April 9, 2019

Retirement Saving – Latinos Get an App

Amid a growing awareness that many Americans aren’t properly prepared for retirement, various efforts have ramped up to push the non-savers to save.

A notable initiative is occurring in state government. California, Illinois, and Oregon have started IRA savings programs that require private employers to offer the state-sponsored IRAs to workers if the company doesn’t already have a 401(k).

Cell phone apps are also popping up to make saving easier. One such app – Finhabits – is being marketed directly to Latinos, who financial experts say are particularly unprepared for retirement. Two out of three Latino workers aren’t saving in a retirement plan, often because they work in low-wage restaurant and hotel jobs that don’t offer one.

The Finhabits app offers both traditional and Roth IRAs, which can also be set up online. The IRA regularly deducts an amount, designated by the customer, from his bank account and invests the money in low-cost exchange-traded index funds managed by Vanguard or BlackRock.

Carlos A. Garcia created the app – in English and Spanish – to confront a barrier to saving that he experienced in his own family as a child growing up in the border towns of El Paso, Texas, and Juarez, Mexico.  Saving “is not part of [Latino] culture,” he said. “Everybody’s working so hard. But you never talk about retirement.”

He carried this sentiment into his first job at Merrill Lynch after college graduation. He turned down the 401(k) option, because “I had no clue what a 401(k) was.”

This blog doesn’t recommend financial products, and Finhabits has advantages and disadvantages over competing apps. The app’s management fee is slightly higher than some, according to expert reviews. Nevertheless, Finhabits follows sound principles, such as investing in low-cost index funds. The Washington state government chose Finhabits as one of its vendors to provide a retirement plan through the state’s Retirement Marketplace for small businesses. …Learn More

April 2, 2019

Retirees Ration or Forgo Dental Care

In April, Trudy Schuett will have a procedure to save a tooth, which she estimates a dentist would charge $3,000 to $5,000 to do.

But Schuett, who lacks dental insurance, will pay about $1,000, because the procedure will be performed by dental students at Midwestern University Clinics in Glendale, Arizona. Her cleanings at the school are affordable too.

Regular clinic visits have saved “buckets of money,” she said.

She is one of those resourceful retirees who always finds a way. But two out of three people over 65 do not have dental insurance, according to the Henry J. Kaiser Foundation, often because they lose the coverage when they leave their employer. Medicare does not pay for routine dental expenses, though it sometimes covers care for medical procedures considered integral to a retiree’s health, such as jaw reconstruction or heart surgery; some Medicare Advantage plans offer dental insurance.

But retirees who lack dental insurance are often forced to forgo care or limit their visits to the dentist. Half of seniors haven’t been to a dentist in over a year, Kaiser said. When they do see a dentist, they spend an average $922 out of pocket. For the half of Medicare beneficiaries trying to live on $26,200 or less, dental care consumes, at minimum, 3.5 percent of their income.

Poor dental care also causes health problems. Dry mouth, a side effect of some medications, can cause teeth to loosen or fall out. Tooth loss makes it more difficult to eat. For a variety of reasons, 15 percent of retirees have lost all of their natural teeth – in West Virginia, a low-income state, 30 percent of retirees have no teeth, Kaiser said.

Schuett, who is 67, is working five hours a week for extra income, but she would rather not spend it on expensive dental care. By saving money at the university clinic, she gets to “blow some cash on the grandkids.”

Squared Away writer Kim Blanton invites you to follow us on Twitter @SquaredAwayBC. To stay current on our blog, please join our free email list. You’ll receive just one email each week – with links to the two new posts for that week – when you sign up here. This blog is supported by the Center for Retirement Research at Boston College. …Learn More

March 21, 2019

Men Who Work Longer, Live Longer

In 2007, the majority of workers in The Netherlands were retiring by their early sixties to take advantage of the country’s generous pension scheme. Then came a sweeping 2009 policy that rewarded older workers with a tax break if they remained employed and active.

In a new study, researchers used this tax break – the Doorwerkbonus, or continued work bonus – to ask the question: do people who worked longer in response to this policy also live longer?  The short answer is “no” for women but “yes” for men. Delaying retirement increased men’s lifespans by three months, compared with a group that was not eligible for the bonus, possibly because working longer improved their health.

The tax break was the equivalent of a wage increase for all older workers in every sector of the Dutch economy. The bonus started as a 5 percent tax cut for working people in the year they turned 62, increased to 7 percent at 63, and 10 percent at 64. After that, the rewards from work dwindled, falling to 1 percent for everyone over 67. (In 2013, the size of the tax break was reduced.)

Prior to the new study, other researchers had examined whether earlier retirements caused people to die younger. But Alice Zulkarnain and Matthew Rutledge at the Center for Retirement Research took the opposite tack. They asked: were the Dutch living longer because they delayed retirement after the Doorwerkbonus went into effect?

While the policy did increase men’s life spans slightly, women seemed unaffected, because fewer of them responded to it by working longer.

Is there a lesson in the Doorwerkbonus for American boomers?  This study indicates that working longer will not only put more money in retirees’ pockets, it might also add to their life spans. …Learn More

March 19, 2019

Boomers Cope with Real Financial Pain

We really appreciate readers opening up about their personal experiences in the comments section at the end of each blog. It’s important to stop occasionally and listen to what they have to say.

