November 24, 2015
Social Security Delay: the Value to You
What matters most in retirement is how much money comes in the door every single month. That’s why this blog – and its sponsor, the Center for Retirement Research – hammers away at the wisdom of delaying when you sign up for Social Security in order to increase the size of your monthly checks.
So here’s a very quick project for the long Thanksgiving weekend: insert your birthday and earnings into this new online tool to get an anonymous, back-of-the-envelope estimate of how much a delay is worth to you.
The age you claim your benefits is crucial, because two out of three households rely on Social Security benefits for more than half of their retirement income. Yet the majority of people still sign up before they’re eligible for their full benefit, which is age 66 for most baby boomers. Monthly benefits are increased for every year of delay, up to age 70.
The cool part of the tool, released last week by the Consumer Financial Protection Bureau and the Social Security Administration, is the sliding feature. It shows how much monthly benefits rise if you change your claiming age from 62 to 66 to 70. Click here to try the tool. …Learn More
November 19, 2015
Listen to Your Elders Please
People do not like to hear advice from their “elders.” But shouldn’t retirement be an obvious exception?
The options for what most workers can do to salvage their retirement finances rapidly narrow as they get closer to retiring. After 50 or so, it’s also tough to find a better job, and only so much can be saved in short bursts – retirement saving requires years of diligence.
If you’re still listening, the following is sage advice drawn from two recent New York Life surveys of older workers on the cusp of retirement and octogenarians.
- Workers in their 50s and early 60s said they started saving too late for retirement. They put the “magic age” at around 26.
- Automatic savings vehicles such as 401(k)s (or even insurance or paying down a mortgage) turned out to be crucial to the sense of how secure pre-retirees feel about their futures. This was particularly true when children were living at home. …
October 29, 2015
Fewer Boomers Get Social Security at 62
The best way for most individuals to increase their retirement income is by delaying Social Security – each year they wait significantly boosts their monthly benefit check.
It seems that baby boomers are getting the message. The share of people who claim their Social Security benefits at age 62 – as soon as they’re eligible – is falling, and falling more rapidly than previously thought.
The share of 62-year-old men who claimed immediately dropped from 56 percent in 1996 to 36 percent in 2013, according to the Center for Retirement Research, which supports this blog. For women with the same birth years, the share of 62-year-old claimers declined from 63 percent to 40 percent.
The Center also confirmed that more people are waiting to sign up for their benefits until after their full retirement age under the program, which is 66 for most baby boomers. Waiting provides at least one-third more in their monthly Social Security checks than the 62-year-old claimers receive. …Learn More
October 27, 2015
Health Insurance Costs Squeeze 401ks?
U.S. workers’ wages, adjusted for inflation, are stagnating, but their share of health care costs keeps going up.
“Something has got to give, right? That something could very well be the 401(k) or 403(b) plan,” said Mark Zoril, a personal financial planner and benefits adviser to small companies.
Six in 10 workers agreed: the rising cost of their health insurance “directly affects” how much they set aside in their retirement savings plan at work, according to a new survey gauging the “financial stress” of more than 2,000 full-time employees with health coverage. The random survey was conducted by LIMRA, a financial services research organization.
Despite a slowdown in medical inflation, employees are paying a growing share of the tab for their health care. Average total premiums for family coverage under U.S. employer health plans rose 61 percent between 2005 and 2015, for example, but the employee’s share of the premium increased 83 percent to $4,995, according to the Kaiser Family Foundation’s annual report. Two out of three individual workers today pay deductibles of at least $1,000, up from 16 percent a decade ago.
Anita Potter, LIMRA’s senior vice president of research, said workplace benefits face increasing competition for workers’ limited resources. …Learn More
October 8, 2015
Blacks Invest Less Often
If two people – one black, one white – have good jobs with comparable incomes, the black person would still be less likely to have a taxable investment account, such as a mutual fund, a new study finds.
Numerous reports have shown that black Americans have fewer retirement and other savings accounts, and less money in those accounts than white Americans. But the problem with many of these comparisons is that they lump people together, regardless of how much they earn.
A new study by the FINRA Investor Education Foundation looks at one type of account – taxable investment accounts – and controls for income as well as two other characteristics that influence wealth: education and age. The study, using data from a 2012 survey of more than 25,000 U.S. households, found that when everything else is equal, black American households were still 7 percentage points less likely to have taxable investment accounts than white households; and Hispanic households were 4 percentage points less likely to have such taxable accounts than white households.
FINRA also identifies other characteristics typical of the one-third of households with a taxable account. …Learn More
September 24, 2015
Changes to Reverse Mortgages Continue
The federal government continues to work out the kinks in its reverse mortgage program. The latest change allows a non-borrower to remain in her home after her spouse, who signed the reverse mortgage, has died.
The federal government established its reverse mortgage program in the 1990s to provide an alternative source of income for retirees over age 62. These Home Equity Conversion Mortgages (or HECMs) are secured by the equity in borrowers’ houses, and the loans are repaid only when they move or die. The loans are federally insured to ensure that borrowers get all the funds they’re promised, even if the lender fails, and that lenders are repaid, even if the value of the property securing the loan declines.
A June 2015 regulation effectively allows lenders to permit a surviving, non-borrowing spouse to remain in the home, postponing loan repayment until she moves or dies. To qualify, the original reverse mortgage must have been approved by the Federal Housing Administration prior to August 4, 2014, and the property tax and insurance payments must be up to date and other conditions met.
The spousal provision adds to earlier changes, detailed in a 2014 report by the Center for Retirement Research, aimed at improving the HECM program’s fiscal viability while protecting borrowers and lenders. These regulations were a response to riskier homeowners who had tapped their home equity to cope with the Great Recession. The regulations reduced the amount of equity that borrowers could extract upfront and also introduced financial assessments of homeowners to ensure they’re able to pay their taxes and insurance. …Learn More
September 1, 2015
New Online Financial Resources
Squared Away periodically alerts readers to information online that might be useful to them. These three crossed the transom in August:
- Natural disasters quickly turn into financial disasters. On Hurricane Katrina’s 10th anniversary, the National Endowment for Financial Education and other organizations have released a guide, Disasters and Financial Planning. The guide includes tips on how to insure properly against hurricanes, floods, or forest fires and how to hire contractors to make repairs after disaster hits.
- The U.S. Social Security Administration posts a raft of brochures online to explain everything from how to get your newborn’s Social Security number or replace your old one (citizen or non-citizen, international students) to disability information for veterans. There’s also information on federal benefits many people may be unaware of. For example, low-income Medicare enrollees can apply for extra help – up to $4,000 per year – to pay for their prescription drugs. Many of the brochures come in multiple languages, including Somali and Vietnamese. Click here to see the full list of publications on socialsecurity.gov.
- The Center for Financial Services Innovation’s Consumer Financial Health Study sorts Americans into four financial states: “unengaged,” “tenuous;” “at risk,” and “striving.” They’re characterized by typical behavioral characteristics of how they handle – or fail to manage – their finances. For example, the unengaged typically “do not know how much their monthly debt payments are.” …