Posts Tagged "retirement"

Piggy bank in vice

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

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.

ChartNumerous 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

House on a stack of money

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

Logos

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.” …

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This Retiree Is a Lucky Dog

It would be even tougher for Sher Polvinale to get by solely on her late husband’s Social Security check of $1,700 per month if he had not bought a life insurance policy that has paid off their house.

Despite her meager financial circumstances, Polvinale’s retirement is rich in rewards.

This 69-year-old former payroll administrator for a construction company said she brings in $200,000 in annual donations for her non-profit, which cares for old, unwanted dogs that need expensive medical care and attention. One can’t help thinking, while watching the National Geographic video below about the retired dog sanctuary in her home, that many elderly people would be lucky to have such a place to live out their final years.

For financial or lifestyle reasons, not everyone settles into a full-blown retirement. Some people refuse to retire altogether, while others try out retirement only to resume working, perhaps in a part-time position. Polvinale’s is one of the myriad stories of how individuals adapt and recreate their lives as they ease into old age and detach from the hard-charging work world.

“I’m kind of an odd person,” said Polvinale, explaining what motivated her to establish the non-profit in 2006. She recalls telling her husband, Joe, who would die in 2008, “I can’t agonize over whether people are going to love their dog until the end of its life. I want to keep them until they die. That’s selfish but I want to know that they’re safe and loved for the rest of their lives.” …Learn More

Skyline of DC

Retirement Researchers Convene Today

Why do older workers retire before they’d planned? How has the Affordable Care Act affected retirees in particular? And what’s known about U.S. immigrants’ wealth levels and Social Security contributions?

Researchers from around the country will present their findings on these and a range of other retirement topics during the 17th annual meeting of the Retirement Research Consortium, starting today at the National Press Club in Washington, D.C.

For the meeting agenda, click here.

The Consortium’s members are the Center for Retirement Research at Boston College (which supports this blog), the NBER Retirement Research Center, and the University of Michigan Retirement Research Center. The studies being presented are all funded by the U.S. Social Security Administration through the Consortium’s members.Learn More

Social Security poster

Misconceptions About Social Security

It is the most important source of retirement income for most workers. Yet too many older Americans lack a basic understanding of certain aspects of Social Security benefits.

In fairness, many people got some key questions right in a survey that quizzed them about the program’s rules and incentives. But a significant minority, and sometimes a majority, revealed a poor understanding of several major features of the program. As the researchers note, misunderstanding Social Security benefits could lead to poor financial decisions about retirement.

They analyzed responses by more than 2,300 people – all between ages 50 and 70 – to a nationally representative survey administered online in 2008. The survey, which took about half an hour, started with basic demographic questions before moving to various questions about components of the Social Security program.

Brief explanations of some program features appear below, followed by the percentage of survey respondents who provided incorrect answers, according to the researcher’s analysis of the results:

  • The U.S. Social Security Administration calculates pensions using a formula based on the average of a worker’s 35 highest years of earnings. This information is important, because each additional year of work could substitute current earnings for an early year of low earnings – or even zero earnings prior to the worker’s entry into the labor force.

68 percent were incorrect in their responses to a multiple choice question that included the correct calculation as one of four options.

  • A married person who has never worked is eligible for a pension equal to half of her spouse’s “full retirement age” benefit if the non-working spouse claims at her own full retirement age, and a reduced benefit if she claims earlier. …

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