On the Web

April 5, 2022

Fewer than half of low-income retirees who are eligible for SNAP food stamps or don’t automatically receive a medication subsidy as part of their Medicaid coverage are taking advantage of the programs.

These are two prominent examples of the head-spinning number of assistance programs for people over 60, from state property tax breaks and veterans benefits to transportation and healthcare assistance.

“Most older adults are not receiving all the benefits they’re eligible for, and it’s most likely that they’re not aware of what benefits are available to them,” said Erin Kee McGovern, director of the Center for Benefits Access at the non-profit National Council on Aging (NCOA).

And when retirees have heard about a specific program, they often assume – mistakenly – that they won’t qualify, she said. Other barriers are the daunting array of different state programs and lengthy application forms, which can be 15 or 20 pages.

To simplify the search, the NCOA created the Benefits Check Up, an online tool that does the initial screening to figure out which federal and state programs are available to individuals based on whether they fit the eligibility criteria.

The Benefits Check Up has been around since 2001, and more than 1 million individuals and social service agencies use it every year. To get the word out about this tool, NCOA provides grants to food banks, senior centers, and 100 local senior services agencies. It’s important to reach as many retirees as possible who need help.

Retirees enter their zip code and just a few other details and click on the categories that interest them, such as veterans’ benefits, health care subsidies, or tax cuts. The website spits out the programs that people might qualify for based on their income and where they live.

If a program looks interesting, the retiree fills out NCOA’s lengthier screening application for that specific program. Eventually, an application will still have to be filed with the relevant government agency.

But the online screening tool streamlines the process and is a great place to start. So check it out. …Learn More

Behavior

March 22, 2022

While living in New York City, Clifton Seale and Charles Gilmore piled up an enormous amount of credit card debt for basic expenses and frequent dinners out.

After retiring – Seale was a librarian and Gilmore a clergyman – the couple were notified of a $200 rent increase on their Queens apartment. With so much debt on the books, they realized they could no longer afford New York City, and after a few visits to see friends near the Delaware seashore, they moved there.

“I like to say I flunked retirement because I found out neither of us could afford to live on the pension and Social Security,” Gilmore said.

Although Delaware was a less expensive place to live, they didn’t turn their finances around until they found the non-profit Stand by Me 50+, which offers free financial coaches to Delaware residents over age 50.

The couple, who have been together 35 years and married for 8 years, have a decent income by rural Delaware’s standards, if not New York’s. Their combined income is about $70,000 per year. They were able to buy a $185,000 three-bedroom house in Lincoln, Delaware, after a friend helped with the down payment. Their $1,150 mortgage isn’t much more than the rent on their one-bedroom apartment in Queens.

Credit cards were Seale and Gilmore’s big issue. They owed about $40,000, including moving expenses and some new furniture purchased in Delaware. Both of them had retired at a fairly young age – 62 – but felt they had no choice but to go back to work. Gilmore found a job at a local operation for a national hospice organization and, last September, landed a part-time position as a Presbyterian pastor. Seale has worked at a non-profit that helps seniors who want to age in their homes.

The extra income helped, but the debt was still going up. “We weren’t paying off as much [debt] as we were spending,” Seale said. “No matter what I did, everything was still falling down around my shoulders.”

They just needed to get rid of the debt. …Learn More

March 17, 2022

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

Since 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 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

March 8, 2022

I’m employed (obviously), turning 65 in June, and writing this blog to answer a question that is nagging at me and probably many of our readers in the same situation: do I have to sign up for Medicare, and if so which parts?

No one is actually required to sign up for Medicare. But everyone will need the health insurance eventually and failing to follow the rules can subject retirees to a lifetime of higher premiums.

And that surcharge can be substantial. Medicare adds 10 percent onto the Part B premium for every year a 65-year-old worker who should’ve, under the rules, signed up for the coverage for doctors and medical services but did not. Late enrollment in Part D drug coverage also triggers a penalty. More on the penalties later.

Part A is easy. Go ahead and sign up for Medicare’s Part A hospital coverage if you have employer health insurance, says Richard Chan, chief executive of CoverRight, an insurance broker with a consumer-friendly website. The federal Centers for Medicare and Medicaid Services agrees.

Part A won’t incur a late penalty if you paid your Medicare taxes for 10 years while working, because, in that case, Medicare does not charge a monthly premium – and Part A is added financial protection. “It’s free, and if you go to the hospital, Medicare can help cover the gaps that your work insurance doesn’t,” Chan said.

Eligibility for Part A begins three months before the 65^th birthday. A couple of important caveats. People who didn’t put in 10 years of work will pay a fairly large Part A premium. And, under federal tax law, people who sign up for Part A are not allowed to contribute to a Health Savings Account, or HSA, which the government views as a health plan.

Part B is trickier. Older workers who have health insurance from a large employer – 20 or more employees – do not have to sign up for Part B until they retire and give up their employer’s coverage.

However, it’s good practice to confirm with the benefits office that the coverage does, in fact, meet Medicare’s requirement that the employer has at least 20 workers because employers with fewer than 20 employees are subject to completely different rules. And it’s not always clear cut whether the threshold has been met if, for example, the company has contractors or part-time employees.

