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34 minutes | Apr 30, 2021
Straight talk from a Vanguard CEO
Jack Brennan, chairman emeritus at VanguardMy guest on the podcast this week is a prominent exponent of a simple, straightforward approach to investing that emphasizes balance, diversification, discipline, low-costs, and a long-term orientation. No surprise there - Jack Brennan is a former chief executive and board chair at Vanguard, which has come to dominate the world of consumer investing with its emphasis on those principals. Brennan remains involved at the company as chairman emeritus, and he is the author of a terrific new book, More Straight Talk on Investing. Jack’s book offers excellent advice for investors of all ages, but I quizzed him about parts of the book most relevant to people nearing retirement or already retired. We discussed asset allocation, how to stay on track when things get rough, and why he believes strongly that retirees should have professional financial advice.Listen to the podcast by clicking the player icon at the top of the newsletter. The podcast also can be found on Apple Podcasts, Spotify and Stitcher.Guest post: Putting your investments in their placeBob French, RetirementResearcher.comThis week I'm featuring a guest post on asset location from Bob French, CFA, the director of investment analysis at Retirement Researcher and McLean Asset Management. Bob will be holding a webinar covering the portfolio management process on Tuesday May 4th, and Wednesday May 5th. He'll be showing you how to keep your portfolio doing what you want it to do. You can sign up here.Most people are leaving money on the table. For all the different ways that we try to optimize our investments, most people ignore their asset location – because they simply don’t know that it’s something they should be thinking about. But asset location is essentially free money just for being organized. Vanguard’s 2019 Advisor Alpha study found that asset location can add up to three quarters of a percent per year – again, just for being organized.Asset location is about choosing which account you put your investments in to make the most out of the tax treatment of your different accounts. There are three different types of accounts: taxable, tax deferred, and tax exempt. We can use the differences in how they’re taxed to maximize our after tax returns.Taxable accounts are things like your brokerage account, where you owe taxes on everything that happens in that year. Tax deferred accounts are your traditional IRAs and 401(k)s. These accounts don’t have the ongoing tax drag of a taxable account, but when you pull money out, you owe ordinary income taxes on that money. Tax exempt accounts, like your Roth IRA and 401(k) are, well, tax exempt. You don’t pay any ongoing taxes, and you don’t owe anything when you take your money out.Your asset location should not drive your asset allocation. Your asset allocation is a strategic decision about how much risk (and return) you want to take. Your asset location is simply a tactical decision about how to implement your portfolio.It’s also important to recognize that the benefits of asset location are dependent on the structure of your portfolio. If all of your money is in your traditional 401(k), there’s not much to do here – your money is where it is. In practice, there are two general guidelines for your asset location. The first is that you want your tax inefficient investments – the ones that kick off a lot of distributions – in your tax deferred or tax exempt accounts. Those distributions would be a serious tax drag in your taxable account. The second is that you want your highest growth assets in your tax exempt account. You can think of the IRS as a silent partner in your taxable and tax deferred accounts, so they get some of the gains in those accounts. By keeping your highest return assets in your tax exempt accounts, you get to keep all of those gains.The biggest upshot of implementing your asset location strategy is that you should try and get your bonds (especially TIPS – they have some nasty tax issues) into your tax deferred accounts, and then work from there.If you want to find out more about asset location, or the other things you should be considering as you maintain your portfolio, sign up from my upcoming webinar, Managing Your Portfolio: the 6 Step Process to Maintaining the Portfolio You Designed on Tuesday May 4th, and Wednesday May 5th. You can register using this link. Webinar: Tips for succeeding in the new world of work“Businesses are planning for a future of less business travel, more automation and more people working from home," says a recent article in theWashington Post. What do changes like these mean for people over 50? According to Kerry Hannon and Marci Alboher, two of the nation's foremost authorities on opportunities for older workers, there are steps we can take to make this market work for us. In her upcoming book, Kerry says that people over 50 can "take control of their professional and economic future with hope, confidence and optimism."In a May 20th fireside chat sponsored by the Encore Boston Network, Kerry and Marci will offer trends, tips and tactics about freelance and remote jobs, job search advice, self-employment and entrepreneurship and finding work you love. They will also discuss how to find your place in the increasingly diverse and multi-generational workforce and the role that mentoring plays in this next stage of encore work. There’s a small fee to attend ($20 for non-members).Subscribe to the newsletterYou’re subscribed to occasional, short posts sent to my free list. Sign up for the paid edition to receive my weekly in-depth report, plus online access to my series of retirement guides. Get on the email list at retirementrevised.substack.com
27 minutes | Apr 23, 2021
An innovative alternative to nursing homes that works
Peter Fitzgerald, National Pace Assn.This week on the podcast we continue our exploration of ways to help people age at home and stay out of nursing homes. Covid-19 had taken the lives of 182,000 people in nursing homes, assisted living and other long-term care facilities . . . one-third of the national total. The troubles have intensified a spotlight on long-running questions about how communities can do a better job supporting people who need care but want to live outside an institutional setting. That question generates a big list of challenges for communities, health care systems and policymakers.I wrote about this topic in a story for the New York Times several weeks ago, and I’ve been following it up with a series of conversations on the podcast.My guest this week is Peter Fitzgerald. Peter is executive vice president for policy and strategy at the National PACE Association. PACE stands for Programs of All-Inclusive Care for the Elderly. This is a unique, innovative program that recipes its funding from both Medicaid and Medicare. PACE provides medical and social services that allow frail seniors to live independently. It serves about 55,000 people in 30 states around the country. Most are low income and eligible for both Medicare and Medicaid. PACE is available only in states that decide to offer it. But the program is poised for a possible dramatic expansion. The American Rescue Act, passed by Congress in March, raises the federal share of states’ spending on home and community-based services by $12.7 billion over the coming year, and PACE is among the eligible programs. More recently, Senator Casey (D-PA) introduced legislation that aims specifically to expand PACE.And the Biden administration’s proposed infrastructure plan includes a $400 billion expansion in Medicaid funding for home-based care. Some of that money could find its way to PACE programs. That would allow it to expand . . . not only in terms of the number of seniors served, but also beyond the primarily low-income population PACE serves now.I asked Peter to explain how PACE works, and why it often is a superior option to institutional care. We also talked about the prospects for expansion. If you’re interested in finding a PACE program where you live, check out the association’s online guide to programs around the country.Listen to the podcast by clicking the player icon at the top of the newsletter. The podcast also can be found on Apple Podcasts, Spotify and Stitcher.Medicare Out-of-Pocket Costs: How Do Enrollees Get Protection?Medicare smooths out much of the variation in the healthcare expenses that seniors incur -- but out-of-pocket costs can be high if you’re not careful.Most Medicare enrollees blunt out-of-pocket risk one way or another. According to new research by the Kaiser Family Foundation, 39% were enrolled in Medicare Advantage plans in 2018; these managed-care commercial alternatives to Original Medicare have built-in caps on out-of-pocket outlays. The rest are enrolled in traditional Medicare, which does not have a built-in out-of-pocket cap. Most of these enrollees get out-of-pocket protection from Medigap, retiree coverage or Medicaid. But 10% of Medicare enrollees have no protection from this risk. They’re in traditional Medicare but have no supplemental coverage.That is a worrisome finding. This year, an Original Medicare beneficiary without supplemental coverage is subject to a deductible of $1,484 for an inpatient hospitalization plus daily copayments for extended hospital and skilled nursing facility stays. There’s also a separate deductible of $203 plus 20% coinsurance for most physician and other outpatient services, including for drugs administered by physicians for cancer and other serious medical conditions.Advantage plans, meanwhile, are required by law to cap annual out-of-pocket expenses: In 2020, the average cap was $4,925 for in-network services, according to Kaiser, while the cap for out-of-network services is much higher, at $8,828. In Original Medicare, the average out of pocket spending among traditional Medicare beneficiaries in 2018 was $6,150, according to unpublished Kaiser data. That figure includes premiums and out-of-pocket outlays for uncovered services (such as dental, vision, and hearing care). Here’s a summary I put together summarizing Medicare’s out-of-pocket structure. As you can see, it’s quite a patchwork:I explore the implications of this patchwork of out-of-pocket protections in my latest Morningstar column.Subscribe to the newsletterYou’re subscribed to occasional, short posts sent to my free list. Sign up for the paid edition to receive my weekly in-depth report, plus online access to my series of retirement guides. Get on the email list at retirementrevised.substack.com
30 minutes | Apr 16, 2021
How would higher inflation impact retirees?
Christine Benz, MorningstarThis week on the podcast we take a look at the prospect of higher inflation, and how retirees would be impacted.In March, the consumer price index recorded its largest 12-month increase since the summer of 2018, rising at a 2.6 percent annual pace. Some analysts think we might be entering a period of sustained higher inflation after many years when consumer prices stayed very steady. It’s not at all clear yet that this actually will happen. But if it does, that would mark a real change for retirees, who live on fixed incomes. Higher inflation would threaten to erode their standard of living.My guest is Christine Benz, director of personal finance at Morningstar. Christine has posted two excellent articles on inflation and retirement in the past couple weeks. One focuses on implications for your portfolio withdrawal rate in the event of higher inflation; the other discusses inflation-fighting investment strategies. I asked Christine to explain why concern about inflation is rising. We also discussed the major risks inflation poses for retirees, and some strategies that retirees can use to protect themselves from inflation risk.Listen to the podcast by clicking the player icon at the top of the newsletter. The podcast also can be found on Apple Podcasts, Spotify and Stitcher.Subscribe to the newsletterYou’re subscribed to occasional, short posts sent to my free list. Sign up for the paid edition to receive my weekly in-depth report, plus online access to my series of retirement guides. Get on the email list at retirementrevised.substack.com
32 minutes | Apr 2, 2021
How do we support people who want to age at home?
