JustCare

Tag: Retirement

  • $150,000: Your health care costs in retirement

    $150,000: Your health care costs in retirement

    With COVID-19, people are retiring a bit earlier than in the past several years and more than one in four Americans are saving less or not at all for retirement. Paul Brandus reports for MarketWatch that Fidelity Investments projects that individuals will spend about $150,000 for health care costs in retirement. These costs keep going up each year, so it’s wise to manage your spending.

    What’s a smart way to prepare yourself? If you do not already know how much you spend each year, you should start keeping track. Try to make paying off any credit card debts a priority. If you can, delay taking Social Security until you’re 70 to maximize your benefits.

    A married couple is expected to spend about $300,000 in retirement. Health care costs for men are slightly lower than costs for women. Men are expected to spend about $143,000 and women closer to $157,000. Fidelity does not explain why. But, it’s likely because women tend to live longer and are also more likely to seek out health care services.

    People’s health care costs have risen 30 percent since 2011. They are up 1.7 percent in the last year. And, that’s more than people’s increase in Social Security benefits this year.

    Fidelity’s projections are based on people enrolling in traditional Medicare and also having Medicare Part D prescription drug coverage.

    Fidelity breaks down spending into three buckets. It estimates that about 42 percent of spending is for deductibles and coinsurance for Medicare Parts A and B. Another 39 percent goes to Medicare Part B and D premiums.  And, 19 percent covers the cost of prescription drugs.

    It’s not clear how Fidelity factors in the cost of services that Medicare does not cover. Most people pay for some dental care, vision care and hearing care. And most people also need long-term care services and supports.

    Long-term care alone is extremely expensive if you do not have family and friends providing it free of charge. It can cost anywhere from $1,603 a month for day services to more than $10,000 a month for a private room in an inpatient facility.

    Here’s more from Just Care:

  • Coronavirus: Without Congressional action, many more older adults will live in poverty

    Coronavirus: Without Congressional action, many more older adults will live in poverty

    A new report by The New School’s Retirement Equity Lab finds that more than half of older workers may be forced to retire involuntarily as a result of the novel coronavirus. In June, the unemployment rate for workers over 55 was 9.7 percent. Unless Congress steps in, the number of older adults living in poverty is projected to increase by millions.

    Nearly four million older workers are likely to lose their jobs because of the pandemic and not return to work. Since March, nearly 3 million older workers have lost their jobs and left the workforce. Another 1.1 million older workers will be forced to leave their jobs in the coming months, according to projections, and will leave the workforce.

    As compared with the 2007 Great Recession, 50 percent more older workers between 55 and 70 have already lost their jobs and permanently left the workforce. Back then 1.9 million older workers lost their jobs as compared to 2.9 million today.

    Between March and June, five million older workers have lost their jobs. Only about half of them are  looking for a job. The rest are not.

    Older workers who find new work are not likely to get paid as much as they had been paid. Their new income is estimated to be 23-41% less than their old income.  That’s on top of the fact that it takes older adults twice as long as younger workers to find new jobs.

    These job losses for older workers, if not addressed, will mean that many more older adults will live in poverty. It will also make the recession worse than it already is. Older workers will not spend as much money as they had been spending.

    And, these job losses take a disproportionate toll on people of color and women, deepening racial and gender disparities. Older workers who are white are less affected by job loss than older workers who are black and hispanic. White older men are least likely to experience job loss.

    More than one in ten older women of color (11.8 percent) are losing their jobs permanently. White women fare somewhat better:  7.5 percent of white women are losing their jobs permanently. A little more than five percent of older white men (5.4 percent) are losing their jobs permanently.

    Older workers of color are more likely to have smaller retirement savings and to live in poverty in retirement. They are retiring earlier. They will need to spend their retirement savings earlier. They will need to take Social Security earlier, meaning lower benefits.

    To address this crisis, Congress needs to continue unemployment benefits for older adults. Older adults also should not be forced to look for work during this pandemic in order to receive unemployment benefits. Forcing them to look for work to obtain benefits puts them at grave risk. And, Congress should increase the amount of unemployment benefits.

    In addition, the authors recommend that Congress lower the Medicare eligibility age to 50. Lowering Medicare’s eligibility age would make it easier and less costly for older workers to get health care. It would also reduce the financial burden for health care imposed on employers who hire older workers.

    Congress should increase Social Security benefits by $200 a month. The minimum benefit should also be increased.

