Posts Tagged "wealth"
October 28, 2021
Boomers Will Struggle with Care in Old Age
The bulk of care for the nation’s elderly is informally provided by spouses, adult children, and other family members. But if family can’t fill the need, will retirees be able to hire an in-home caregiver or pay for a nursing home in the future?
Just one in five 65-year-olds has enough family and financial resources combined to provide the support they would require in the event they develop the most severe care needs as they age, according to new research by the Center for Retirement Research. At the other extreme, more than one in three will have insufficient resources to cover even a minimal amount of care.
The study builds on previous report showing that most retirees will eventually need some care, though only one in four is predicted to have severe needs. And one in five will not need any care. The new study used data from a national survey of older Americans to determine how many total hours of care are required for three different levels of need – minimal, moderate and severe.
For example, 924 hours of family or professional care per year are used by the typical person who gets minimal assistance, such as housekeeping or cooking for a few weeks or months. But people with severe needs receive nearly 2,300 hours of care per year – with half supplied by family members. This would add up to more than 11,000 hours over a five-year period, which is the length of time the researchers used to define severe care needs.
Next, the researchers calculated how many hours of care could be covered informally by family and how many hours of formal care the retirees could purchase with their income and any financial assets. If the total hours of care they can cover with their resources fall short of what is required for a given level of need, then retirees have insufficient resources to meet that need.
Unmarried women are in the toughest position, because they lack not only a spouse to take care of them in old age but also the financial advantages enjoyed by married couples, who tend to be wealthier than single people. Over half of unmarried women will not be able to cover even minimal care needs. In contrast, only a third of couples could not provide for any future care.
There are also big disparities by race: nearly half of older Black Americans and two-thirds of Hispanics do not have the family and financial resources to provide at least minimal care, compared with only a third of whites. …Learn More
June 22, 2021
Immigrants’ Wealth Tied to Residency Status
We celebrate the stories of hard-working immigrants who achieve the American Dream. But their success in the real world largely depends on their residency status.
Undocumented farm workers are the most precarious. Living in the shadows makes it difficult to break out of low-wage jobs and move into more lucrative work. The Dreamers who came here as children are also undocumented. Some have been granted temporary protected status by the federal government, but they’re not eligible for federal student aid, and companies are often reluctant to hire them, even though the law permits it.
UCLA researcher Josefina Flores Morales uses U.S. Census data to investigate the connection between immigration status and socioeconomic status. She confirms what most people would expect – that net worth rises as an immigrant’s residency status becomes more stable.
Consider Latinx households. Dreamers and other undocumented workers have an average $38,000 in net worth. Latinx immigrants who carry green cards allowing them to live and work permanently in the United States have much more – about $66,000 in wealth. The foreign-born people who became citizens have $79,000, and citizens of Latinx descent who were born in this country have more than $92,000.
One reason undocumented immigrants’ wealth is much lower is that they tend to be younger than the immigrants with residency status or citizenship. But the differences in Latinx wealth, depending on immigrant status, persist even after age 50.
Non-Hispanic white households follow a similar pattern – net worth rises as citizenship becomes more secure. Undocumented white immigrants have about $59,000 on average. That’s a fraction of the wealth held by the richest whites, who were born here.
The chips fall somewhat differently in the Asian and Black communities. The immigrants who’ve gained citizenship have higher wealth levels than even the Asian-Americans and Black Americans born here, both of whom have a history of being subject to discrimination and slavery. But these groups are smaller than the Latinx and white communities. …Learn More
May 20, 2021
Black Millennials’ Wealth is Sliding
It’s still too early to assess the full impact of the COVID-19 downturn on Millennials’ economic fortunes. But Black Millennials had already lost a lot of ground before the pandemic hit their communities hard.
Their wealth in 2019 was just half of what would be expected based on how much wealth their parents’ generation had at the same age.
Other Millennials are also running behind previous generations, but only slightly. And their situations have improved in recent years, while Black Millennials are sliding farther and farther behind.
The Federal Reserve Bank of St. Louis called the situation “alarming” in its new report.
The oldest Millennials are turning 41 this year. But in 2019, the typical Black family born in the 1980s had only $5,000 in their savings accounts, 401(k)s, home equity and other wealth – compared with the roughly $11,000 they would be expected to have based on the previous generation. Hispanic Millennials had $22,000, and whites had $88,000.
Black Millennials are struggling for a few different reasons, said Ana Hernández Kent, a senior researcher for the St. Louis Fed’s Institute for Economic Equity. Homeownership is a major source of wealth for most Americans, but only a third of them own homes – half the rate of their white peers.
Student debt is another big issue, because African-Americans who borrowed money for college either didn’t graduate or used the loans to attend lower-quality for-profit colleges at disproportionate rates. Their college experiences haven’t always translated to earnings that are high enough to justify the debt taken on to pay for an education.
“They’re over-leveraged,” Kent said. “Just over a third of Black Millennials with at least a two-year degree are more likely to say the costs of college are larger than the benefits.” …Learn More
February 11, 2021
Billionaires Got Much Richer in Pandemic
That’s one perspective on the pandemic. The growing billionaire class is another one.
Since last March, the nation’s 660 billionaires have added more than $1 trillion to their wealth – a 39 percent increase. Their combined net worth is now $4 trillion, which is nearly double the $2 trillion held by the 165 million Americans in the bottom half, according to the Institute for Policy Studies’ new report.