Anne Tumlinson, founder of Daughterhood.orgCovid-19 had taken the lives of 181,000 people in nursing homes, assisted living and other long-term care facilities ….. one-third of the national total. The troubles have intensified a spotlight on long-running questions about how communities can do a better job supporting people who need care but want to live outside an institutional setting.I explore these questions in a new New York Times Retiring column posted this weekend. I interviewed a couple dozen experts for the story in areas ranging from health care to housing, urban planning and health care. I’m planning a series of podcast follow-ups to dive deeper into different aspects of the story. My podcast guest this week is one of those experts. Anne Tumlinson is one of the nation’s top authorities in public policy on caregiving, having worked for years on Capitol Hill and in the private sector as an analyst, researcher and consultant. She is the founder of ATI Advisory, a Washington, D.C.-based research and advisory services firm that works to reform health and long-term care delivery and financing for the nation’s frail and vulnerable older adults. Daughterhood.orgBut she also is the founder of Daughterhood.org, a fascinating national network of support circles for caregivers. Earlier in her career, Anne worked as a healthcare advisor to the late Congressman John Lewis (D-GA), and then as the lead for Medicaid program oversight at the Office of Management and Budget. I asked Anne for her thoughts on the challenges people face when they need to make caregiving decisions for loved ones, most often on short timelines and without adequate preparation or knowledge — and, how that affects the choices that need to be made between institutional and home-based care.Listen to the podcast by clicking the player icon at the top of the newsletter. The podcast also can be found on Apple Podcasts, Spotify and Stitcher.Biden’s big bet on expansion of home-based careMy New York Times column notes that the recently-approved American Rescue Act contains a very large ($12.7 billion) increase in federal spending on home and community-based services through the Medicaid program. Moreover, the $2 trillion infrastructure plan proposed by the Administration this week includes an addition $400 billion over eight years to bolster long-term care outside of institutional settings.Howard Gleckman notes in a Forbes.com post that this latest proposal is an important step forward - but that it does nott address the nation’s broader long-term care problems:It focuses on only one piece the puzzle—Medicaid HCBS. And it still won’t provide sufficient services for many older adults and younger people with disabilities who rely on Medicaid for their care. It doesn’t boost funding for a long list of non-Medicaid federal programs that are critical to those living at home. And it does nothing at all for middle-income Americans who are unable to pay for long-term care insurance but are not poor enough to qualify for Medicaid. The rest of the Washington agenda on retirementCongress recently rescued the retirements of more than 1 million workers who faced the prospect that the pensions they earned and had been promised might evaporate. The American Rescue Act allocated $86 billion for grants to struggling multiemployer pension funds that would allow them to continue paying full benefits. The law authorizes the Pension Benefit Guaranty Corporation (PBGC) to make the grants, which do not need to be repaid.The generosity of the move came as a surprise. Previously, Democrats had been pushing a package of low-interest loans to aid the multiemployer funds, while Republicans wanted to boost insurance premiums paid by employers, add new premiums paid by plan participants, and force more conservative accounting assumptions. But the Democratic majority is looking at things a bit differently this year. And so long as Congress is casting a benign eye on the well-being of these pensioners, I have a short list of other “must-do” retirement items for the consideration of lawmakers. And these are reforms that will impact a much larger - and more demographically diverse - group of retirees now and in the years ahead than the multiemployer plan fix.My list includes:Expansion of Social SecurityReduction of the Medicare eligibility ageFixing long-term care insuranceBuilding affordable senior housingLearn more in my Reuters column this week.Subscribe to the newsletterYou’re subscribed to occasional, short posts sent to my free list. Sign up for the paid edition to receive my weekly in-depth report, plus online access to my series of retirement guides. Get on the email list at retirementrevised.substack.com
30 minutes | Feb 16, 2021
Medicare's solvency problem, and what to do about it
Gretchen Jacobson - The Commonwealth FundThis week on the podcast, we consider the most urgent retirement-related issue facing the new Biden administration and Congress: Medicare’s solvency problem. The problem has to do with just one part of Medicare - Part A. That’s the Hospital Insurance Trust Fund, which pays for hospital bills. Unlike other parts of Medicare, Part A is funded mainly through the Medicare payroll tax; parts B and D are financed through a combination of general government revenue and premiums paid by beneficiaries. The Medicare trustees projected last year that Part A will become insolvent in 2024 — less than three years from now. Just last week, the Congressional Budget Office forecast a somewhat longer insolvency date due to an improving economic outlook - 2026. But we’ll have to wait to see what the Medicare trustees have to say a bit later this year - they don’t always agree with the CBO projections.Joining me on the podcast to talk about Medicare solvency is Dr. Gretchen Jacobson. Gretchen is vice president for Medicare at The Commonwealth Fund, a foundation that focuses on health care. She’s a top expert on Medicare, holding a Ph.D. in health economics, and having also worked for a number of years on Medicare policy at the Kaiser Family Foundation before joining Commonwealth.Commonwealth recently published a really interesting series of blog posts by Medicare experts outlining proposals to solve the Part A problem, which I recommend. For this conversation, I asked Gretchen to walk us through all the options for fixing Medicare’s finances. And a note for listeners: I taped this interview before the CBO projection was issued - so the context of our conversation is a 2024 insolvency date.Listen to the podcast by clicking the player icon at the top of this page. The podcast also can be found on Apple Podcasts, Spotify and Stitcher. Here’s my recent Reuters column on Part A solvency.Subscribe to the newsletterYou’re subscribed to occasional posts sent to my free list. Sign up for the paid edition to receive my weekly in-depth report, plus online access to my series of retirement guides. Get on the email list at retirementrevised.substack.com
31 minutes | Jan 15, 2021
How to get what's yours when it comes to health care
Philip MoellerWhen it comes to “getting what’s yours,” Philip Moeller is the man.Phil is the principal author of the Get What’s Yours series of consumer guides, which already includes best-sellers on Social Security and Medicare. His latest book was published this week, titled Get What’s Yours for Health Care: How to Get the Best Care at the Right Price. The theme of this volume: consumers have the power to fight back when it comes to health insurance and the health care system.Close readers know that I’m a skeptic when it comes to the value of consumerism in health care. But I respect Phil’s work tremendously and he is among the most knowledgeable writers I know on Social Security and Medicare - so a podcast chat about the new book seemed in order. On this week’s program, Phil and I discuss the concept of consumerism in health care, and the key barriers people face navigating the system. We also explore related issues in Medicare, including the challenges of shopping insurance marketplaces and the complexities of transitioning to Medicare from other forms of health insurance.Along with his books, Phil has written about Social Security, Medicare and other retirement issues for the PBS NewsHour in his “Ask Phil” column. He also has been a research fellow for the Center on Aging & Work at Boston College. Phil is a former contributor to Money magazine and U.S. News & World Report. His blog can be found here.Listen to the podcast by clicking the player icon at the top of this page. The podcast also can be found on Apple Podcasts, Spotify and Stitcher.Subscribe to the newsletterYou’re currently signed up for occasional posts and podcasts; the full newsletter includes all the week’s news in retirement, personal finance and public policy. You’ll also have access to my series of guides on key retirement topics, such as transitioning to Medicare and getting the most from Social Security. Get on the email list at retirementrevised.substack.com
27 minutes | Dec 17, 2020
Creativity and older adults: The story of Encore Creativity's chorale singers
Encore's 13th Annual Holiday Concert last year at the John F. Kennedy Center for the Performing Arts in Washington, D.C.This is the last newsletter and podcast of the year, and with the holidays upon us, I thought it would be fun to wrap up with something a little different and uplifting, after the awful year that was 2020. So - how about a little holiday music from the country’s largest choral group for singers over age 55?Encore Creativity is the nation's largest choral organization for older adults. Based in Maryland, Encore has 15 chorales and six rock and roll choruses in the metropolitan Baltimore-Washington area, as well as a chorale in New York City. The organization is led by Jeanne Kelly, a professional vocalist, performer, teacher, conductor and music administrator who started the group in 2001. Encore got its start when Jeanne was approached by Dr. Gene Cohen, the well-known pioneer researcher on creativity and older adults. Cohen, who died in 2009, was a founder of the national movement around positive aging, and he argued against the old stereotypes that aging leads to an inevitable decline in physical and mental capacity. Jeanne KellyCohen wanted Jeanne to start a choral group for older people as part of a landmark research project he was conducting. It would examine how older adults would be affected if they had the chance to study choral music under a professional conductor. So Jeane agreed to start a group. The study found a wide array of positive effects - better physical health, fewer doctor visits, less use of medication and fewer falls. And the singers reported better morale and less loneliness.One thing led to another, and Jeanne Kelly is still at it today. Encore Creativity has grown tremendously over the years, with around 800 singers participating in more than 20 programs. Most of them are up and down the east coast, but there are some affiliated programs elsewhere. These are no-audition groups - everyone is welcome - which is amazing considering the quality you will hear in the music on the podcast.This year, of course, the pandemic forced Encore to adapt - all of its programs went virtual, which presented some challenges. But their work is coming to fruition with the group’s first virtual holiday concert, which Encore produced along with AARP. That debuts this evening - December 17th at Encore’s website. But it will be available on demand throughout the holidays at that web address.On the podcast, you’ll hear excerpts from Encore’s 2019 Kennedy Center performance. I hope you’ll give it a listen - and tune in to the entire program tonight or during the holidays.Listen to the podcast by clicking the player icon above; the podcast also can be found on Apple Podcasts, Spotify and Stitcher.Not a subscriber yet? Here’s a special yearend offer!Subscribers receive the full edition of the newsletter (this free version is abridged), and they have access to my series of retirement guides at any time.Sign up now and you’ll receive the newsletter for a year at half off the normal price. Click here to sign up, or use the little green button below.Six Social Security fixes that should be on Biden’s agenda President-elect Joe Biden will be plenty busy battling the pandemic when he takes office next month, and Social Security will likely not be on top of his agenda. But nudging higher reforms for Social Security, our most important retirement program, would be a very smart move.The role of this safety net program has never been more important as the country attempts to dig out from the COVID-19 disaster. In my new Reuters column, I list six Social Security moves the new president and Congress should make.The vaccinesMedicare will cover the cost of all FDA-approved vaccines. All Americans — whether they get their health care from Medicare, Medicaid or private insurance, or they do not have coverage — will be able to get a COVID-19 vaccine at no cost, under federal rules. Vaccine rollout in nursing homes faces obstacles and confusion. Walgreens and CVS staff will soon begin vaccinations at tens of thousands of long-term care facilities. Some staff and residents are wary, and there are thorny issues of consent.Trials went well, but reassuring older adults remains a challenge. The two leading coronavirus vaccines seemed to work well in elderly trial volunteers. “I just can’t understand why people are afraid,” one 95-year-old said.Should you be worried about allergy problems? British health officials recommended that people with severe allergy reactions not be given the vaccine. Such reactions to vaccines are rare, even in people who have allergies to food or bee stings.Facebook has overhauled its approach to harmful Covid-19 health misinformation, announcing major changes that would send a much stronger message to users who have interacted with harmful falsehoods about the virus.Retirement security, women and COVIDResearching my recent story for The New York Times on how retirement security for women is impacted by COVID, I discovered MomsTown, a very interesting network for women that has launched a series of daily podcasts. The latest episode features RISE, a scholarship program committed to accelerating equity for moms of color. Check it out here. Recommended readingThe Labor Department completed the Trump administration’s fiduciary rule for retirement accounts, but it likely will be revised by the new administration . . . Trump’s $200 Medicare discount card may soon be in the mail . . . How Biden could help older workers . . . Nobel laureate Robert Merton on annuities, reverse mortgages and the key design principles of good retirement . . . Scientists reassess the need for routine medical care . . . 2020 was especially deadly, and COVID wasn’t the only culprit . . . Pandemic delays regulations regarding cheaper hearing aids . . . Improving your balance to prevent falls . . . To get a good night’s sleep, you may need to make different dietary choices . . . Six predictions for retirement planning in 2021 . . . Who is to blame for the 100,000 COVID deaths in nursing homes?Next newsletter on January 7thThe newsletter heads off now for some winter quarrantined R&R. I’ll be back with you on January 7th. Until then, I hope you have peaceful, COVID-safe holidays. Get on the email list at retirementrevised.substack.com
33 minutes | Dec 11, 2020
How should we reform long-term care after the pandemic?