    Finally, Congress should establish a Federal Older Workers Bureau to improve working conditions for older adults and increase profitable work opportunities for them.

    Here’s more from Just Care:

  • Coronavirus: Older workers might be forced to retire early

    Coronavirus: Older workers might be forced to retire early

    Older adults working in jobs that put them in close contact with others might be forced to retire early as a result of the coronavirus pandemic. Mark Miller reports for The New York Times on the pressures older workers are feeling and the financial risks they face if they retire early. Luckily, they have Social Security, but Congress needs to increase benefits to ensure the economic well-being of retirees.

    Some jobs put older workers in situations where the risks to their health from COVID-19 are high. And, there is no way for them to protect themselves. Experts say that working conditions will affect whether older adults continue working or retire early.

    But, workers who retire early are likely to receive lower Social Security benefits. They will not pay in as long as they otherwise would or realize benefits from higher earnings, both of which increase the likelihood of higher benefits. They also might have to take Social Security early, which will mean they only get 75 percent of their full annual benefit.

    Of course, if you work longer, you also might be able to save more money. And, you might be able to take advantage of health insurance that your employer helps pay for. Notwithstanding, there has been a huge spike in early retirement. And, that will probably worsen a retirement crisis.

    Many older workers are giving up significant income by retiring early. According to the Kaiser Family Foundation, older workers earned on average $49,100 in 2018. Yet, they could be putting themselves at grave risk of getting COVID-19 if they return to work. They are in a no-win situation.

    The good news for some older workers is that they have been able to work remotely. According to the Center for Retirement Research, nearly half of them–47 percent–worked in jobs that could be done from home.

    Still, the novel coronavirus pandemic is likely to impoverish many 50 to 60 year olds today, once they retire. Researchers at the New School find that 54 percent of these workers will be impoverished in retirement, up from 28 percent, unless Congress acts to expand Social Security.

    Older workers whose employers will let them work from home or return to work in safe environments or in phases are best off. But, employers have no obligation to do so and might fear liability if their older workers contract COVID-19. Congressional Republicans are on their side. Senate Republicans and their employer allies are working to enact legislation that would protect employers from liability if their employees contract COVID-19.

    Here’s more from Just Care:

  • Coronavirus and Congress: How to help older workers

    Coronavirus and Congress: How to help older workers

    The novel coronavirus has hit Americans hard. And, it has hit older workers especially hard. Not only are older workers at greater risk of serious harm from COVID-19, they are also at greater risk of losing work and not being able to find new work, writes Paul Brandus in an op-ed for Market Watch. Moreover, work that requires a commute can endanger the health and wellbeing of older workers.

    The Labor Department reports that, for people over 55, the unemployment rate has fallen to 11.8 percent in May, down from 13.6 percent in April. Those numbers are actually lower than the unemployment rate for younger Americans.

    But, there’s more to the story. Older adults are not likely to find new jobs easily. When they do, they will likely earn less than they had. That’s the way things have gone in the past.

    Add to that the fact that older adults might justifiably fear going to work if they were to find a new job. Commuting could increase their risk of getting COVID-19. They are likely to wait until there’s a vaccine or a treatment before commuting.

    Unfortunately, working from home is less of an option for older workers. They tend to have jobs that involve commutes. So, when they can’t work from home, workplace safety becomes a critical issue. If it is unsafe to be at work, older workers should stay home.

    Older adults need better unemployment benefits at least until we are out of this pandemic. That said, unemployment benefits are always short-term. Those benefits might not last until older workers can take a new job. As a result, many older workers might find themselves falling into poverty.

    Teresa Ghilarducci, a labor economist and director of the Schwartz Center for Economic Policy Analysis at the New School in New York, has three solutions for helping older adults:

    1. Social Security benefits should increase right away by an extra $200 in benefits each month. This would bring the average monthly benefit to $1,703. It would help reduce stress levels for older workers.
    2. Congress should enact a universal pension plan for workers. It would supplement Social Security benefits for the nearly half of older Americans who rely exclusively on Social Security for their income in retirement.
    3. Congress should lower the Medicare eligibility age to 50, as some members of Congress have proposed. Older workers who lost their jobs would at least still have health insurance.

    In fact, Congress should improve Medicare benefits, fill gaps in coverage and expand it to cover everyone, to best rein in costs and help older adults. That’s what Medicare for All would do. And, Medicare for All reduces overall national health care spending.