When you eventually do sign up, you’ll need documentation, which is provided by your employer, to prove to Medicare that you were eligible to defer Part B without penalties. …Learn More

February 24, 2022

Retirees have long been reluctant to spend the money they’ve accumulated in their 401(k) savings plans. But it also used to be common for retirees to have a traditional pension to cover their regular expenses.

By the time the baby boomers came along, pensions were available to a dwindling minority of workers, and it isn’t entirely clear how much they’ll tap into their 401(k)s.

A new study quantifies the impact of this transformation in the U.S. retirement system, where traditional pensions are now found almost exclusively in the public sector. The conclusion, by the Center for Retirement Research, is that retired boomer households lacking a pension seem more likely to rapidly deplete the 401(k) savings they rely on, “leaving them with more risk that they will outlive their savings.”

Consider a simple example of the difference a pension makes. In the past, typical households that started retirement with a pension and $200,000 in 401(k)s and other financial assets had about $28,000 more at age 70 than their counterparts with $200,000 in assets but no pension. After age 75, the difference between the haves and have-nots widened to about $86,000.

For this analysis, the researchers used data on the retirement finances provided in a survey of older Americans, specifically the heads of households born between 1924 and 1953, which includes some of the earliest boomers.

The researchers also found that the pace at which these retirees spent their savings hinged on the percentage of wealth they held in the form of annuities, whether a pension, Social Security, or an insurance company annuity. The retirees who got more of their income from annuities depleted their savings more slowly.

Based on prior generations’ behavior, the researchers roughly estimated that boomers – given their lower pension coverage – are in danger of using up their financial assets at around age 85. This would leave them with little room in their budgets for a long life, a large unexpected medical bill, or an inheritance for their children.

Boomers probably shouldn’t assume then that their parents’ retirement experiences are a reliable indication of how they will fare.

To read this study, authored by Robert Siliciano and Gal Wettstein, see “Can the Drawdown Patterns of Earlier Cohorts Help Predict Boomers’ Behavior?” …Learn More

February 22, 2022

The pandemic has dramatized the grim consequences of Black and Latino Americans having less access to healthcare than whites: disproportionately high death rates from COVID-19.

But there has been some progress toward racial equity in an unlikely place: Medicare Advantage plans sold by insurance companies. Enrollment in the plans has increased unabated for years, and minority enrollment more than doubled between 2013 and 2019.

During that time, Advantage plans increased from about a third of the various Medicare options purchased by Black, Latino, Asian and other minority retirees to nearly half, according to the non-profit Better Medicare Alliance.

Dr. Elena Rios, president of the National Hispanic Medical Association, and Martin Hamlette, executive director of the National Medical Association representing Black physicians, said Advantage plans provide retirees with access to preventive services like mammograms and cholesterol checks that keep them healthy.

Advantage plans are “a needed tool in the work of building a more just health care system,” they wrote in a recent Health Affairs article.

The appeal is upfront affordability. The monthly premiums are significantly lower than Medigap premiums, and many Advantage plans charge no premium. They frequently include prescription drug coverage, eliminating the need to pay for a separate Part D drug plan.

The reason Advantage plans are especially popular with minorities is that they tend to have lower incomes than whites and less room in their monthly budgets for medical care. Three out of four minority retirees in Advantage plans have incomes below 200 percent of the federal poverty level, compared with half of the whites in the plans.

Like all insurance, however, Advantage policies are a mixed bag. Medicare beneficiaries in poor health may face higher costs down the road if they experience a major medical crisis. In one study, the sickest retirees with Advantage plans had more risk of inordinately large annual out-of-pocket expenses for copayments and deductibles than retirees with Medigap plans. …Learn More

February 15, 2022

Early in this new documentary, the director’s message seems to be that retirement finances are messy, elusive, and too complicated for mere mortals to understand. He’s right on all counts.

Filmmaker Doug Orchard reminds us in “The Baby Boomer Dilemma: An Exposé on America’s Retirement Experiment” that there are no easy solutions for Social Security, which economists predict will deplete its trust fund reserves around 2034. Closing the shortfall will probably require some combination of benefit cuts and revenue increases.

Social Security is “one of the most important problems we face as a nation,” The Wharton School’s Olivia Mitchell says in the documentary.

Our other primary program – a 401(k)-style retirement savings plan – seems great when the stock market is going up, as it has until recently. Viewers are reminded of the 2008 stock market crash, which panicked older workers who realized they might not have time to make up their losses before retiring. The stock market rises over long periods of time, increasing the money in retirement accounts, but it entails risks that can be unnerving for workers and force them into making bad decisions about their investments.

Finally, the filmmaker presents a real-world example – in Florida – of the difficult decisions workers grapple with in a U.S. retirement system that has largely transitioned from defined benefit pensions, which provide regular monthly income, to 401(k) and other defined contribution plans, which accumulate a pot of savings that retirees have to figure out how to manage.

“Baby boomers are sort of the guinea pig, and we’ve said, ‘Okay you figure it out guys,’ ” says David Babbel at Wharton. …Learn More