Listen now (33 min) | This week on the podcast, we consider the sorry state of affairs in the world of long-term care. The U.S. has never had good answers when it comes to insuring against the risk of a long-term care need. And now, the pandemic is raising the stakes. Costs are rising for everything from assisted living to skilled nursing facilities and home-based care. Meanwhile, the pandemic has taken the lives of more than 100,000 residents and staff of long-term care facilities. Get on the email list at retirementrevised.substack.com
23 minutes | Nov 13, 2020
The 2021 Social Security COLA: How healthcare takes a big bite of your benefit
Healthcare costs are rising at several times the rate of general inflation, and it’s one of the major financial challenges that retirees face as they struggle to maintain their standard of living. Nowhere is this more clear than in the annual interplay between the Social Security cost-of-living adjustment (COLA) and Medicare Part B premiums. Last month, Social Security announced a 1.3% COLA for 2021. That’s a very meager increase, but it looks worse following Medicare’s announcement last week that the monthly standard Part B premium will rise $3.90, to $148.50. If you’re enrolled in both Social Security and Medicare, the Part B premium is deducted from your benefit, so its interplay with the COLA is important. The impact varies depending on your Social Security benefit amount, as the chart below shows. For people with very low benefits, Medicare eats up most or all of the COLA; in cases where the Part B hike would be larger than the COLA, the Social Security benefit is unchanged due to the “hold harmless” provision in federal law, which prohibits any decrease in benefits.This year’s Part B premium was on track to rise much more than $3.90 per month, but a COVID relief measure passed by Congress recently capped the increase at 25% of whatever it would have been if Medicare simply followed the usual formula. Joining me on the podcast this week to walk through the changes for 2021 is Mary Johnson. Mary is the Social Security and Medicare policy analyst for The Senior Citizens League; she’s been tracking the COLA for more than 25 years, and knows this topic inside and out. Mary points out that we’re really in an unprecedented situation with regard to COLAs. Over the past decade, we’ve had zero COLAs three times, and one year where the increase was just three-tenths of a percentage points. Over a 12-year period, the COLA has averaged just 1.4%. “Twelve years is about one-third of the length of time a person spend in retirement,” she says, “So that is having a significant impact on the lifetime retirement benefits you receive from Social Security.”Listen to the podcast by clicking the player icon above. The podcast also can be found on Apple Podcasts, Spotify and Stitcher.Not a subscriber yet? Take advantage of a special offerSign up now for the free or subscriber edition of the newsletter, and I’ll email a copy of my latest retirement guide to you. This one looks at how to think about timing your retirement in the age of pandemic.Just a reminder- subscribers receive the full edition of the newsletter (the free edition is abridged), and they have access to the entire series of guides at any time. Click on the little green button to subscribe, or go here to learn more.Medicare marketplaces really don’t work very wellEvery fall, you get the barrage of messages. It starts with the Annual Notice of Change document that Medicare sends, listing the changes in your current Part D or Advantage plan coverage. Then there’s the “Medicare & You” handbook containing detailed information about plan options. A flurry of email alerts urging you to shop your coverage using the Medicare Plan Finder website also go out each fall. Insurance companies flood the airwaves and mailboxes with advertisements and brochures. Journalists like me nag you about this with our columns and newsletters!None of it is working very well. A new study by the Kaiser Family Foundation finds that 57 percent of Medicare enrollees don’t review or compare their coverage options annually, including 46 percent who “never” or “rarely” revisited their plans. Strikingly, two-thirds of beneficiaries 85 or older don’t review their coverage annually, and up to 33 percent of this age group say they never do. People in poor health, or with low income or education levels, are also much less likely to shop.Why? Tricia Neuman, a co-author of the Kaiser report, sums it up:“A large share of the Medicare population finds this whole task pretty unappealing, and they just don’t do it. That raises questions about how well the system is working.”If you’re enrolled only in Original Medicare with a Medigap supplemental plan, and don’t use a drug plan, there’s no need to re-evaluate your coverage. But Part D drug plans should be reviewed annually. The same applies to Advantage plans, which often wrap in prescription coverage and can make changes to their rosters of in-network health care providers. Plans can change the monthly premium as well as the list of covered drugs - and they can change the rules around your access to drugs, or impose quantity limits or require prior authorizations.The findings call into question just how well privatization of Medicare is working - if you don’t have willing, tuned-in buyers, how well can a marketplace really work?I explore that question in my latest Retiring column for The New York Times, which was published today. Along with the column, here are a few more thoughts on this topic:Medicare has not always been this way: At its creation in 1965, Medicare was envisioned as a pure social insurance program, with everyone paying in the same amounts and receiving the same coverage. But with the expansion of drug coverage in 2003 and the rapid growth of Medicare Advantage, we’re headed toward a system of marketplaces with the original program increasingly looking like a public option. Advantage is projected to account for 64% of enrollment by 2028, according to Avalere Health:A different approach is possible: A standard benefit in Medicare, funded through premiums and payroll taxes, would work just fine - especially if we change the law to permit the federal government to negotiate drug prices, just as the VA and Medicaid can do. That’s prohibited under the law that created Part D. What sense does that make?Human behaviorand choice: The Medicare marketplace is a key example of the choice-driven ideology that has driven so much of our retirement system over the past four decades. We have shifted decision making and risk from the sponsors of benefit plans to participants - the poster child being the move from defined benefit pensions to defined contribution 401(k) plans. We know how well that is working - 401(k) account balances are concentrated among the wealthiest households, participation is flat and the decline of DB pensions has taken a huge bite from overall retirement security (see my write-up of the latest Federal Reserve data on retirement saving accounts in this recent newsletter edition). All of these systems are wrapped up in ideology about competition and consumer choice. When will we wise up? It’s been proven over and over again that the best way to deliver retirement security to the majority of households is through our social insurance programs, so let’s beef them up, make them less complicated and as universal as possible. Still time to shop this yearHere’s my last reminder of the year to revisit your Part D or Advantage coverage this fall. There’s still time - enrollment runs until December 7th. Get assistance from your local State Health Insurance Assistance Program, the federally funded counseling service that provides free one-on-one assistance in every state; (use this link to find yours.)The Medicare Rights Center offers a free consumer help line: (800-333-4114.)You can browse plans on the Medicare Plan Finder, the official government website that posts stand-alone prescription drug and Medicare Advantage plan offerings. The plan finder now allows users to sort plans not only by premiums but for total costs, including premiums, deductibles, co-pays and coinsurance payments.When it comes time to enroll, call Medicare to sign up at 800-MEDICARE (800-633-4227) and to ensure that your enrollment has been processed.Social Security and retirement timing in the age of COVID: My discussion with Jean Chatzky on Facebook LivePersonal finance guru Jean Chatzky invited me to join her this week on Facebook Live to talk about Social Security, retirement timing and the pandemic. Jean conducts a great interview, and we spoke at length about how COVID-19 has impacted retirement planning, and altered Social Security claiming - you can listen to a replay here.Join me for a panel discussion on the future of retirementI’ll be joining a panel discussion next week on the pandemic’s impact on the outlook for retirement within workplace plans a bit later this month, moderated by my Reuters colleague Lauren Young. Also on the panel are Christine Benz of Morningstar, economist Teresa Ghilarducci, Kedra Newsom Reeves of Boston Consulting and Harry Dalessio from Prudential Retirement.The session will be convened on Monday November 16th at 1pm eastern time. Registration is free, and the conversation will be provocative, so please join us (register here). Get on the email list at retirementrevised.substack.com
30 minutes | Oct 29, 2020
How will the pandemic change financial planning?