    We could pay for Ghilarducci’s solutions in a number of ways. One way would be to increase Social Security contributions. People with higher incomes would continue contributing 6.2 percent of their income beyond the $137,700 ceiling. Medicare payroll contributions, which are not capped, also could be raised from 1.45 percent.

    Here’s more from Just Care:

  • Coronavirus: Likely to worsen a retirement crisis

    Coronavirus: Likely to worsen a retirement crisis

    More than 30 million Americans have lost their jobs as a result of the novel coronavirus. Older adults are being hit especially hard in the job market, writes Alicia Munnell for MarketWatch. Some believe that older adults will be least likely to get jobs when the economy reopens. The pandemic is likely to deepen a projected retirement crisis.

    Today, unemployment is almost at 15 percent. Usually, unemployment hurts the youngest working Americans most, 25 to 54 year olds next, and older adults least. This time around, the youngest Americans, who tend to work in the hospitality and other service industries have again been hit hardest. But, after them, Americans 55 and older have been most affected.

    The unemployment rate for Americans 55 and older rose to 13.6 percent in April. It was at 2.6 percent less than five months ago, in January. Add to high unemployment a decline in retirement savings and many more older adults are at serious risk in retirement.

    It used to be that older adults held onto their jobs longer than younger adults, in part because they had a longer track record. But, they also tend to earn higher wages. And, COVID-19 puts older adults at higher risk of infection. Age discrimination could also be contributing to job loss for older workers.

    Older workers are typically least likely to be hired when the economy is back in swing. After the great recession 12 years ago, older workers spent twice as long finding work as younger workers. On average, they waited nine months to find work. More than four in ten (41 percent) were still looking for work 18 months after the Great Recession. Those who were rehired took steep pay cuts. Employers believe they can get equally or more skilled younger workers at less cost.

    To be sure, unemployment or employment at lower wages before you reach your full Social Security retirement age generally affects the amount you will receive in Social Security benefits.

    Here’s more from Just Care:

  • Retirement security is not improving

    Retirement security is not improving

    Except for the wealthiest Americans, retirement security is not improving. Mark Miller reports for the New York Times on the plight of most older adults since the great recession. Although many parts of the economy have recovered, middle and low-income Americans have largely not seen meaningful growth in their retirement income.

    In fact, evidence from the Federal Reserve shows that, at best, middle and lower-income families have managed to recover their retirement savings. And, many middle and lower-income families have not managed to recover their retirement savings.

    In addition, Social Security benefits are replacing a lower proportion of people’s retirement income, even though benefits have adjusted up a bit for inflation. The longer wait to reach Social Security’s full retirement age—once 65 and now increasing to 67 for people born in 1960 or later—also operates as a benefit cut. And, Medicare costs are going up.

    It is getting harder for baby boomers and GenXers to have adequate resources in retirement. The wealthiest households are doing a lot better today and should be in good shape when they retire. But, middle-income households have as good a chance of success in retirement as of failure. Meanwhile, people with low incomes have a much lower chance of having the resources they will need in retirement.

    People who were out of work during the recession also often were without health insurance. Those people who were not yet eligible for Medicare could sign up for coverage through the Affordable Care Act, but at a significant cost. Today, 9.4 percent of people between 50 and 65 are uninsured. That’s largely because 14 states opted not to expand Medicaid.

    Medicare spending has risen considerably, in large part as a result of private Medicare Advantage plans, which have been overbilling the federal government and taxpayers for their services. The question is whether Republicans in Congress will succeed at shifting more costs onto older and disabled Americans with Medicare to reduce spending or whether Democrats will succeed at enacting laws that end Medicare Advantage abuses that drive up spending as well as rein in health care prices. Speaker Nancy Pelosi’s prescription drug bill, H.R.3, would save Medicare tens of billions of dollars a year in lower prescription drug costs alone.

    The official unemployment rate for people over 55 is at 2.6 percent. But, if you include people who were unsuccessful at finding jobs and have stopped looking for work, the unemployment rate goes up to 5.5 percent. Moreover, wages are not up in the last decade for older people who are working. They are at $872 a week, as compared with $861 ten years ago.

    Nearly 80 percent of older adults have equity in their homes that they may be able to draw on if they need money. But, since the recession, fewer older adults own their homes. And, there has been a significant drop in the proportion of people under 65 who now own their homes. They are at serious risk of not having adequate resources to pay for health care and housing costs as they grow older. Today, almost five million older people who own their homes are paying at least half their income on housing costs, forcing them to spend less on food and health care.

