JustCare

Tag: Assets

  • Is it fair to say we have a retirement crisis?

    Is it fair to say we have a retirement crisis?

    It is easy to find policymakers and thought leaders who deny we have a retirement crisis. But there’s no denying that the overwhelming majority of people face a sharp drop in income at retirement. The Economic Policy Institute, a Washington think tank, has a new report that highlights how middle-income families have lost significant assets since the Great Recession.

    The EPI analysis shows that today fewer people have defined benefit pensions to rely on.  And Social Security payments are not replacing as much of people’s working income as it once did.  Moreover, 401k-style defined contribution plans and IRAs, are not growing nor anywhere near making up for these losses.  They have “failed most American workers.”

    Rather, EPI reveals that the households near retirement during the Great Recession took a significant financial hit. On average, they lost nearly a quarter of their savings. But, these losses hurt the wealthiest Americans far less than everyone else, contributing to greater retirement inequality. Median families (those in the 50th percentile) lost more than half of their retirement savings between 2007 and 2010. Families in the 90th percentile only lost 5 percent.

    Other notable findings from EPI:

    • Total wealth has shrunk for 80 percent of people over the last several decades. So, they do not have as much available to spend for retirement.
    • Most people at the bottom half of the income distribution have no retirement savings; since 2000, fewer working age families have retirement savings except among top income earners.
    • Single women are particularly vulnerable because they tend to earn less, have less savings and live longer than men, often outliving their savings.
    • Half of near-retirees have no retirement savings at all and those with savings have median savings of $17,000. Before the recession, they had more than twice that amount, about $36,000.
    • Retirees are also seeing cuts to Social Security benefits, which were passed in 1983 but are still taking effect in the form of a slowly rising retirement age, from 65-67.

    And, because older adults and people with disabilities typically can count on Medicare to cover only about half of their health care costs, their expenses can be very high. Medicare does not cover nursing home care or other long-term services and supports.  

    What’s the solution? Here are three ways government can help promote retirement security.  Expanding Social Security benefits would help a lot, particularly for people with low incomes and in poor health.Teresa Ghilarducci explains the value of Guaranteed Retirement Accounts here. People who are in good health and who can find work are best off if they continue working and put off collecting Social Security until age 70. Their benefits will increase substantially.  

  • MyRA, a new retirement savings option from the U.S. Treasury

    MyRA, a new retirement savings option from the U.S. Treasury

    Most older adults have limited savings. But, it’s estimated that seven out of ten older adults will need long-term services and supports at some point in their lives, typically for three years. If family and friends are unable to provide care services, the costs can be high. Beginning this month, the U.S. Treasury offers people myRA, a new way to save for retirement.

    What is myRA? MyRA is a retirement savings account that allows you to save up to $15,000. Your money is invested in a U.S. Treasury retirement savings bond.

    What does it cost to set up myRA? There are no enrollment, money management or other costs or fees and no risk of losing money.

    Can I lose money if I invest in myRA? You cannot lose money in myRA. Your savings are guaranteed by the U.S. Treasury and will grow over time. You will earn the same interest as federal employees who invest in the Government Securities Fund, which was 2.14 percent in 2014 and 3.19 percent over the ten years ending December 2014.To understand how your savings will grow, visit the U.S. Treasury MyRA site, here.

    Who is eligible for myRA? MyRA is designed for people who do not have access to a retirement savings plan through their jobs.

    How much money can you put into your myRA? MyRA gives you flexibility to save as little as you’d like and up to $5500 a year if you’re under 50 and $6500 a year if you’re 50 and over. You can save up to $15,000 in your myRA.  After your account reaches $15,000 or after 30 years, your savings will be transferred to a private-sector managed Roth IRA.

    How do you put money into your myRA? You can have your employer automatically deduct money from your paycheck for your myRA. Or, you can write a check whenever you’d like to your myRA account. You can also ask that a federal tax refund go to your myRA.

    What happens if you leave your job? If you leave your job, your myRA leaves with you.

  • 2014 data on income and savings of people with Medicare

    2014 data on income and savings of people with Medicare

    A new Kaiser Family Foundation report reveals that income and assets for people with Medicare have slightly improved in the last year, not adjusting for inflation, though they are still far lower than most people realize. Kaiser also projects that they will continue to improve in the next 16 years.  That said, the income gap is projected to widen, and people with Medicare with incomes in the top 5 percent will see greater improvement than people in the bottom quartile.

    In 2014, half of all people with Medicare have annual incomes under $24,150 (up from $23,795 in 2013, adjusted for inflation to 2014 dollars) and only one in 20 of them had incomes above $93,000.  One in four have incomes under $14,350.

    Race and ethnicity, age and gender continue to matter when it comes to income.  White people with Medicare have substantially higher median incomes than Blacks and Hispanics.  Median income of White people with Medicare is more than double that of Hispanics, $27,450 as compared to $12,800, and about two-thirds higher than Blacks with Medicare, $16,150.

    People between the ages of 65 and 74 have far higher median incomes, $29,700 than other age cohorts of people with Medicare. People with disabilities under 65 have the lowest median income at $17,050.  People 85 and older have median incomes that are also quite low, at $18,850.

    Marital status also matters significantly when it comes to income.  Median income for individuals who are married is at $28,300, almost double that of single individuals at $14,450.

    For more information from the Kaiser Family Foundation on wealth of people with Medicare, click here.  For an interactive tool breaking down income and assets based on education levels and more, click here.

  • Income and assets of people with Medicare: Kaiser Foundation shows you the money

    Income and assets of people with Medicare: Kaiser Foundation shows you the money

    In case you think that older people are living large, the Kaiser Family Foundation has an interactive tool that will quickly change your mind. What’s particularly interesting is the demographic data.

    Overall, in 2013, half of all people with Medicare had incomes below $23,500 and four out of five had annual incomes of less than $48,000. Only ten percent had annual incomes above $70,000. One in 20 had annual incomes above $94,000.

    Not surprisingly, average annual income rises with education. In 2013, college graduates with Medicare had an average annual income of $41,000 as compared with high school graduates, whose average annual income was only a little more than half that, $21,400.

    Average annual income for men with Medicare, $25,850, was almost 20 percent higher than for women, $21,800

    Average annual income for White people with Medicare, $26,400 was almost double that of Hispanic people, $13,300 and about 60 percent more than Black people, $16,350. (Here are four things to know if your income is low and you have Medicare. And here are five programs to lower your costs if you have Medicare.)

    Savings were also far less than many would presume.  In 2013, half of all people with Medicare had savings below $62,000, and four out of five of them had savings below $317,000. Only ten percent had savings above $620,000 and one in 20 had savings above $1,113,000.

    Education is a big driver of savings. Average savings for college graduates was $216,200, more than four times savings of people with only high school degrees, $49,200.

    Average savings for men, $69,600, was almost 30 percent higher than for women, $54,700.

    Average savings for White people with Medicare, $89,500 was almost ten times more than Hispanic people, $9,300 and almost nine times more than Black people, $10,300. (Not surprisingly, the vast majority of Americans want to expand Medicare and Social Security or keep them at current levels.) Fortunately, Medicaid covers significant health care costs for people with Medicare with low incomes.

    See detailed income and asset information for yourself on the Kaiser web site.