Christine BenzThis week on the podcast, we take a look at how financial planning for retirement may change as a result of the pandemic. I invited Christine Benz of Morningstar to join me for this discussion after she published a thought-provoking essay on this question on the Morningstar website. Christine is Morningstar’s director of personal finance, and she is one of the country’s top researchers and writers on personal finance and planning. From her vantage point at Morningstar, she has access to a wealth of top-notch analysis, research and data on investing, saving and other aspects of planning. Christine thinks the pandemic has produced a sudden - and significant - shift in how individuals think about spending and saving goals, the possibility of an unplanned early retirement, setting aside liquid emergency funds, paying for health care and dealing with the current low yield environment for fixed income investments.Listen to the podcast by clicking the player icon at the top of the page. The podcast also can be found on Apple Podcasts, Spotify and Stitcher.This week on the podcast, we take a look at how financial planning for retirement may change as a result of the pandemic. I invited Christine Benz of Morningstar to join me for this discussion after she published a thought-provoking essay on this question on the Morningstar website. Christine is Morningstar’s director of personal finance, and she is one of the country’s top researchers and writers on personal finance and planning. From her vantage point at Morningstar, she has access to a wealth of top-notch analysis, research and data on investing, saving and other aspects of planning. Christine thinks the pandemic has produced a sudden - and significant - shift in how individuals think about spending and saving goals, the possibility of an unplanned early retirement, setting aside liquid emergency funds, paying for health care and dealing with the current low yield environment for fixed income investments.Listen to the podcast by clicking the player icon at the top of the page. The podcast also can be found on Apple Podcasts, Spotify and Stitcher.Not a subscriber yet? Take advantage of a special offerSign up now for the free or subscriber edition of the newsletter, and I’ll email a copy of my latest retirement guide to you. This one looks at dealing with the Social Security Administration during the COVID19 crisis. Customer service at the Social Security Administration has changed during the coronavirus crisis - the agency closed its network of more than 1,200 field offices to the public in March. Just a reminder- subscribers receive the full edition of the newsletter (the free version is abridged), and they have access to the entire series of guides at any time. Click on the little green button to subscribe, or go here to learn more.Older volunteers forge new pathways in the pandemicVolunteers are the lifeblood of nonprofit organizations, but the pandemic has created major barriers to participation, especially for older people, who face a higher risk of serious illness or death if they contract the coronavirus. As a result, nonprofit organizations and volunteers are grappling with the challenge of finding new, safe ways to engage with older volunteers. Learn more in my latest story for The New York Times. Be sure to check out the comments on the story, available via a link at the bottom of the article if you are viewing it in a web browser and logged on to the site.The story is part of a broader section on retirement that the Times published online this month - you'll find several other interesting stories on topics like entrepreneurship in retirement, where retirement is headed in the pandemic and more.Open enrollment: Original Medicare or Advantage?Medicare’s open enrollment season is underway, and a key decision point is whether to use Original Medicare or Medicare Advantage. Premium newsletter subscribers can review my guide to choosing between Original Medicare and Medicare Advantage here. Get on the email list at retirementrevised.substack.com
27 minutes | Oct 21, 2020
Medicare fall enrollment is here - what to look out for this year
Every fall, you have an opportunity to review your Medicare coverage during the open enrollment season that runs from Oct. 15 through Dec. 7. This is the only chance most enrollees get to switch between original fee-for-service Medicare and Medicare Advantage, the all-in-one managed care alternative to the traditional program. You also can re-evaluate your prescription drug coverage — whether that is a stand-alone Part D plan, or wrapped into an Advantage plan. It’s a good opportunity to make sure you’re getting the coverage best suited to your health care needs, and perhaps to save some money on premiums and other out-of-pocket costs.Joining me this week on the podcast this week to discuss fall enrollment is one of the nation’s top Medicare consumer advocates - Frederic Riccardi, president of the Medicare Rights Center. I asked Fred to talk about why the fall enrollment is so important for Medicare enrollees, how to reevaluate your prescription drug or Medicare Advantage coverage and the recent trends in plan offerings. I also got Fred’s tip on the smartest way to select coverage. Listen to the podcast by clicking the player icon at the top of this page. The podcast also can be found on Apple Podcasts, Spotify and Stitcher.Also check out my Morningstar column this week on fall enrollment. Not a subscriber yet? Take advantage of a special offerSign up now for the free or subscriber edition of the newsletter, and I’ll email a copy of my latest retirement guide to you. This one looks at dealing with the Social Security Administration during the COVID19 crisis. Customer service at the Social Security Administration has changed during the coronavirus crisis - the agency closed its network of more than 1,200 field offices to the public in March. Just a reminder- subscribers have access to the entire series of guides at any time. Click on the little green button to subscribe, or go here to learn more.How fees impact your retirement savings over timeInvestment fees often don’t sound like much - what’s a 1% annual fee, after all, considering all the great returns you’ll be earning. Butthis thinking is dangerous. Compound interest works in your favor on the investment side of the equation - and works just as powerfully on the expense side. Fees compound over time, hindering growth and accumulated saving.Pew Trusts built this nifty calculator that allows you to run scenarios on your own accounts. Get your most recent statement out and give it a whirl - and consider whether you could do better by slashing your fees (translation: low-cost passive index funds or ETFs).Open enrollment: Original Medicare or Advantage?Medicare’s open enrollment season is underway, and a key decision point is whether to use Original Medicare or Medicare Advantage. Premium newsletter subscribers can review my guide to choosing between Original Medicare and Medicare Advantage here. Get on the email list at retirementrevised.substack.com
38 minutes | Oct 15, 2020
Joe Biden's Social Security reform plan: A look under the hood
This week on the podcast, I examine Democratic presidential candidate Joe Biden’s plan to reform Social Security, with the help of economist Richard Johnson of the Urban Institute. Rich is the co-author of a new Urban Institute report on Biden’s plans for both Social Security and Supplemental Security Income, which provides cash benefits to low-income older adults and people with disabilities. The report relies on DYNASIM, a sophisticated economic model that the Urban Institute has been using since the 1970s to projects the size and characteristics of the U.S. population 75 years into the future. Why focus only on the Biden plan, and not President Trump’s? You could well ask that about Johnson’s analysis - or about this podcast. And the answer is simple - there is no Trump campaign plan for Social Security. So before we get into the Biden plan, I want to offer a few thoughts on what it’s been like to cover retirement policy in what I think it’s fair to call a very asymmetrical election year. The Trump campaign hasn’t offered up detailed policy ideas on Social Security, or really, much of anything else. There’s no GOP platform either - something that typically comes out of a political party’s convention. We do know the history of Republican legislative proposals on Social Security. They typically call for restoring the program’s long-range financial balance by cutting benefits via higher retirement ages, less generous cost of living adjustments. But there’s nothing on the table right now to consider.Frankly, I find any effort to make side-by-side comparisons of these two candidates to be a disservice to readers, because it implies that we’re dealing with two normal candidates who can be covered using traditional journalistic methods and tools. But there’s nothing normal about this situation - only one of the two major party candidates does normal stuff - like, proposing ideas and policies. So, on Social Security, I’m just telling you - there’s only one actual plan to cover, and it’s the Biden plan. And Social Security does need reform. The combined retirement and disability trust funds are on track to be exhausted in 2035 - and probably a bit sooner than that due to the pandemic. Exhaustion means there would be sufficient revenue coming in to pay only about 80 percent of promised benefits. At the same time, most Democrats and all progressives believe benefits should be expanded to improve their adequacy - that is, replace more pre-retirement income to help low and middle class retirees maintain their standard of living in retirement.Biden has offered up a balanced plan that addresses both of these challenges. In a typical Biden approach, his plan is moderate. It doesn’t go as far as the party’s left wing would like, but it marks a shift from where Biden - and most other centrist Democrats - have stood on Social Security over the last decade. Notably, Biden’s plan is much more detailed than the typical policy offerings from presidential candidates - as you’ll learn from my conversation with Rich Johnson.Listen to the podcast by clicking the player icon at the top of the newsletter. The podcast also can be found on Apple Podcasts, Spotify and Stitcher.Not a subscriber yet? Take advantage of a special offerSign up now for the free or subscriber edition of the newsletter, and I’ll email a copy of my latest retirement guide to you. This one looks at dealing with the Social Security Administration during the COVID19 crisis. Customer service at the Social Security Administration has changed during the coronavirus crisis - the agency closed its network of more than 1,200 field offices to the public in March. Just a reminder- subscribers have access to the entire series of guides at any time. Click on the little green button to subscribe, or go here to learn more.Social Security awards a 1.3% COLA for 2021Seniors will receive a 1.3% cost-of-living adjustment (COLA) in their Social Security benefit next year, the Social Security Administration announced. That’s a $20 monthly raise for the typical beneficiary, to about nearly $1,540.That’s a small increase by historical standards, and it may be smaller still for many after Medicare’s Part B premium hike is netted out. We won’t have a final Part B increase amount until sometime in November, and each enrollee’s final Social Security adjustment will vary accordingly. Social Security will mail COLA notices in December that spells out your net increase. Let’s hope those arrive in a timely manner, since, you know - the Postal Service.This year, Congress has capped the Part B increase at 25% of whatever the increase would have been - so that should help somewhat.The maximum income subject to FICA taxes will increase to $142,800 in 2021 (from $137,700 this year).I’ll have full analysis of this next month, after the Medicare figures become available.Open enrollment: Original Medicare or Advantage?Medicare’s open enrollment season begins today, and runs through December 7th. I’ll have analysis soon on the market for prescription drug and Medicare Advantage offerings for next year soon, but just a couple quick points for now:Review your options. Consider how you will receive Medicare benefits in the year ahead, because fall enrollment is the time when most people will be able to make changes.If you have Original Medicare and a Medigap and are happy with your coverage, there’s no need to makea change.If you have a Medicare Advantage or Part D plan, review your coverage options even if you are happy with your current coverage; plans change their pricing and benefits every year.Read the Annual Notice of Change (ANOC) that Medicare sent to you in September (via mail or email). This lists the changes in your current plan, such as the premium and copays, and will compare the benefits in 2021 with those in 2020. Premium newsletter subscribers can review my guide to choosing between Original Medicare and Medicare Advantage here.Timing your retirementRoughly one-third of workers retire earlier than plan, research shows. The most common causes for unexpected early retirement are health problems and job loss. More Americans are planning to work longer to improve their retirement outlook; in this guide we consider those benefits, and ways to manage late-career work in ways that will help you stay in control of your retirement timeline. Click here to download my guide to timing your retirement (subscribers only).Choosing your Medicare coverageOriginal Medicare, or Medicare Advantage?This is the most basic decision you’ll make about health insurance at the point of retirement.If you opt not to join Original Medicare at that time, you forego the preexisting condition protections offered in Medigap supplemental policies. Medicare Advantage can save you money on premiums, but Original Medicare remains the gold standard for its flexible access to providers and predictability of total costs over your lifetime.Click here to download my guide to choosing Medicare coverage (subscribers only). Get on the email list at retirementrevised.substack.com