    Here’s more from Just Care:

  • How to be smart about money you inherit

    How to be smart about money you inherit

    Susan Garland advises people on how to be smart about money they inherit, in The New York Times. No matter how much you inherit, she strongly recommends not doing anything with it for some period of time. Here’s what she says you need to think about:

    Between paying for housing, health care and education, most Americans are struggling to make ends meet and are not able to save much if any money. If you’re lucky enough to inherit some money, you likely have many ways you could spend it. But, you might not have a good sense of how to prioritize your needs. So, it generally is not wise to go out right away and spend some or all of your inheritance.

    Unless you have saved all you need for retirement, it’s probably smart to think about saving and investing most if not all of your inheritance. Today, people who inherit money appear to save only about half of it. And, one in five baby boomers who inherited $100,000 or more spend all of it.

    Find out whether you might need to pay taxes on the inheritance. People who inherit money often make the big mistake of not realizing that they may have taxes to pay on their inheritance. In fact, if you’re not careful and you inherit a 401(k) plan or Roth IRA, you could end up with a big tax bill.

    One financial advisor recommends that you should take many months, at a minimum, to consider what you should do with an inheritance. During that time, talk to people you trust about your options. If possible, you should hold off making loans to family and friends. Explain to them that you want to take a meaningful period of time to think through your options.

    What’s the typical amount people inherit? Fifty percent of inheritances are under $50,000. Thirty percent or so more inheritances are between $50,000 and $250,000. Even if you inherit a lot, you could easily end up frittering the money away if you’re not careful, as many people do.

    Of course, everyone needs to decide for themselves how to spend the money they inherit. Still, you might want to consider putting aside the equivalent of six months of expenses in case of emergency.

    If you’re nearing retirement or recently retired, you might also use the money to pay for your living expenses so that you can delay taking Social Security benefits. Every year you delay taking Social Security benefits up to age 70, you increase your benefits by about eight percent.

    You might also use your inheritance to pay off debt with high-interest rates. Instead of continuing to pay the high interest, you might put that money aside as savings. Than again, if you are paying low interest on your debt, you might not want to pay off your debt.

    If you’ve inherited someone’s IRA account, you need to follow the legal rules in order to avoid paying huge taxes on your inheritance. If you follow the rules, you can keep the money and allow it to grow tax free. You pay taxes only on the annual distribution you are required to take.

    However, keep in mind that if you move the IRA money you inherit into another bank account–even if it’s your own IRA account–all of it becomes taxable right away. You want to establish a special bank account for your inherited IRA and have the bank transfer the funds you are inheriting directly into that account.

    If you inherit a Roth IRA, you must take an annual distribution. Your yearly Roth IRA distribution is tax free. But, if you don’t take the distribution, you must pay a 50 percent penalty to the IRS on the amount you should have taken as a distribution.

    Don’t let your love and respect for the person who gifted you the money get in the way of investing it in ways that best suit your needs. You should not assume that the money you inherited is invested in the best possible investment vehicle for you. Explore different investment vehicles for your inheritance. Consider putting the money in a few different stocks or bonds to protect yourself. If the money’s in one company and it goes belly up, you could lose it all.

    Here’s more from Just Care:

  • Medicare for All would give Americans more disposable income

    Medicare for All would give Americans more disposable income

    Most Americans do not have enough savings to carry them through retirement. In large part, that’s because the rising costs of employer health coverage has kept wages down, preventing people from saving for retirement. It’s also because Medicare only covers about half of people’s health care costs. Medicare for All would give Americans more disposable income.

    As the debate over the future of health care in the US rages on, older Americans have a choice to make. They need to choose between the Medicare they have today, with its premiums, deductibles and coinsurance, as well as its lack of an out-of-pocket cap, and Medicare for All, which would reduce their out-of-pocket health care costs significantly. Working Americans also have a choice to make. They need to choose between employer health coverage with low wages and Medicare for All with more disposable income.

    The latest data from Axios reveals that, after you adjust for inflation, Americans have not seen much of an increase in their wages over the last two decades. Many people don’t realize it, but their wages are a lot lower than they otherwise would be if their employers were not providing them with health insurance. Employers have been unable to keep the cost of health insurance down and have instead taken those costs out of their employees’ wages.