“It’s a troubling sign that too much of society’s wealth and income is flowing upwards to that small group of people,” Chuck Collins of the Institute for Policy Studies said during an interview on NPR’s Fresh Air.
The institute’s report is based on Forbes magazine’s annual estimates of the net worth of the world’s richest people.
Inequality has always been with us, but economists say it has grown as billionaires’ wealth has hit stratospheric levels.
To be sure, inequality would’ve been worse without the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The $500 billion in direct assistance to families last spring prevented a surge in poverty, and the relief bill passed in late December is sending more aid to unemployed and under-employed people who need it.
The billionaires are getting richer for a couple reasons, starting with a surprisingly strong stock market in 2020. Despite the worst public health crisis in a century and a struggling economy, the Standard & Poor’s 500 stock index shot up 18 percent.
But some billionaires were also in the right place at the right time – a pandemic. …Learn More
July 2, 2020
Recession Destabilizes Boomers’ Finances
The COVID-19 recession has changed everything.
This extreme disruption in our lives is always top of mind, which was reflected in our most widely read articles so far this year, based on the blog’s traffic.
Baby boomers, their retirement plans having been deeply affected by the Great Recession, are once again reassessing their finances. One popular article explained that the boomers who were in their early to late 50s during the previous recession lost about 3 percent of their total wealth at the time. This put their retirement planning at a distinct disadvantage compared with earlier generations in their 50s, whose wealth, rather than shrinking, grew 3 percent to 8 percent. The current recession is the second major setback in just over a decade.
Prior to the pandemic, readers liked articles about making careful retirement plans. Post-pandemic, the most popular article was about laid-off boomers desperate for income who may have to start their Social Security prematurely. The retirement benefits can be claimed as early as age 62, but doing so locks in the smallest possible monthly Social Security check – for life.
Even before Millennials were hit by the recession, they were already farther behind older generational groups when they were the same age. One article explained that the typical Millennial had just $12,000 in wealth. They are “the only generation to have fallen further behind” during the pre-pandemic recovery, the Federal Reserve said.
Here are a dozen of this blog’s most popular articles for the first half of 2020. They are grouped into three topics: COVID-19 and Your Finances, Retirement Planning, and Retirement Uncertainties.
COVID-19 and Your Finances:
Social Security Tapped More in Downturn
Lost Wealth Today vs the Great Recession
June 18, 2020
Recession Slams Millennials – Again
Several young adults in my life have been derailed by the COVID-19 recession.
A few examples. My daughter-in-law just finished her graduate degree in occupational therapy and sailed through her certification only to be met by a stalled job market. A friend’s daughter, fresh out of nursing school, has already been turned down for one job. My nephew, a late bloomer who had finally snared a job making jewelry for a major retailer, was laid off and is floundering again.
Student loans, the Great Recession, and now a pandemic – Millennials can’t seem to catch a break.
Going into this pandemic, people in their 20s and 30s already had lower wages, more student debt, and less wealth than previous generations at the same age. This recession arrives at a critical time when Millennials were trying to catch up, build careers and strive for financial goals.
For the youngest ones, this is their first recession. But the downturn is the second blow for older Millennials, many of whom had the bad luck of entering the job market in the midst of the Great Recession a decade ago.
Does this double jeopardy put them in danger of becoming “a lost generation”? Millennials’ predicament prompted the Federal Reserve Bank of St. Louis to ask this question in a new report on their finances.
The COVID-19 recession, the report said, “could upend many of their lives.”
The situation is far from hopeless, of course – they have several decades to make up for this rough patch! There’s no reason they can’t overcome the setbacks with some pluck and determination.
But this will require much more effort to pull off amid the highest unemployment rate since the Great Depression. The Federal Reserve estimates more than 5.5 million Millennials have become unemployed this year – African-Americans bore a disproportionate share of the layoffs.
Young adults were over-represented in the food service, hospitality, and leisure industries slammed by state shutdowns to control the pandemic. And as the recession plays out, Millennials, with their shorter tenures in the labor market, will continue to be vulnerable to layoffs.
Don’t forget about Generation Z either. The recession will be a tough period for its oldest members, who are just graduating from college and haven’t built up their resumés. They may be less appealing job candidates when so many experienced people are eager to work and willing to compromise on pay at a time of sky-high unemployment. …Learn More
May 7, 2020
Parents Cut Back Aid to Kids in Downturn
When the economy tips into a recession, as it is doing in reaction to the COVID-19 pandemic, the question of whether parents will give financial help to their adult children could conceivably go either way.
Parents looking for some peace of mind might throw a financial lifeline to their struggling or unemployed offspring. Or parents who’ve been providing some support might pull back.
One study of how parents in the United States and Germany handled this dilemma found that they retrenched in both countries during the Great Recession.
Parents are often an important source of support for their adult children. But between 2005 and the peak of the recession in 2009, the share of U.S. parents providing financial or in-kind support fell from 38 percent to 35 percent.
Germans are less likely to help their children in the first place, and they pulled back even more over the four-year period, from 24 percent to 10 percent of the parents, according to the 2017 study, which was funded by the U.S. Social Security Administration.
By 2011, the two countries had started to diverge: the Germans were stepping up their support again, while Americans continued to pull back. One obvious reason German parents snapped back earlier was that their economy recovered more quickly. …Learn More