34 minutes | Sep 16, 2020
How to address the immense racial gap in retirement wealth
This week, the podcast revisits a topic I wrote about for The New York Times last month - race and retirement. I’ve written before about how the inequities people of color experience during their working lives spill over into retirement. But during this time of racial reckoning, I wanted to take a deeper dive into the topic.For the Times story, I took special care to seek out the voices of Black Americans who also are expert on this topic. That’s how I found my way to economist Darrick Hamilton. Professor Hamilton is one of the nation’s leading voices on the causes and consequences of racial and ethnic economic disparities. He recently left Ohio State University to rejoin The New School in New York City, where he is teaching and starting up a new Institute for the Study of Race, Stratification and Political Economy.Darrick is a leading proponent of one of the most creative ideas for addressing the racial wealth gap - “baby bonds.” The idea is to provide every American child with a government-funded trust account at birth, starting with a $1,000 contribution. Kids born into lower-wealth families would receive more contributions over time, and the accounts would benefit from compound interest growth. The premise is that much of the wealth in the U.S. is transferred from generation to generation, and there’s a powerful compound effect that starts with our legacy of racist laws and policies and ends with today’s white households able to access far more capital for wealth-building activities - attending college, buying a home or starting a business. Baby bonds could serve as a proactive remedy for that injustice, and in many cases could impact the wealth available at retirement for people of color. In the Times story, I outline the basic numbers on race and retirement. They may not be surprising, but they certainly are appalling. In 2016, the typical Black household approaching retirement had 46 percent of the retirement wealth of the typical white household. For a Latino family, it was 49 percent. Two-thirds of single black retirees have incomes too low to meet basic living expenses. And that was before the pandemic. Since COVID19 struck, unemployment rates for older Black and Latino workers have been much higher than for their white counterparts. And mounting evidence suggestions that millions are being forced into premature retirement. That’s going to translate into sharp cuts in Social Security income and savings, and expensive disruptions in health insurance.The baby bonds concept has caught on in the Democratic party - Senator Cory Booker advocated for it during his presidential campaign and he has sponsored baby bond legislation in the Senate. The idea also has found its way into the Biden presidential campaign.Listen to my conversation with Darrick Hamilton by clicking on the player icon at the top of the newsletter. The podcast also can be found on Apple Podcasts, Spotify and Stitcher.Not a subscriber yet? Take advantage of a special offerSign up now for the free or subscriber edition of the newsletter, and I’ll email a copy of my latest retirement guide to you. This one looks at dealing with the Social Security Administration during the COVID19 crisis. Customer service at the Social Security Administration has changed during the coronavirus crisis - the agency closed its network of more than 1,200 field offices to the public in March. Just a reminder- subscribers, have access to the entire series of guides at any time. Click on the little green button to subscribe, or go here to learn more.Will FICA revenue deferral open the door to privatization of Social Security? Here’s how it could play outI've been writing over the summer about the threat posed to Social Security by President Trump’s threat to continue deferring FICA tax collections should he win reelection. This has been a chaotic episode, with shifting indications from the White House on how a FICA revenue gap might be plugged. And most employers seem to be ignoring the deferral altogether as not worth the bother, and are continuing to collect FICA. Even the U.S. Chamber of Commerce - a staunch Trump ally - has expressed disapproval. Trump signed a presidential memorandum in August ordering the deferral through year-end of FICA revenue, and he also said that he would push for termination altogether of the tax if he wins a second term. It’s not at all clear that he could push this through Congress, but some experts think that the IRS code might permit him to defer FICA collections for an additional year.If we do stop funding Social Security through FICA, just about anything can happen. The concept of an earned benefit can go out the window pretty quick, and people will start thinking of Social Security as welfare. In the political back and forth over FICA, the Trump administration has stated that any deferred FICA revenue would be replaced by general revenue funds. But that suggests a transfer of more than $1 trillion annually - a tall order for a Congress already grappling with the demands of economic support for a flagging economy. It also would mark a turning point in Social Security’s funding structure. The program has always been funded mainly by FICA (it also receives relatively small amounts of revenue from taxes on benefits and interest on trust fund bonds.). Self-funding has been one of the program’s political strengths, as it gives workers and beneficiaries a sense of ownership - as per this oft-quoted 1941 quip from President Franklin Roosevelt:“We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program. Those taxes aren’t a matter of economics, they’re straight politics.”Some Republicans have not given up on the dream of converting Social Security into a system of personal saving accounts - an anchoring idea of the reforms proposed by President George W. Bush. The plan was a political and policy flop, but some on the right continue to push it, including the Heritage Foundation.If you doubt this, check out this recent op-ed on FICA by Andrew Biggs of the American Enterprise Institute (emphasis added at the conclusion of this passage):. . . President Trump made clear in an Aug. 12 news conference that his real goal is to replace the Social Security payroll tax with revenues drawn from the general tax fund, the vast majority of which is income taxes. This idea faces both practical and philosophical hurdles, but could help the political parties finally come together to fix Social Security. The first problem with funding Social Security via income taxes is obvious: the federal budget is already in deficit, which means there isn’t room to fund Social Security with general revenues without significantly cutting other programs or raising income taxes. And that tax increase wouldn’t be tiny. In 2019, the federal government collected about $1.7 trillion in individual income taxes, versus nearly $1 trillion in Social Security payroll taxes. Even if the President’s plan would replace only the employees’ 6.2% payroll tax, that would mean about an additional $500 billion in general tax revenues needed. Moreover, funding Social Security with income taxes is also contrary to the program’s history, in which benefit were funded with a flatrate tax that applied to all earnings up to a maximum, which is currently $137,700 per year. The payroll tax contributed to the view that Social Security is an “earned benefit” rather than a welfare plan.But most Democrats have already given up on the idea of truly earned benefits, since their Social Security proposals focus on lifting the payroll tax cap and making the rich carry more of the load.Income-tax financing would simply take that idea in a more progressive direction. While about 15% of earnings accrue to employees with salaries above the $137,700 payroll tax ceiling, almost half of total income taxes are paid by households with incomes above that level. More than one-third of income taxes are paid by the top 1% alone.But what is in it for Republicans? The answer is that an income-tax-financed safety retirement net need not be nearly as expensive as the current Social Security program. For instance, Australia’s Age Pension costs around one-fifth of what Social Security does, because it merely supplements households’ own savings to ensure a minimum standard of living in retirement. Canada and New Zealand also use income tax-financed programs to provide a strong base of retirement income.For this idea to work, though, the U.S. would need to follow Australia’s lead by signing up every worker for a retirement savings account with automatic contributions. Those contributions could be funded using the payroll taxes that no longer would be needed to fund Social Security. Biggs was a deputy commissioner of Social Security during the Bush administration and he was involved in the aforementioned failed effort to convert Social Security into a system of private savings accounts. He hasn’t talked much about privatization in recent years - until now, that is:Once transitioned into place — which admittedly would take years — the result would be higher private savings, particularly for lower-income households, which reduces wealth inequality and boosts the economy. And while income taxes would be higher, total government spending on Social Security would be lower.To be clear, this is my plan, not President Trump’s. But for income tax-funding of Social Security to work, for it to overcome 30 years of Congressional inaction on Social Security, it needs to think creatively and offer something to both sides. Because the traditional menu of reforms — payroll tax rate increases, higher retirement ages, lower cost-of-living adjustments and so forth — haven’t motivated Congress to action. Joe Biden has been hammering Trump on the FICA issue in television ads running in swing states. We are living in a very weird world, indeed, when the chief actuary of Social Security is quoted in a political ad. Get on the email list at retirementrevised.substack.com
39 minutes | Sep 3, 2020
Timing your Social Security claim: What factors influence the decision?
The recession is likely to prompt more people to claim Social Security early if they are forced to retire sooner than expected. But what else influences claiming decisions? My guest on the podcast this week is Shai Akabas, director of economic policy at the the Bipartisan Policy Center (BPC). He is the co-author of a new study that examines the broader environment in which claiming decisions are made - and it finds that better information, descriptive language and policy incentives could all nudge people toward making more optimal Social Security strategies.One thing I appreciate about this study is the way it defines “optimal.” It moves beyond the question of the total lifetime benefit a claimant will receive from Social Security, or “break-even” point analysis. That approach tends to push people toward earlier claiming, research has found, because it frames later claiming as a gamble on living longer than average - in other words, beating the longevity odds. Most people have trouble imagining themselves living longer than average lives, especially at younger ages. But the mortality data tells us that many will, and that for married couples chances are good that one spouse will survive to very old age.Rather, BPC considered a range of holistic questions claimants should consider: Does your decision provide enough longevity insurance in case you outlive the rest of your savings?What is the need for money right now, instead of later?Will my decision impact my surviving spouse?Click on the player icon at the top of the newsletter to listen to my conversation with Shai. The podcast also can be found on Apple Podcasts, Spotify and Stitcher.Not a subscriber yet? Take advantage of a special offerSign up now for the free or subscriber edition of the newsletter, and I’ll email a copy of my latest retirement guide to you. This one looks at dealing with the Social Security Administration during the COVID19 crisis. Customer service at the Social Security Administration has changed during the coronavirus crisis - the agency closed its network of more than 1,200 field offices to the public in March. Just a reminder- subscribers, have access to the entire series of guides at any time. Click on the little green button to subscribe, or go here to learn more.Disclose wrongdoing? Not all financial planners are complying with the new SEC rules Millions of investors are now receiving a new government-mandated disclosure form from their financial planners that requires them to list any past misdeeds that have led to regulatory fines or worse. But a terrific Wall Street Journal investigation finds that a sizeable number are not complying. The Securities and Exchange Commission’s new “Regulation Best Interest” relies heavily on a disclosure form that aims to give investors an easy way to evaluate financial advisers. The form provides information on fees, misconduct and conflicts of interest. It’s called a “customer or client relationship summary” or Form CRS. The disclosures are important, since there is a long and ugly history of abuse of investors by brokers with unethical track records.The WSJ examined disclosures from thousands of firms, comparing them with the disclosure information on the SEC website:At least 1,300 brokerage and financial-advisory firms incorrectly stated on the new document that neither they nor their financial professionals had legal or disciplinary histories, the Journal’s analysis showed. That is about 20% of the roughly 6,200 firms in the analysis that reported they had no past blemishes.Reg BI is a weak rule, plain and simple. We are living in a buyer-beware environment where it is absolutely critical to do your homework before hiring an advisor (or perhaps, firing one). Don’t work with anyone who is not a fiduciary. And, you can look up any adviser’s record on the SEC website.Recommended reading this weekBill Bengen revisits the famous 4% drawdown rule . . . How to factor in climate change into a retirement relocation decision . . . Time to get comfortable with the idea of professional decline . . . AARP thinks the 2021 Social Security COLA will be somewhere between 0.5 percent and 1% for 2021 . . . How Social Security could come to a screeching halt . . . Why postal service disruptions can be life-threatening . . . Why dizziness can be a big problem as we age. Get on the email list at retirementrevised.substack.com