    Put differently, 20 years ago, in 1999, households spent about 14 percent of their income on health insurance. Thirteen years later, in 2012, households spent more than double that, 31 percent of their income, on health insurance. Since then, premiums have stayed about the same, but deductibles and coinsurance have increased significantly.

    Median inflation-adjusted household income in 2017 was $61,400, up just $1,400 from $60,000 in 1999. The cost of health insurance was $18,800 in 2017, more than double what it was in 1999 (up 121 percent).

    Other data, just released by Peterson-Kaiser Health System Tracker, shows that households with large employer health plans have seen their health care spending rise twice as fast as workers’ wages in the last ten years. In 2018, putting aside the employer contribution towards health insurance (about two-thirds of the cost), the typical worker spent $7,726, $4,706 on premiums and $3,020 on deductibles and copays. That’s a 67 percent increase from 2008 and an 18 percent increase from 2013.

    We need to control health insurance costs. That means overhauling our commercial health insurance system, which drives up costs. The simplest and most cost-effective way to do so is to have one public health insurance program that covers everyone.

    Medicare for All would end employer-provided health insurance coverage and give everyone guaranteed affordable health care coverage. In turn, people would see their wages increase. They would pay for health insurance through their taxes. But, the amount they would pay in taxes would be lower than the amount they currently lose in wages.

    With Medicare for All, working people would have more money to save for retirement and to spend on housing and education. Older adults would have lower health care costs. Everyone would have far better health care benefits–no premiums, coinsurance or deductibles. And, all Americans would be able to see the doctors they want to see anywhere in the United States.

    Here’s more from Just Care:

  • Without pensions, more people rely on Social Security

    Without pensions, more people rely on Social Security

    Axios reports that, increasingly, companies are doing away with pensions. As a result, younger adults are unlikely to have pensions, putting their retirement security at risk. Most probably, they will rely heavily on Social Security.

    Millennials and members of Generation Z are at greatest risk of not having adequate retirement savings. Pensions give workers guaranteed income in retirement. But, most companies today do not want to assume the cost of pensions, which provide defined benefits–guaranteed annual income. Pensions put the companies at risk if the stock market drops or retirees live long lives. Instead, companies may offer defined contribution plans, which do not guarantee a fixed amount of income each year.

    To avoid financial risk, companies are selling people’s pensions to insurance companies, putting workers’ savings at risk instead. If the insurance company fails or a person’s benefit was not calculated correctly, the person loses.

    Only 81 of the Fortune 500 companies offered a pension plan in 2017. Twenty years ago, 288 offered a pension plan. And many pension funds today do not have the funding they may need to pay out what they are supposed to pay out.

    Retirement savings accounts, including 401(k) plans come with no guarantees and often with fees. They provide less security than pensions, as they fluctuate with the stock market. If the stock market drops, 401(k) plans are likely not to generate the income expected.

    Some people buy annuities.  But they have costs and risks as well. The most cost-effective way to promote retirement security is by strengthening Social Security.

    Here’s more from Just Care:

  • Many more people over 65 working in order to manage financially

    Many more people over 65 working in order to manage financially

    Suzanne Woolley reports for Bloomberg News that 20 percent of people who reach 65 are working rather than retiring in order to manage financially. That’s double the proportion of Americans who worked past 65 just 35 years ago.

    Between the high cost of health care, small savings, and the demise of guaranteed pensions in retirement, many Americans need to work past 65. The last time 20 percent of Americans over 65 were still working was in the late 1960’s.

    To be clear, people working past age 65 tend to be college-educated. Their inflation-adjusted average income is $78,000 today, up from $48,000 in 1985. Their income has increased 63 percent, compared with workers under 65, whose average annual income has increased 38 percent to $48,000.

    The people who most need more income in retirement are generally less educated and unable to find jobs.

    Accepted wisdom is that people need about 80 percent of their pre-retirement income to make do. Social Security benefits are estimated to replace only about 40 percent of that pre-retirement income. And, the typical worker on the bottom half of the income scale, with income below $40,000, has no retirement savings, excluding the value of any property they have.

    People earning between $40,000 and $115,000 a year pre-retirement typically have about $60,000 in savings. The top ten percent of income earners with incomes above $115,000 typically have savings of $200,000, not enough. By one estimate, a typical college-educated professional needs to save between $1 and $2 million today “to retire fairly comfortably.”

    Here’s more from Just Care: