Thursday, March 6, 2014
New GAO Report on "Retirement Security: Trends in Marriage, Work, and Pensions May Increase Vulnerability for Some Retirees"
The decline in marriage, rise in women's labor force participation, and transition away from defined benefit (DB) plans to defined contribution (DC) plans have resulted in changes in the types of retirement benefits households receive and increased vulnerabilities for some. Since the 1960s, the percentage of unmarried and single-parent families has risen dramatically, especially among low-income, less-educated individuals, and some minorities. At the same time, the percentage of married women entering the labor force has increased. The decline in marriage and rise in women's labor force participation have affected the types of Social Security benefits households receive, with fewer women receiving spousal benefits today than in the past. In addition, the shift away from DB to DC plans has increased financial vulnerabilities for some due to the fact that DC plans typically offer fewer spousal protections. DC plans also place greater responsibility on households to make decisions and manage their pension and financial assets so they have income throughout retirement. As shown in the figure below, despite Social Security's role in reducing poverty among seniors, poverty remains high among certain groups of seniors, such as minorities and unmarried women. These vulnerable populations are more likely to be adversely affected by these trends and may need assistance in old age.
Friday, February 14, 2014
Via University of Michigan Retirement Research Center, a call for papers connected to an upcoming conference:
With support from AARP, a conference on Social Insurance and Lifecycle Events Among Older Americans will be held on December 5th of 2014 in Washington, DC.
The conference will focus specifically on lifecycle events commonly encountered by older Americans, the responsiveness of current policies to those events, and new thinking about policies consistent with a changing political environment.
The conference will be organized into three sections dealing with the importance of:
- changing career/job patterns,
- changes in family structure, and
- health limitations.
Papers should focus on experiences and policies aimed at addressing Americans age 50 and older and highlight the experiences of different socio-economic groups, with a particular emphasis on the disadvantaged.
Funding is available for domestic travel to the conference for one author of each paper to be presented. It is anticipated that either a special issue of a scholarly journal or an edited volume will be produced based on papers delivered at the conference.
Paper proposals for the conference should be sent to Professor Kenneth Couch by March 15, 2014. Authors will be notified of acceptances by April 15, 2014. Drafts of papers to be presented at the conference will be due by the end of October. Additional details here.
Saturday, January 18, 2014
New report from SSA's Office of Retirement and Disability Policy addresses SS, SSI participation rates by African Americans
African Americans: Description of Social Security and Supplemental Security Income Participation and Benefit Levels Using the American Community Survey
Patricia P. Martin and John L. Murphy
Research and Statistics Note No. 2014-01 (released January 2014)
Intro/summary: African Americans encounter significant economic disadvantages, making them a critical focus for social insurance programs. Examining how the African American population uses Old-Age, Survivors, and Disability Insurance (OASDI, or Social Security) benefits and Supplemental Security Income (SSI) payments clarifies the role these programs play in supporting at-risk populations.
Earlier research has explored various facets of the relationship between Social Security and African Americans. For instance, many studies investigate African Americans' low retirement benefit receipt rates relative to whites (Abbott 1977, 1980; Thompson 1975; Huntley 1979; Parsons 1980; Gibson 1987, 1991, 1994; Farley 1988; Hayward, Friedman, and Chen 1996; O'Rand 1996; Gendell and Siegel 1996; Choi 1997; Hendley and Bilimoria 1999; Gustman and Steinmeier 2004; Bridges and Choudhury 2007, 2009; Favreault 2010). Others examine the prominent role of children's benefits for African Americans (Newcomb 2003/2004; Tamborini, Cupito, and Shoffner 2011). This analysis contributes to that body of research by using a relatively new, publicly available, and comprehensive data source, the American Community Survey (ACS), to document the demographic and economic characteristics of African American OASDI beneficiaries and SSI recipients. It is designed to lay the groundwork for future detailed analyses of how African Americans interact with Social Security and related programs.
In this note, we first discuss the strengths of the ACS and the methodology of this analysis. Next, we present the demographic and economic characteristics of the African American population in the 2009 ACS. Then, we present ACS data on OASDI and SSI participation and benefit levels, comparing African American participants with overall participants in three age distributions: the full age range for which benefit statistics are available in the ACS (15 or older), working age (18–61), and retirement age (62 or older).
Monday, January 13, 2014
Earlier today I posted about a new article on tightening scrutiny of investment plans and financial products marketed to seniors. On the theme of liability for those who push completely unsuitable investments, I should add that the U.S. Supreme Court recently accepted cert on Fifth Third Bancorp v. Dudenhoeffer, where employees challenged the investment practices of their 401(k) plan administrators. The issue is breach of fiduciary duties for continuing to encourage investment of employee retirement monies in the employer's securities despite the company's deepening involvement in the subprime mortgage market that drastically increased risk.
The plan administrators argue that they are entitled to a "presumption of reasonableness" for investing in employee stock ownership plans (ESOPs) under ERISA law, citing 29 USC 1104(a)(2). The workers challenge application of such a presumption at the pleading stage. They assert continued recommendations to invest, rather than divest, combined with what they believe and allege was the plan administrators' knowledge of the risk, are sufficient to frame a cause of action for violation of fundamental fiduciary obligations under ERISA protections.
I wish I could predict the Supreme Court's action means that employees and retirees will have a better chance of getting past motions to dismiss on pleadings in retirement plan cases. Afterall, even a conservative such as Chief Justice Rehnquist rejected application of heightened standards at the complaint stage as grounds to dismiss civil rights cases, in Leatherman v. Tarrant County Narcotics (1993). But, the fact that the Court accepted cert where the 6th Circuit actually ruled in favor of the employees makes me a little less than hopeful. There is a split in the circuits, with, for example, the 2d Circuit ruling in 2011 in favor of plan administrators on similar allegations in In re Citigroup ERISA Litigation.
Lots of interesting blog commentary on this topic, including SCOTUS Blog.
AARP is filing an Amicus brief for the plaintiffs in the Dudenhoeffer case, as discussed by Drexel Law Professor Lisa McElroy in AARP's Blog.
Thursday, January 9, 2014
The National Bureau of Economic Research has released 2013/Vol. 2 of the Bulletin on Aging and Health. The 2013 No. 2 Bulletin includes the articles below:
1) The Value of Medicaid to Older Households
by Mariacristina De Nardi, Eric French, and John Bailey Jones
2) Who Uses the Roth 401(k)?
by John Beshears, James Choi, David Laibson, and Brigitte Madrian
3) Do Financial Incentives Induce Disability Insurance Recipients to Return to Work?
by Andreas Kostol and Magne Mogstad
Also: Abstracts of Selected Recent NBER Working Papers
NBER Profile: Michael Baker
View a printable PDF copy of the 2013 No. 2 NBER Bulletin on Aging and Health here.
The HTML version is available at the Bulletin's homepage.
Wednesday, January 8, 2014
The cover story for the January 2014 issue of the ABA Journal is "Road to Retirement: Ways to Make Retirement Anything but Resignation." It is a surprisingly long piece, combining advice for younger workers with strategies across the decades, from late 20s to retirement, including the potential need for "life event adjusments."
Lots of interesting facts and quotes here, including observations on the theme of "reinvention" rather than retirement from Deanell Reece Tacha, "the 67-year old dean of Pepperdine Law School," now in her third year of law school administration, after serving 25 years as a judge on the 10th Circuit.
The article notes the ABA estimates some 400,000 lawyers are presently age 62 or older.
Tuesday, January 7, 2014
Sometimes what you don't know can hurt you, especially when it comes to individual retirement accounts. For instance, if you don't know that contributions for the prior year can be made up until the April 15 tax deadline of the current year, you may be missing out. Some misconceptions are innocuous while others can lead to serious tax blunders. Don't feel bad; even financial advisers get tripped up by the intricate rules of IRAs. Figuring out how the accounts work and what's allowed could be a full-time job. As a result, the list of things most people don't know about IRAs could fill a book.
This article list nine common misconceptions about IRAs--read about them here.
Monday, January 6, 2014
Catching up after a busy weekend at the Association of American Law Schools (AALS) Annual Meeting 2014 in New York City, I'm happy to report the presentations at the Section on Aging and the Law seemed to go smoothly and were well received, with a very engaged audience. While the weather made travel to and from NYC a bit tricky, it also seemed to "encourage" strong attendance at sessions. (I found myself skating even when not visiting the rink at Rockefeller Plaza!)
Section Chair Susan Cancelosi (Wayne State) was snowed out -- but I suspect Susan would be pleased by the reaction to the program she planned. Thank you, Susan, for putting together the theme, securing speakers, making sure we were all on track, and creating a back-up weather plan. We've decided you should be the moderator next year, if you don't mind!
Dick Kaplan (Illinois) led off the panelists, using his best "Dr. Phil" style to walk us through (both literally and metaphorically) the latest changes to Medicare triggered by the Affordable Care Act and other recent legislation. Recognizing that many in our audience do not teach elder law or health care law, Dick offered information useful to all academics who "expect" to retire. For example, recent information from the Employee Benefit Research Institute supported his forecast that a 65-year old person retiring in 2012 would need substantial saving just to cover out-of-pocket medical expenses, in the range of $122,000 -$172,000 for men and between $139,000 - $195,000 for women (with projections also affected by prescription drug usage). Dick reminded us that this figure does NOT include any costs for long-term care.
Next on the panel was Laura Hermer (Hamline), who is new to our Section -- and a very welcome addition. Using her health law background, Laura outlined the maze of programs, including state plan innovations and waiver programs under Medicaid, that may provide "long-term services and supports" (or LTSS -- the latest acronym that seems to be an intentional step away from a "care" model) for older persons. Her presentation emphasized the shift to home or community based care, but Laura made clear that this shift depends heavily on unpaid care by family members.
Incoming Section Chair Mark Bauer (Stetson) made effective use of visual images of 55+ communities in Florida to demonstrate his concern that exemptions from civil rights protections that permit age-restricted communities may not be matched by actual benefits for the older adults targeted as residents. Mark stressed the percentage of housing that is not designed to match predictable needs for an aging population. Examples included multi-story designs without elevators, steps into even ground-level units, and bathrooms without wheel-chair accessibility. Mark's presentation expanded on his recent article in the University of Illinois' Elder Law Journal.
Speaking last, my topic was the latest state law developments tied to federal laws that authorize nursing homes to compel a "responsible party" to sign a prospective resident's nursing home contract. States are creating potential personal liability for costs of care for family members, agents or guardians, or transferors or transferees of resources, if the resident is deemed ineligible for Medicaid. Here are links to a copy of the slides I used for my presentation on "Revisiting Nursing Home Contracts," as well as to a related short article I was invited to write for the Illinois State Bar Association's Trusts & Estates Section in December 2013.
The panel presentations were followed by great questions and observations from the audience, further highlighting the financial challenges of aging. Plus, it was wonderful to see several new members volunteering to join the planning committee for future programs for the Aging and Law Section of AALS. And welcome back to the board to Alison Barnes (Marquette Law).
January 6, 2014 in Consumer Information, Ethical Issues, Federal Statutes/Regulations, Health Care/Long Term Care, Housing, Medicaid, Medicare, Programs/CLEs, Retirement, State Statutes/Regulations | Permalink | Comments (0) | TrackBack (0)
Wednesday, January 1, 2014
Professor Morgan blogged about this interesting NYT article earlier, but I want to highlight a portion of Jessica Silver-Greenberg's "Winning Veterans' Trust, and Profiting From It." The article is especially critical of "actors" active in representing or promoting VA benefits for aging veterans, including "lawyers, financial advisers and insurance brokers."
"Questionable actors are capitalizing on loose oversight to unlock the V.A. money and enrich themselves, sometimes at veterans’ expense. The V.A. accreditation process is so lax that applicants provide their own background information, including any criminal records. But the V.A. has only four full-time employees evaluating the approximately 5,000 applications that it receives annually. Once people get the V.A.’s stamp of approval, they rarely lose it, even if a customer complains or regulatory actions mount. Last year, the V.A. revoked its accreditation for two of its more than 20,000 advisers."
But it is one thing to question the standards for accreditation for individuals to represent or assist applicants for VA benefits. It strikes me there is an irony to the fact that the VA requires accreditation in order to serve as a paid advisor, yet that very accreditation is, according to the article, apparently part of the problem.
It seems to me the history described in the article also suggests the very real importance of VA benefits to individuals, especially those struggling to afford long-term care, such as 86-year-old Henry Schaffer, who seems to be in that gray zone of just enough inome to be "ineligible" for VA benefits, but not enough income to afford to pay privately. Thus, the arguable need for "planning." The article has a mixed message, one that I tend to question, as the article seems to imply that the increased rate of usage of VA benefits is due primarily to improper benefit awards, secured by manipulative "players" rather than experienced consultants working within the rules.
I noticed that the comments to the article are as interesting as the article itself, pointing to the need for better public understanding of VA benefits (including the availability of benefits for spouses of former members of the service). The comments highlight the consequences of close calls on ineligibility, and therefore also emphasize the need for qualified legal or other knowledgeable assistance.
Monday, December 23, 2013
On the front page of the Sunday edition of the Arizona Republic, is a feature story on the "evolution" of Sun City, by writers Catherine Reagor and Lesley Wright. Even though I grew up -- and rode horses -- on the edge of the original Sun City, one of the earliest, and arguably the most successful age-restricted retirement communities, I didn't know the history. Some interesting details:
- The original Sun City opened in 1960, the brainchild of developer Del E. Webb, who at first thought it might be challenging to sell homes to "older" adults, given the tradition of 30-year mortgages, as people thought " they might not live that long." But, on opening day, "thousands of people showed up to see the modest block-wall homes with carports that sold for $8,500 to $11,700, $600 more for air-conditioning." (If you have ever visited the Valley of the Sun in August ... you can guess that added $600 was an easy sell.)
- Today there are three Sun Cities in the Phoenix region. The median home price in the original community is still comparatively modest at $128,750, while Sun City Grand's median price is $240,000. The median income for residents in the original community is $36,903, and for the "newer" community, median income is $55,000.
- The communities have staved off attempts (and lawsuits) to open residence to younger individuals. At least one half of a couple must be 55 or older.
- In some instances, the residents of the first Sun City are now the granchildren of earlier residents. And the legacy of homes may continue. One resident was quoted as saying, "We plan to live here until the end and leave the house to our children...."
Sunshine and golf were highlighted in the original marketing, especially to snow birds from North Dakota, Minnesota and Wisconsin. But the community has had to change to keep up with expectations, and the "community's improvement fund, started in 1999, pays for new amenities. Pickleball course recently were added, and gym were updates with new equiptment," thus pointing to the wider range of interests (and sun-awareness) of today's retirees.
Thursday, December 12, 2013
From the University of Michigan Retirement Research Center, a paper on "Older Adult Debt and Financial Frailty" by Annamaria Lusardi (George Washington Univ. of Business) and Olivia Mitchell (Wharton, Univ. of Penn.). The authors compare data from three different time periods to analyze older persons' debt, debt management practices and corresponding potential for financial insecurity. Key findings include:
- Older Americans now on the verge of retirement are more likely to have substantial debt than in the past. "Median debt for those age 56-61 has more than quadrupled, from about $6,200 in 1992 to $28,300 in 2008 (in 2012 dollars)."
- Housing purchased with small down payments and subject to large mortgages are key reasons for higher debt for Boomer retirees.
- Income, level of education, marriage status, race, number of children, health, were also factors identified as affecting risk of financial insecurity after retirement.
One sentence that particularly stood out: "Baby Boomers are more likely to have engaged in expensive borrowing practices."
Tuesday, November 26, 2013
Via Yahoo News:
A man from Leeds, England has invented a dog-controlled washing machine. The "Woof to Wash" machine has a bark-activated "on" switch. A special "paw" button allows the pooch to easily open and close the machine's door. The inventor, John Middleton of U.K. laundry company JTM, intends for the "Woof to Wash" machine to make laundry an easier task for people living with disabilities by letting them delegate the trickier parts of the job to support dogs who have been trained to load and empty the machines. "We developed this machine because mainstream products with complex digital controls seldom meet the needs of the disabled user," he said. The Sheffield charity Support Dogs is training the animals to operate the new machines.
"People who are visually impaired, have manual dexterity problems, autism or learning difficulties can find the complexity of modern day washing machines too much," Middleton told Anorak. "I had been working on a single program washing machine to make things easier, and there was a lot of demand for it."
Saturday, November 23, 2013
After P.S. Ramachandran turned 80, he and his wife decided it was time to stop living alone. Rather than take the traditional path of moving in with their son, the Ramachandrans chose an option once rare in India: a retirement community. “We wanted to be independent,” said Ramachandran, now 85, a former government official who moved to the Brindavan Senior Citizen Foundation’s retirement village overlooking the Nilgiri hills near Coimbatore city in southern India. “We have company and everything we need here, and activities to keep us busy as long as we’re physically able.”
Rising wealth from the region’s rapid growth in recent decades is changing the way many Asians grow old, breaking up the traditional family unit as children move to the cities or go abroad in search of better-paid jobs. The change is a new source of business for companies from India’s Tata Housing Development Co., Malaysia Pacific Corp. and Singapore’s ECON Healthcare Group, which are constructing retirement villages for the wealthy that offer cafes, tennis courts and yoga. The developers are following companies from adult-diaper makers to holiday operators that have swooped in on Asia’s silver economy, catering to the region’s growing cohorts of over-60s.
Excluding Japan, the market will be worth about $2 trillion by 2017 -- more than the current Indian economy -- according to Singapore-based market researcher Ageing Asia Pte. Filial Piety “Filial piety is still big in Asia, but it has less of a role now,” said Janice Chia, founder and managing director at Ageing Asia. “My grandparents were satisfied with staying home, watching a bit of TV, walking in the park and looking after the grandkids. But my parents want to travel, keep their minds active and don’t necessarily want to live with their children.”
Thursday, November 21, 2013
Somehow I had missed this particular incarnation of predatory lending. The National Consumer Law Center (NCLC) recently circulated a consumer impact statement on pension-based loan scams. Often advertised as "cash advances," in reality the individual is agreeing to assign future pension payments to the lender, with repayment terms that include an outrageously high interest rate. In 2011, NCLC and attorneys with the National Association of Consumer Advocacy were successful in a class action suit in state court in California, in which they challenged loans requiring "assignments" of military pay or pensions as violating federal law. The court ordered restitution to the class members.
The New York Times ran a 2013 feature on "Loans Borrowed Against Pensions Squeeze Retirees," by Jessica Silver-Greenberg, part of a series on "A Vulnerable Age," that examined financial traps that can face older adults, especially during a tight economy. A sidebar to the article detailed an example of a loan to a disabled military veteran for $10,000, with a $353 monthly payment for 60 months, leading to total costs over the life of the loan of $21,180, representing an interest rate of 36.4%.
Wednesday, November 13, 2013
University of Michigan's Retirement Research Center has released a new paper on "Technological Progress and the Earnings of Older Workers." From the the abstract:
"Economists' standard model assumes that improvements in total factor productivity (TFP) raise the marginal product of labor for all workers evenly. This paper uses an earnings dynamics regression model to study whether, in practice, older workers benefit less from TFP growth than younger workers. . . . We find that although the earnings of younger workers track TFP growth 1-for-1, the earnings of older workes do not: we find for example, that a 60-year-old male's earnings grow only 85-90% as fast as TFP. Nevertheless, our analysis implies that in an economy with an aging labor force, gains from experience tend to outweigh older workers' inability to benefit fully from TFP improvement."
Sunday, October 20, 2013
Last week, I was part of our law school's team for the annual AALS Recruitment Conference, where prospective academics have a first wave of interviews with law schools, with everyone trapped in the same highrise hotel in Washington D.C. Yikes.
For a thoughtful analysis of how to succeed as an aspiring law professor, see a recent Stanford guide on "How to Get A Law Teaching Job." For an amusing take on the interview experience, from the applicant's perspective, watch this video on "Stuff Appointments Committees Say."
Every academic should be required to participate in such interviews on a regular basis if for no reason other than it is an important reminder of just how much talent is out there, and by comparison, how important it is to stay on top of our games just to keep up. Each of the candidates was bright, engaged, had umpteen top-notch publications, and concrete plans for the future.
By the way, in preparing for the conference, I was interested to see resumes from a significant number of applicants who listed "elder law" as a specific teaching interest.
As often happens after talking to the next generations of law professors, the older members of the current generation start talking about retirement. And, in turn, during the last few years such conversations usually involve retirement "numbers." As in, how much money do you need in order to retire safely?
Of course, the law professor's traditional answer works well here. "It depends." A very concise, interesting, and still lawyerly take on the "numbers" game comes via the Huffington Post. See "Retirement Planning with Just 3 Numbers"
Friday, September 27, 2013
Despite modest gains in the economy in 2012, national poverty rates remain virtually unchanged from last year. However, a new study highlights one group that has unexpectedly fallen deeper into poverty: elderly women. Among women 65 and older, the ‘extreme poverty’ rate rose 18% in 2012. Extreme poverty is defined as an annual income of $5,500 or less for older individuals living by themselves. “The cause has to be something that hits elderly individuals particularly hard,” said Kate Gallagher Robbins, a senior policy analyst at the National Women’s Law Center, who conducted the study. ”We also know that poverty for elderly men and women was statistically unchanged so we are talking about a group of individuals who went from being poor to extremely poor.”
The extreme poverty rate for elderly women ticked up to 3.1% in 2012 from 2.6% in 2011. An additional 135,000 elderly women became categorized as extremely poor, bringing the total number of elderly women in extreme poverty to 733,000. Sixty-two percent of elderly women in this group are white, non-Hispanic, 16% are Hispanic, 17% are black, 4% are Asian and 2% are Native American.
The National Women’s Law Center is currently exploring potential reasons for the sudden increase.
“One factor might be cuts in recent years to Social Security Administration funding which may be making applications for [Supplemental Security Income] more difficult,” Robbins wrote in an email to MSNBC.com. “Without Social Security, almost 15.3 million more elderly individuals would have been poor in 2012, yet many policy makers are debating switching the cost-of-living adjustment to the chained CPI which will reduce the value of benefits for current beneficiaries. Clearly these data show that making such cuts would be unconscionable.”
Another cause for the rise in the extreme poverty rate for this group may have to do with unemployment insurance benefits. Since older workers are more likely to be unemployed for longer periods of time, the likelihood that their unemployment insurance benefits expired, or even cut, between 2011 and 2012 is high.
Wednesday, September 25, 2013
Tuesday, September 24, 2013
For a number of years, I have taken on the interesting task of researching resident rights and financing or governance issues for "Continuing Care Retirement Communities" or CCRCs, an important part of the network of senior living options in the U.S. One of the many strengths of CCRCs is the way residents and administrators pull together to respond to a crisis or handle a challenge.
Frasier Meadow Retirement Community, a CCRC in Boulder, was hit hard by the recent devastating flooding in Colorado. The Assisted Living area was severely damaged, requiring relocation of AL residents. The good news is that the relocations were accomplished safely, and the hard work of clean-up and reorganization has begun. Regular updates on the Frasier website and social media connections have helped to keep families and friends up-to-date.
Hat Tip to Walt Boyer, board member at the National Continuing Care Resident's Association or NaCCRA, for information on Frasier's early recovery efforts.
Saturday, September 14, 2013
Via the Wall St. Journal:
A white paper put out by the Center for Retirement Research at Boston College noted that 83% of married couples can benefit from “unusual claiming strategies” commonly known as “file and suspend” and “restricted application.” Both claiming strategies take advantage of the simple fact that for every year that social security benefits are delayed beyond full retirement age, payments increase 8% until age 70. In this time of low interest rates, delaying social security is one of the best financial bargains available to workers. Both strategies ease the pain of waiting by claiming spousal benefits. Once having reached full retirement age (currently 66), a spouse is eligible to to receive benefits based on the earning of a partner. One member of a married couple claims a spousal benefit first and then claims a higher full retirement benefit based on his or her own earnings at a later time up to age 70. Spousal benefits are 50% of the partner's benefit, so some cash is flowing while waiting out as much of the time as possible to age 70. There is no penalty for receiving the spousal benefit during this interim period. For a married person to get spousal benefits, the primary beneficiary must first claim their benefits.
Under file and suspend , the primary beneficiary claims his or her benefit and then suspends receipt. The spouse then claims a spousal benefit. In this case both members of the couple wait to receive the higher deferred benefits, but the couple is receiving the spousal benefit during the interim period. If both defer their benefits, the total benefits the couple can receive can be quite high. If they both wait until 70 to claim their own benefits, their benefits will be 32% higher than the benefits they would have received if they had both claimed at full retirement age.
The second related strategy is filing a restricted application . While this strategy seems to be less well-known than file and suspend, we have found that this is more often the best strategy for a married couple. With a restricted application, the primary beneficiary still needs to claim before the spouse can receive a spousal benefit, but the primary beneficiary doesn't suspend. He or she simply takes a benefit when the claim is made....
Read more in the WSJ.