28 minutes | Aug 27, 2020
How to not go broke in retirement
Not going broke in retirement - that sounds like a good plan to me! So this week on the podcast, we’ll hear from the author of a new book outlining the instructions for meeting that goal.Steve Vernon is an actuary by background, and he worked for years as a consultant to large corporate retirement plans before starting his own consumer retirement education firm. He is the author of six books on retirement planning, and also spends part of his time doing research at the Stanford Center on Longevity.Steve’s latest book is Don’t Go Broke in Retirement - A Simple Plan to Build Lifetime Retirement Income.Steve writes that there are five essential decisions to make about your retirement plan:When to retireWhether to work part time after you do retireWhen to start your Social Security benefitsHow to deploy your savings in retirementHow to protect retirement income from a financial crisis.These decisions are essential now, as we move through the severe recession induced by the pandemic, and I quizzed Steve about how to think about these five guideposts during the current emergency. Listen to the podcast by clicking the player icon above. The podcast also can be found on Apple Podcasts, Spotify and Stitcher.Not a subscriber yet? Take advantage of a special offerSign up now for the free or subscriber edition of the newsletter, and I’ll email a copy of my latest retirement guide to you. This one looks at dealing with the Social Security Administration during the COVID19 crisis. Customer service at the Social Security Administration has changed during the coronavirus crisis - the agency closed its network of more than 1,200 field offices to the public in March. Just a reminder- subscribers, have access to the entire series of guides at any time. Click on the little green button to subscribe, or go here to learn more.Does Social Security still rely on the postal service?Top Democrats have been warning that the problems afflicting the United States Postal Service pose will hurt seniors who rely on letter carriers for Social Security checks, medications and other critical mail. There is some evidence already of problems with prescription drug deliveries - but how about Social Security? Should beneficiaries be concerned about a slowdown in mail service?I took a dive into this for my latest New York Times Retiring column, because my recollection was that most Social Security benefits are delivered electronically these days. Sure enough - 99 percent of all benefits these days are delivered via direct deposit to a checking or savings account, or to a government-sponsored debit card. The Social Security Administration has required electronic delivery since 2013, although some exceptions are made.But in a system as massive as Social Security, one percent translates to a significant number of people still receiving paper checks - 850,000. Just as important, Social Security sends and receives millions of pieces of mail every year, including notifications, requests for information, Medicare enrollment forms and replacement Social Security cards. More isolated, rural parts of the country are particularly vulnerable to problems within the postal system. And the shutdown since March of Social Security’s national network of field offices because of the pandemic means that more business is being transacted through the Postal Service that normally would be handled through in-person visits.Learn more in my Retiring column.Another chat about the pandemic and retirement timing Before the coronavirus pandemic, at least one retirement trend was headed in the right direction: More workers were staying on the job longer, and that was good news for retirement security. But COVID-19 has stopped that trend in its tracks. An accumulating body of data reflects an acceleration of early retirement as jobless older workers give up on the labor market due to the unique health barriers posed by the coronavirus. This trend will be bad news for the retirement prospects of millions of Americans.I joined career coach Marc Miller (yes, he uses an incorrect spelling for his name) on his podcast this week to discuss implications of the pandemic for careers and retirement timing. You can catch our conversation here. Or, read my latest Morningstar column, here.Recommended reading this weekThe U.S. Department of Labor’s social investing rule is likely to advance despite massive opposition . . . And DoL will hold a hearing on its new fiduciary rule after all . . . Millions of unemployed older workers are struggling to keep their health coverage . . .More than 40 percent of COVID19 deaths are linked to nursing homes . . .Trump sends fast, cheap COVID19 test to nursing homes, but there’s a catch . . .Is it time to abolish nursing homes? Get on the email list at retirementrevised.substack.com
16 minutes | Aug 20, 2020
Retired by the pandemic? Part-time work could fill the gap
Before the pandemic, at least one retirement trend was headed in the right direction: more workers were staying on the job longer - and that was good news for retirement security.But COVID-19 has stopped that trend in its tracks. Early retirement is accelerating as jobless older workers give up on the labor market due tothe unique health barriers posed by the coronavirus.What can you do if you find yourself in this situation? This week on the podcast, I talk with Kerry Hannon. Kerry is an expert on career transitions, entrepreneurship and retirement. And she has a new book that couldn’t be more timely - Great Pajama Jobs: Your Complete Guide to Working from Home.I invited Kerry on the program to talk about how part-time work can help fill income gaps in the event of early retirement . . . and practical strategies for finding part time gigs. We talked about the types of jobs out there, companies doing the hiring, how to make sure your skills are a good fit and where to search.Click the player icon at the top of the newsletter to listen to the podcast - it also can be found on Apple Podcasts, Spotify and Stitcher.Not a subscriber yet? Take advantage of a special offerSign up now for the free or subscriber edition of the newsletter, and I’ll email a copy of my latest retirement guide to you. This one looks at dealing with the Social Security Administration during the COVID19 crisis. Customer service at the Social Security Administration has changed during the coronavirus crisis - the agency closed its network of more than 1,200 field offices to the public in March. Just a reminder- subscribers, have access to the entire series of guides at any time. Click on the little green button to subscribe, or go here to learn more.Retirement abroad: A new calculator helps you figure it outIf you’ve ever toyed with the idea of retirement abroad but have no clue where to go, a new calculator could give you a first-cut look at some ideas.International Living magazine has launched an Overseas Retirement Calculator to generate a list of places where you budget may provide good value. You input data about your age, savings, and projected retirement budget, and the calculator generates overseas options to consider in Latin America, Southeast Asia, and Europe. All of the locations appear on International Living annual Global Retirement Index, which details the world’s top retirement locales.If you do give this calculator a whirl, keep in mind that it is no more than a starting point -do your research carefully before heading off somewhere!I interviewed one of the magazine’s editors last year on how to do this.What a shock - people are throwing away thick packets of disclosure formsA key criticism of the Securities and Exchange Commission’s new Regulation Best Interest is that it relies too heavily on disclosure - so long as brokers tell you about all their conflicts of interest, all is well. Now, advisors report that clients are ignoring the disclosure forms. Shocking!ICYMI: Race and retirementIn last weekend’s New York Times, I examined how structural racism impacts people of color in retirement, and ideas that have surfaced to address the problem. Racial gaps in retirement security were large before the coronavirus struck, and the economic disruptions caused by the pandemic could worsen the problem. Get on the email list at retirementrevised.substack.com
18 minutes | Aug 14, 2020
Why Trump's tax deferral poses a bigger threat to Social Security than you might think
Source: AARPThis week on the podcast, we consider this startling question: What would happen to Social Security if we eliminate its funding? That’s the question I’m asking myself following Donald Trump’s presidential memorandum last weekend ordering the deferral through year-end of revenue collected under the Federal Insurance Contributions Act - better known as the payroll tax - that funds Social Security. FICA is the more appropriate name, because it more accurately describes the purpose of these payroll deductions. This is the main way that Social Security is funded - a 12.4% tax split evenly by workers and employers. The program also earns some revenue from interest on trust fund bonds and taxation of benefits, but that’s trivial compared with the $1 trillion in FICA that comes in to the Social Security trust fund every year.And FICA is the more appropriate name, because it more accurately describes the purpose of these payroll deductions - they are insurance premiums that we pay for Social Security. Which is a social insurance program. That’s a term that used to mean something in our country, but it is hardly used anymore. So, just to review the bidding:Social Security and Medicare provide benefits we all earn through a lifetime of premiums - that we pay via FICA. The idea of an earned benefit is the core concept of social insurance, alongside the idea that these programs efficiently protect us all against risks - namely, the loss of income in old age in the case of Social Security, or healthcare costs in the case of Medicare. But here’s the real stunner: in an election year, Trump threatened last weekend to push for termination of FICA altogether if he wins a second term. One of his top campaign lieutenants doubled down on that pledge in a tweet. White House officials have been scrambling all week to walk this back, but . . . who knows.I wrote about this for Reuters this week. But I also covered a fascinating webinar yesterday on Social Security reform where this came up. It was sponsored by the American Academy of Actuaries, and it featured a panel of Social Security experts from different perspectives and areas of expertise. Social Security’s chief actuary was on the call - and when you hear Steve Goss talk about Social Security, you really are hearing from the authoritative source on the finances of the program. The panel also included panelists with three different ideological perspectives - Rachel Greszler, an economist with the Heritage Foundation, Bill Hoaglund of the Bipartisan Policy Center, and Nancy Altman of Social Security Works.If we stop funding Social Security through FICA, just about anything can happen. The concept of an earned benefit can go out the window pretty quick, and people will start thinking of Social Security as welfare. The podcast includes comments from all the webinar guests, and there’s an especially valuable overview from Goss on the current state of Social Security’s finances. Steve references some of his presentation slides in that clip, so if you want to follow along with him, here’s a link to a downloadable PDF that includes the relevant slides. The whole thing gets a little wonky, so you may prefer to just listen.Ironically, all this is up for discussion on the 85th birthday of Social Security. FDR signed Social Security’s enabling legislation on this date in 1935 - and it has has never missed payment of a dime’s worth of benefits. For most of its history, Social Security has been our most important retirement program. And for most of its history it has been the subject of controversy and unwarranted attacks. Defunding Social Security is a surprising proposal to hear in an election year - just take a look at the chart at the top of the newsletter showing responses to a new public survey on Social Security issued today by AARP to commemorate the anniversary - this question shows the overwhelming support for Social Security by Democrats, Republicans and independents alike as they respond to this question: How important is Social Security relative to other government programs?This is a year to pay attention to what politicians say about the future of the program.Not a subscriber yet? Take advantage of a special offerSign up now for the free or subscriber edition of the newsletter, and I’ll email a copy of my latest retirement guide to you. This one looks at dealing with the Social Security Administration during the COVID19 crisis. Customer service at the Social Security Administration has changed during the coronavirus crisis - the agency closed its network of more than 1,200 field offices to the public in March. Just a reminder- subscribers, have access to the entire series of guides at any time. Click on the little green button to subscribe, or go here to learn more.America’s racial retirement gap, and how to close it In this weekend’s New York Times, I examine how structural racism impacts people of color in retirement, and ideas that have surfaced to address the problem.Racial gaps in retirement security were large before the coronavirus struck, and the economic disruptions caused by the pandemic could worsen the problem.Since the pandemic hit, unemployment rates for older Black and Latino workers have been much higher than for their white counterparts, and evidence is mounting that millions of older workers will retire prematurely. That will mean sharp reductions in Social Security income, savings and costly disruptions in employer-provided health care that will hit nonwhite workers especially hard.But the gaps in resources for retirement were large before the pandemic. In 2016, the typical Black household approaching retirement had 46 percent of the retirement wealth of the typical white household, while the typical Hispanic household had 49 percent, according to a study by the Center for Retirement Research at Boston College.A bit of good news: Social Security closes the racial gap significantly. The Center for Retirement Research at Boston College compared wealth ratios for white, Black and Latino near-retirement households, including Social Security and pensions, retirement and non-retirement saving accounts and home equity. But the researchers then compared wealth with and without Social Security. This first table shows what the wealth gap would look like if we didn’t have Social Security - you can see the gaps are quite large. This second table compares wealth including Social Security. Inequality is still large, but not quite as staggering.This is due in part to Social Security’s progressive benefit formula — it returns a higher percentage of pre-retirement income to lower-income than higher-income workers. And unlike private pensions and homeownership, nearly all Americans participate in Social Security. The universal nature of Social Security also is an important factor. My Times story discusses ways that Social Security could be changed to close the gap further, and an intriguing concept for jump-starting wealth for people of color at birth. Get on the email list at retirementrevised.substack.com
28 minutes | Jul 31, 2020
Why Congressional "rescue committees" for Social Security and Medicare should worry you
This week on the podcast, we examine proposed Senate legislation to create Congressional “rescue committees” that could propose cutbacks to Social Security and Medicare benefits.My guest is Nancy Altman, the president of Social Security Works, one of the leading progressive advocacy organizations for Social Security. Nancy also brings a unique vantage point as a scholar and historian of Social Security. And she also served on the staff of the Greenspan Commission, which succeeded in passing significant reforms to Social Security back in 1983.Senator Mitt Romney of Utah is the sponsor of the TRUST Act, a bill I consider to be ironically named, because it could lead to benefit cuts for these programs through a secretive closed-door committee process. The TRUST Act has been rattling around Congress for a while, but now it may be included in whatever pandemic relief bill the Senate Republicans wind up proposing. Yes, you heard that right - in the middle of a pandemic, Senate Republicans may propose a review of Social Security and Medicare that could lead to cutting these vital programs.The TRUST Act would require the U.S. Department of the Treasury to report to Congress on the health of the Social Security and Medicare trust funds within 45 days of passage. Congress would then appoint bipartisan committees to come up with recommendations by June of 2021. Then, lawmakers would be required to take an up or down vote on the proposals, with no amendments allowed.Ok, first - let’s stipulate that these trust funds have problems that need to be addressed. The Social Security trust fund is on track to be exhausted in about 15 years - at that point, it would have sufficient revenue coming in the door to pay roughly 80 percent of promised benefits. The Medicare hospital trust fund - which pays for Part A - is on track to be exhausted in 2026 - and it could be sooner than that due to the pandemic. But we don’t need reports from Treasury to know these things - the Social Security and Medicare trustees issue exhaustive, authoritative financial health reports annually. And we don’t need new analysis of ways to reform the programs - numerous studies, reports and Congressional hearings have been held in recent years, featuring testimony from experts representing all political and policy perspectives.But there’s a good reason why Republicans want this debated away from the public eye, especially where Social Security is concerned. Simply put, they want to advance ideas that the public doesn’t support, like higher retirement ages, means testing and a stingier annual cost of living increase. That is clear from their own legislative proposals in recent years, and the ideas they push in bipartisan policy settings, such as the 2016 report issued on retirement policy by the Bipartisan Policy Center. But public poll after public poll has shown that given the choice, the public would prefer higher taxes over benefit cuts. Sometimes, the Republicans come right out in the open and tell you why they want the debate to occur in private. Here’s Iowa Senator Joni Ernst at a town hall meeting last year:Click the player icon at the top of this page to listen to the podcast. And here’s my Reuters column this week, which discusses the TRUST Act.Not a subscriber yet? Take advantage of a special offerSign up now for the free or subscriber edition of the newsletter, and I’ll email a copy of my latest retirement guide to you. This one looks at dealing with the Social Security Administration during the COVID19 crisis. Customer service at the Social Security Administration has changed during the coronavirus crisis - the agency closed its network of more than 1,200 field offices to the public in March. Just a reminder- subscribers, have access to the entire series of guides at any time. Click on the little green button to subscribe, or go here to learn more.Why it’s time to fire your brokerJay Abolofia thinks it’s time to get rid of your broker.Jay is a fiduciary CFP, founder of his own planning firm, Lyon Financial Planning and an economist. You may recall that he joined me on the podcast back in March to talk about how to deal with fear of stock market volatility.Jay recently got back in touch with me about an article he posted on the high cost and financial conflicts involved in working with a stock broker - a timely topic, since the Security and Exchange Commission’s new (and toothless) “Regulation Best Interest” took effect recently. Jay’s post is titled Why it’s time to break up with your broker, and it details the numerous conflicts of interest and high fees that pose major barriers to your financial success. I’ve been highlighting this topic for years, but Jay did some great digging into the disclosure forms of the major brokerage firms, so I asked his permission to cross-post his article here:In his book The Four Pillars of Investing, financial theorist and author William Bernstein puts it bluntly:“Under no circumstances should you have anything to do with a full-service brokerage firm . . . Severing that professional relationship is necessary to your financial survival.”This is often easier said than done, as your broker may be your neighbor, friend or even family. In what follows, I shed light on the conflicts of interest and excessive fees that are commonplace in the brokerage industry today. (Please proceed with caution. What I’m about to share may shock you.)Your Broker is Not Your BuddyA stockbroker is a person in the business of buying and selling financial securities on behalf of customers. Long story short, a stockbroker is a professional salesperson. Brokers need trades to make money. Unlike investment advisors, who must register with the SEC or state securities regulator, brokers are not fiduciaries. Rather than being required by law to act in their clients’ best interest (like doctors, lawyers, bankers and accountants), brokers are instead subject to a “suitability” standard upheld by a private-sector organization. This standard says that brokers should “have a reasonable basis to believe a recommended transaction or investment strategy is suitable for the customer.” Yes, you read that correctly! As the old adage goes, a broker’s job is to slowly transfer his client’s assets to his own name.There are no educational requirements to be a broker. No courses in finance, economics or law. Not even a high-school diploma. Earn a 72% on the simple multiple choice Series 7 exam and you’re ready to manage other peoples’ life savings. Spend five minutes reading my Four Steps to Successful Long-term Investing and you’ll know far more than the average broker.Brokers have one incentive, and that is to earn their commission. This creates a minefield of conflicts. In their so-called Important Account Information booklet, a disclosure document hidden deeply within their website, Morgan Stanley beautifully summarizes many of these conflicts of interest. I count over twenty major conflicts (see pages 7-12). These read like a coup de grâce. Here are five I find particularly egregious.“A Financial Advisor has an incentive to recommend more transactions or to break transactions into smaller increments that might generate higher and more frequent commissions.”“A Financial Advisor has an incentive to recommend that you add more assets to your account, as it will generate a higher asset-based fee . . . [and earn them more] compensation based on certain milestones.”“Financial Advisors may receive more or less compensation if, for example, clients select certain products over others.”“Financial Advisors, could engage in outside business activities and investments or have outside or pre-existing relationships with product or service providers that conflict with their job responsibilities.""Financial Advisors are also compensated when their clients borrow funds."In short, you can’t trust much of anything your broker says. It’s not because they are inherently bad. It’s because they are trained and incentivized to sell, not to deliver objective advice.Your Broker Charges Exorbitant Asset-Based FeesBrokers are typically paid an investment management fee based on the amount of assets they manage in your accounts. These are called asset-based or assets under management (AUM) fees. These fees may or may not include any financial planning your broker provides and may be in addition to other fees, commissions, fund expenses, taxes, and investment-related costs. For example, a 2% AUM fee means you’ll pay $20K in fees this year on a $1M account. As the account grows, the fee grows proportionately.Below is a summary of AUM fees charged by some of the largest brokerage firms for their most common investment management service for retail customers. Morgan Stanley, Ameriprise and Wells Fargo take the cake for highest fees. Although publicly available, this information is a bear to uncover. These fees are typically assessed on at least the first $1-5M in the account, depending on the broker and service, with slightly lower fees assessed on higher account balances.Two percent might not sound like much, until you consider that it’s ¼ to ½ of the gross annual return you may expect to earn in your accounts. Over years of investing, this can add up to hundreds of thousands of dollars lost, both to fees and lost investment growth—every dollar paid in fees is one less dollar earning compound interest in your account. With a 2% AUM fee, a $1M account growing at 6% a year will result in cumulative fees over 20 years of $623K and $443K in lost investment growth. This amounts to a loss of over $1M, or 48% of the account’s cumulative growth!Break Up With Your BrokerGiven these major conflicts of interest and exorbitant asset-based fees, Bernstein’s advice to break up with your broker really adds up. You’ll likely get much better financial advice and save hundreds of thousands of dollars by working with an independent, fee-only fiduciary. One with solid credentials and experience, who provides comprehensive financial planning, not just investment advice or management. Better yet, find an advisor who does all of this for a straightforward fixed-fee and your future self will thank you! Fee information can often be found in the firm’s disclosure documents. For example, read the section on “fees and compensation” in the firm’s “wrap fee” program brochure or ADV Part 2A. Here are source links I used for each firm: Morgan Stanley, Ameriprise, Wells Fargo, Merrill Lynch, Edward Jones, UBS, Fidelity, Charles Schwab. Get on the email list at retirementrevised.substack.com
31 minutes | Jul 9, 2020
How will couples navigate retirement timing in the pandemic?
