retirement plans. Here are their other findings: …Learn More