Aging readers reacted strongly to blog posts in recent weeks about two of the biggest challenges they face: spiraling prescription drug costs and a so-so job market for older workers who aren’t ready to retire.

Here are summaries of their comments on each article:

High Drug Prices Erode Part D Coverage

Readers expressed anger about rising prescription drug prices in response to a blog featuring a diabetic in Arizona who, despite having a Medicare Part D plan, spends thousands of dollars a year for her insulin. She resorts occasionally to buying surplus supplies on eBay from private individuals.

Dr. Edward Hoffer in Boston responded that Americans pay five times more for Lantus than diabetics in the rest of the world. “The same is true for most brand name drugs and most medical devices. It is an embarrassment that we pay double per capita what comparable western countries pay for health care with worse national health statistics,” he said.

Bill MacDonald shared his story in a Tweet and follow-up messages.  This North Carolina retiree on a fixed income has paid $6,000 annually out-of-pocket – a third of his income – for two drugs he’s taken since an automobile accident caused medical problems and depression that led to other issues. He spends $3,200 for one of the drugs, a cholesterol medication called Repatha – that’s his tab after his insurance company pays for most of it. (Last year, Amgen slashed Repatha’s price from more than $10,000 per year to $5,850, which MacDonald hopes will reduce this expense.)

Steve B. was thrilled about a new generic on the market to replace his Rapaflo, a prostate medication. Then he learned that the generic is not much of a bargain either.

Careers Become Dicey after Age 50 …Learn More

March 12, 2019

How Does Your Wealth Compare?

Depressing or eye-opening?

An online tool tells you where you stand financially by stacking up your net worth against other Americans.

The calculator compares a family’s net worth – financial and other assets minus debts – with all other U.S. families. Homeowners can choose to include the value of their home equity in their total net worth – or not.

Older people have had more time to accumulate wealth, so the rankings are based on the age of the household’s primary wage earner. The comparison is made with 2016 data from the Federal Reserve Board’s triennial Survey of Consumer Finances, which is the gold standard for personal financial data.

Since family – not individual – data are being compared, people who live alone are at a disadvantage. They will be measured against households with more than one person working and accumulating assets.

The calculator is on the DQYDJ financial blog written by a computer programmer and a financial professional. The validity of the results was confirmed by an economist formerly with the Center for Retirement Research, which sponsors this blog.

It might be fun to find out how you’re doing. But use this online tool at your own risk! …Learn More

February 21, 2019

High Drug Prices Erode Part D Coverage

Medicare Part D, passed in 2003, has significantly reduced seniors’ spending on prescription drugs. But the coverage hasn’t protected Leslie Ross from near calamity.

The 72-year-old diabetic needs insulin to stay alive. The prices of these drugs have skyrocketed, forcing her to supplement her long-lasting insulin, Lantus, with more frequent use of a less-expensive insulin. This one remains in her body only four hours, requiring more vigilance to control her blood sugar.

To cut her Lantus bills – nearly $1,700 this year – she has sometimes resorted to buying unused supplies from other diabetics on eBay. “You take your chances when you do stuff like that,” she said. “I checked that the vial hasn’t been opened. It still had the lavender cap on it.” She also reuses syringes.

The issue facing retirees like Ross is an erosion of financial protections under their Part D prescription drug coverage because of spiraling drug prices. New medications are hitting the market at very high initial prices, and the cost of older, once-affordable drugs increase year after year, said Juliette Cubanski, director of Medicare policy for the Henry J. Kaiser Family Foundation.

“A fundamental problem when it comes to people’s ability to afford their prescription drugs is the high prices charged for many of these medications,” she said.

Part D has no annual cap on how much retirees have to pay out of their own pockets for prescriptions. A new Kaiser report finds that retirees’ spending on specialty drugs – defined as costing more than $670 per month – can range from $2,700 to $16,500 per year. Specialty drugs include Lantus, Zepatier for hepatitis C, Humira for rheumatoid arthritis, and cancer drugs like Idhifa, which treats leukemia.

They “can be a real retirement savings drainer,” especially for very sick seniors, said Mary Johnson of the Seniors Citizens League, a non-profit advocacy group. …Learn More

February 19, 2019

Tweaking Social Security for the Future

Social Security remains as vital today as it was after its 1935 passage. But advocates for the nation’s most vulnerable retirees have proposed ways to enhance their benefits.

Consider the minimum benefit. Put on the books in the early 1970s, its goal was to prevent poverty among retirees who had worked for decades in low-paying jobs. The benefit’s value has diminished due to a design flaw that rendered it largely ineffective.

A recent policy brief by the Center for Retirement Research analyzed various modest proposals to increase the minimum benefit and improve low-income retirees’ financial security.

This brief was the last in a series on modernizing Social Security. The relatively low cost of these proposals, many of which have bipartisan support, could be offset by benefit reductions for less-vulnerable retirees. The House of Representatives is planning hearings later this year looking into ways benefits might be enhanced.

The following are synopses of the policy problems and proposals discussed in the other briefs and covered in previous blogs: …Learn More