This week on the podcast, we take a look at the challenges facing couples as they navigate decisions about timing their retirement in the time of pandemic. This podcast stems from a column I wrote last month for the New York Times. That story examined how the pandemic is affecting all aspects of retirement timing for older workers - everything from the job losses happening due to the recession to age discrimination issues related to health risks.Retirement timing is one of the most important factors affecting retirement plans. When you are able to work longer, those additional years of wage income make it easier to delay your Social Security filing, earning delayed filing credits. Working longer also can mean saving more and living off those savings for fewer years. It also could get you more years of employer-subsidized health insurance. (For more on this see my recent guide for subscribers on retirement timing.)About one-third of baby boomers and Genxers tell pollsters that they plan to work longer because of the economic crisis. But that may be easier said than done. Even before the pandemic, about half of all workers who retired between age 55 and 64 did so involuntarily because of ill health, family responsibilities or job loss. And the pandemic is going to make things much tougher. For the first time since World War II, the rate of unemployment and underemployment has been running higher for workers over age 65 than it for other adults. There’s also mounting evidence of a large spike in people taking early retirement, as I note in the Times story. The virus creates a sort of double jeopardy for older workers - if they go back to work, they face a risk of serious illness. If they stay home, they stand to lose income and may be forced to file for Social Security earlier than planned. That will have lifetime financial consequences.One of the topics I covered in the column is how couples are approaching these complicated questions. A decision to return to the workplace may not only create infection risk for that person but put a spouse at risk as well. I wanted to pursue that further on the podcast this week.Joining me are two guests: Katherine Carman is a senior economist at the RAND Corporation. Currently she is studying health insurance decisions and retirement decisions. And she is the co-author of a Rand study (pre-pandemic) on retirement patterns among couples. The research found a fluid pattern of decision making, often involving phased retirement, short-term jobs, and periods of non-employment and returns to work. She found that for most couples, there is a “discordant” phase, when one spouse works longer than the other. Dorian Mintzer is an experienced therapist; retirement transition, money, relationship, and executive coach; consultant; speaker; and writer. She hosts the monthly Revolutionize your Retirement Interview with Experts series; she also is co-author of the award winning book The Couple's Retirement Puzzle: 10 Must-Have Conversations For Creating An Amazing New Life Together. And at age 74, Dori finds herself at a personal crossroads and she and her husband try to sort out their own retirement timing issues.Not a subscriber yet? Take advantage of a special offerSign up now for the free or subscriber edition of the newsletter, and I’ll email a copy of my latest retirement guide to you. This one looks at dealing with the Social Security Administration during the COVID19 crisis. Customer service at the Social Security Administration has changed during the coronavirus crisis - the agency closed its network of more than 1,200 field offices to the public in March. Just a reminder- subscribers, have access to the entire series of guides at any time. Click on the little green button to subscribe, or go here to learn more.Widespread unemployment and retirement riskWidespread unemployment due to the pandemic would increase the number of older households at risk of being unable to maintain their pre-retirement standard of living. That’s not a big surprise.But the latest update of the National Retirement Risk Index (NRRI) finds something else quite interesting. Low-income households face greater job risk, but their retirement security risk is similar to that of higher income groups.The NRRI is produced by the Center for Retirement Research at Boston College. The latest update finds that widespread unemployment would increase the NRRI from 50.2 percent to 54.9 percent of all working-age households, resulting in an additional 4.7 percent of households at risk in retirement. The results for the 30 percent of households that experience the job loss are much more dramatic. The NRRI for this group increases from 54.4 percent to 75.4 percent, a 21-percentage-point jump.But a closer look by income groups and age shows that while low-income households have a greater chance of losing their job than those in the upper two groups, their risk does not increase proportionately. What’s going on? According to CRR: One reason for this pattern is the progressivity of the Social Security benefit formula. Reduced lifetime earnings due to the employment shock increase the Social Security replacement rates for the unemployed in all income groups, but this effect is particularly important for the bottom third, which relies almost entirely on Social Security for retirement income.I’m starting work now on a new story about the role Social Security plays in this very difficult economic climate in smoothing out retirement inequality, with a particular focus on race. Stay tuned.Nursing home death rates exposes cracks in the systemThe high death rates from COVID-19 in nursing homes and long term care facilities was a catastrophe waiting to happen. As Trudy Lieberman notes in this article for the USC Annenberg Center for Health Journalism:The coronavirus pandemic has exposed the chasms, the fissures, the cracks in many American institutions. Nowhere, though, are they more apparent than in the nation’s arrangements for long-term care — specifically, in its nursing homes, where some 1.4 million people, mostly women, live out the rest of their days.The virus has exposed what advocates for better treatment and families of loved ones in nursing facilities have known for years. Care is often substandard, infection control sometimes non-existent, living space overly crowded, staff members too few to keep residents safe, and a regulatory system that looks good on paper but too often looks the other way when politics and lobbying trump good enforcement and resident safety.In May, the Government Accountability Office released a damning report showing that only 18% of the country’s nursing homes had no deficiencies for infection control and prevention in one or more of the years from 2013 through 2017, before the virus hit. That’s a grim indictment of how America cares for its most vulnerable elders. “It is a policy failure based on moral negligence,” said Larry Polivka, executive director of the Claude Pepper Center at Florida State University. “We need to understand more clearly this moral failure that is responsible for the crappy long-term care system we have built over the decades. It comes from not caring enough about older people when they need help.”Lieberman goes on to cite several examples of exemplary reporting on the pandemic and nursing homes from outlets including Reuters, the Boston Globe and PBS NewsHour; you'll find links to those stories in Trudy's story.Meanwhile, Paul Kleyman offers an excellent round-up on this topic in his Generations Beat Online newsletter that includes links to more worthwhile coverage. And Howard Gleckman of the Urban Institute asks this provocative question: We’re having a national conversation about race and Policing - why aren’t we having one about race and long-term care?Recommended reading this weekCovid-19 sickens seniors differently -here’s why . . . How a Covid-19 vaccine could cost Americans dearly . . . What seniors should know before going ahead with elective procedures . . . Planning to work beyond retirement age? Consider entrepreneurship . . . New internet radio station helps seniors share their favorite music. Get on the email list at retirementrevised.substack.com
20 minutes | Jun 12, 2020
What the hell is going on with the stock market?
For this week’s podcast, I called up financial planner and author Allan Roth to ask one simple question: “What the hell is going on with the stock market?”I’ve long believed that it is folly to forecast the market’s direction, and this podcast serves as a nice reminder of why I’m right about that! When I first invited Allan to talk about the market earlier this week, the backdrop was the gravity-defying rally of the last couple months. The day after we talked, the S&P 500 racked up its worst day since March, falling nearly 6 percent. I’m writing this on Friday morning; how will the market do today? I haven’t got a clue. The rally since March made no sense to me in the first place. Jeff Sommer summarized this sentiment nicely in a column for The New York Times last weekend:Towns and cities across the United States have been convulsed in protest against police killings of black people. The president has declared that he is prepared to deploy the United States military to “dominate” the streets — while his secretary of defense says he opposes using military force against American civilians.Teetering on a constitutional precipice, the country faces catastrophic unemployment, grave trade tensions and a deep recession. And no one needs reminding that the world has been stricken by a coronavirus pandemic that has already killed more than 380,000 people, more than 106,000 of them in the United States.You may want to place these items in a different order, add some or subtract others. But it would seem that at least we can all agree that we are looking at an ugly picture.Yet there is a glaring exception to all this gloom: the stock market. It has been absolutely fabulous! In fact, by some measures, the American market has never been better.On Thursday, the stock market seemed to be facing reality after a fresh Federal Reserve projection that the economy faces a long, multi-year slog back to health, and that much uncertainty remains. But we might recover from the drop quickly. Or not.Allan Roth joined me for a podcast back in March to talk about how average retirement investors should think about market volatility. He was back on my radar screen this week following an excellent column for Adviser Perspectives titled The Question Every Advisor Must Answer. This piece runs through the panicky questions and assertions many financial planners are fielding from clients these days:An economic depression is possible, if not likely.There will be at least a 50% market decline.The chance of a rally, much less getting anything close to historical stock returns, is near zero.A state-issued general obligation (GO) muni bond held to maturity is safe – no defaults since 1932 – and yields 5% on a taxable equivalent basis.Take everything out of stocks for at least six months or until after a big correction.In our conversation, Allan and I considered those questions and more. Listen to the podcast by clicking the player icon at the top of this page. The podcast also can be found on Apple Podcasts, Spotify and Stitcher.RetirementRevised.com guide: Timing your RetirementSpeaking of working longer - if you’re a subscriber, check out my recent guide on Timing your Retirement. This guide gets into the details on how timing impacts your retirement security. You can find it on the newsletter guide page for paid subscribers.If you haven’t subscribed yet, give it a try - $60 annually or $5 per month, no obligation and feel free to cancel at any time. You’ll have access to all of my newsletter content and podcasts, plus all of the retirement guides, including:Claiming Social SecurityTransitioning to MedicareSelecting Medicare plansAging in PlaceManaging the cost of health care in retirementHow to hire a financial advisorClick the little green button below to subscribe, or here to learn more about the newsletter and podcast.These economists want to lock down everyone over age 65Here’s a truly outrageous plan for getting the economy back up and running: simply force everyone over age 65 into lock down.That’s one of the ideas floated in a frightening research paper by three economists from the Massachusetts Institute of Technology. Their argument: since older people are at greater risk of serious illness and death, let’s just force them all to stay home and let everyone else get back to work. Here’s how they summarize it in an article for Time magazine:As is well documented, the mortality risk from COVID-19 is highly correlated to age. Because those over 65 years of age have around 60 times the mortality rate of those ages 20 to 49, lock downs on the elderly as a protective measure can be very effective in reducing deaths. They also have lower economic costs than lock downs for younger adults, as only around 20% of those over 65 are still working.The choice between protecting lives and economic recovery is complex and difficult–not least because politicians and the public alike disagree on the trade-off between excess deaths from the pandemic and the economic damages. But our study shows, no matter what the priorities are, targeted policies bring both public-health and economic benefits.Ok, first of all - comorbidity risk is not high only for the elderly. It is very high for people who are obese, have diabetes or asthma, for example. Do we place all of them in a mandatory lock down, too?Just to be clear - I think older people should be isolating themselves to protect against risk. That only makes sense, on a voluntary basis. But a mandatory, discriminatory policy based on age does not.The article doesn’t explore the implications of such a policy from an age discrimination standpoint - that is, what about older workers who are still on the job? This probably is because their paper they classify everyone over age 65 as “old.” (They didn’t have the nerve to use that description in the Time article - only in their research paper, which is here).This study underscores why it is so important to rely on guidance on COVID19 from real experts - who just happen to be epidemiologists. Not economists.Speaking of epidemiologists . . .The New York Times asked more than 500 epidemiologists when they personally expect to resume 20 activities of daily life, assuming that the pandemic and the public health response to it unfold as they expect. The results offer a telling snapshot of what the real experts on the pandemic expect, from a “vote with your feet” perspective. This is well worth a glance - the charts alone are worth a thousand words.The upshot: for most of them, resumption of daily activities is anywhere from three months away to more than a year.Recommended reading this weekThe latest on prescription drug reform proposals from the presidential campaigns and Congress . . . 30 companies that hire for part-time, remote work-from-home jobs . . . Policy ideas for strengthening the Medicare Hospital Insurance trust fund . . .Nearly half of workers expect to withdraw savings because of the COVID-19 crisis. Get on the email list at retirementrevised.substack.com
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