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Public Pension Plans Have Time to Recover
Tweet Share on Facebook March 30, 2011 Comment (1)While state and local pension plans are clearly hurting, a new report from the Center for Retirement Research at Boston College (CRR) finds that they are not facing short-term emergencies.
Depending on key assumptions about future investment returns, researchers conclude that even under stringent conditions, "most plans have enough assets to last for at least 15 years, although some notable exceptions exist." Using a more likely scenario for how state and local governments would handle future pension funding, the report said, "most plans have enough for at least 30 years" of payments.
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8 Ways to Manage a Longer Life
Tweet Share on Facebook March 21, 2011 CommentAmericans' continuing longevity gains may be the ultimate good news-bad news story for our times. The longer we live, ironically, the higher our stress levels rise concerning outliving our money, having good retirements, and being able to afford long-term care expenses.
Our retirement savings are already inadequate. Healthcare costs continue to soar. And the major programs that help us afford our later years—Social Security and Medicare—face cuts to help balance the federal budget. No wonder a major retirement confidence survey released last week found Americans deeper in the retirement doldrums than at any other time in its 21-year history.
[In Pictures: 10 Places to Reinvent Your Life in Retirement.]
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4 Ways Your Home Can Pay You
Tweet Share on Facebook March 18, 2011 Comment (23)Despite being financially stressed and worried about retirement, homeowners, by and large, continue to see their homes as a roof over their head and not a key financial asset that may improve their retirement prospects. According to research by the Society of Actuaries, only about 20 percent of homeowners plan to use their home equity to help finance retirement. Of those who do, few have thought about tapping their home's value and simply plan to sell it to generate retirement funds.
"Even for middle-income and moderately affluent Americans in their critical preretirement years (55-64), non-financial assets, principally home equity, may represent as much as 70 percent of total assets exclusive of pensions and Social Security," the report said. Tom Horgan, a Society of Actuaries spokesman and former chief actuary of the Federal Housing Administration, agrees with traditional advice that home equity should only be tapped when necessary, and when it helps achieve a specific retirement objective. In most cases, his best advice for homeowners approaching retirement is to sell their home and downsize into smaller, less-expensive living quarters that also may be closer to shopping and cultural activities. Renting an apartment also eliminates property taxes and most maintenance expenses.
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Retirement Outlooks Continue to Worsen
Tweet Share on Facebook March 15, 2011 Comment (2)American workers and retirees have little confidence in achieving successful retirements, according to the 2011 Retirement Confidence Survey from the Employee Benefit Research Institute. If there is any silver lining to the survey, EBRI says, it's that the dour outlook was likely partly a result of the public's more realistic understanding of the scale of retirement resources needed to support rising healthcare costs and longer life spans. Unfortunately, it added, this recognition has not yet led to more retirement savings or better planning.
[Visit the U.S. News Retirement site for more planning ideas and advice.]
The 21st edition of EBRI's annual survey found workers more pessimistic than in any past survey. Only 13 percent of current employees were "very" confident of achieving a comfortable retirement, while 27 percent were "not at all" confident. During the past year, roughly a third of employees and retirees alike said they had been forced to dip into savings just to help pay for basic living expenses. And 80- to 90-percent majorities of current workers and retirees expressed concerns about possible decreases in Social Security and Medicare benefits, EBRI reported, while at the same time believing that healthcare costs would continue to outpace inflation.
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What's Your City's Recovery Ranking?
Tweet Share on Facebook March 14, 2011 Comment (1)The nation's 100 largest metropolitan areas all grew during the fourth quarter of 2010, and most had regained all of their recession production losses by the end of the year, according to an ongoing study by the Brookings Institution, the Washington-based research and policy think tank. However, Brookings found no such recovery in employment or housing, as home prices fell in 98 of the 100 largest markets between the last quarters of 2009 and 2010.
"It looks like economic output is recovering fairly well and the job market is recovering at a glacial pace," says Howard Wial, co-author of the latest Brookings report on its MetroMonitor project. "What we're seeing, at the metro level at least, does suggest substantial productivity gains. This often happens in the early stages of a recovery." Even though business sales are increasing, employers are reluctant to make full-time hires and tend to meet rising demand by adding overtime work for existing full-time employees and adding part-time workers.
[See our list of 10 Bargain Retirement Spots.]
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How to Get Ready for Smaller Government
Tweet Share on Facebook March 11, 2011 Comment (2)What's happening in Madison, Wisc., has already come to your town, too, although probably in a less extreme way. State and local governments are strapped for dollars. Moreover, they're looking at the budget deficit discussions in Washington with every expectation that the flow of federal money to the hinterlands will be squeezed as well. Welcome to the era of shrinking government.
Countless senior organizations and social service nonprofits are howling over possible cuts, and the volume knob will be turned up further in coming months. But the illusion that we can somehow afford to continue spending at anything near current levels is disappearing. And all that spending, by the way, does not go to wasteful programs and fat-cat tax breaks. Most of it goes to us.
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Retirement Security: A Thing of the Past?
Tweet Share on Facebook March 8, 2011 CommentWhile pensions seem less affordable than ever, they remain the overwhelming retirement choice of consumers. According to new research, the Great Recession exposed such fundamental flaws in America's retirement support system that consumers overwhelmingly think the current system is broken beyond repair.
[Visit the U.S. News Retirement site for more planning ideas and advice.]
In response to the downturn and their own inadequate retirement savings, consumers have sharply lowered their expectations for their retirement years. Retirement delays and reduced spending plans have been widely reported. The new research, commissioned for the National Institute on Retirement Security (NIRS) found that traditional hopes for "the good life" have all but disappeared. "Only 11 percent [of consumers] expect retirement to include leisure, travel, restaurants, and/or hobbies," according to the report. Nearly three-quarters of Americans feel that the disappearance of traditional pensions "has made it hard for workers to achieve the American dream."
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What You Need to Know About Social Security Reform
Tweet Share on Facebook March 7, 2011 Comment (30)Both political parties include Social Security in their deficit reduction efforts. So it looks like some program defenders have already lost their battle to keep it from even being considered for cuts. The battleground thus will be moving to specific reform proposals. Depending on who's talking, Social Security is either a runaway fiscal disaster that needs to be overhauled or a healthy program that has done its job and needs only a tweak or two. With the spin doctors in high gear, here are factual answers to key statements about the program.
[See 10 Ways to Boost Your Social Security Checks.]
First, a little background. Social Security is funded by payroll taxes, paid equally by employees and employers. Since 1990, each has paid 6.2 percent of covered wages up to a ceiling, which currently is the first $106,800 in annual earnings. This tax supports the Old-Age, Survivors, and Disability Insurance (OASDI) program, which has two parts—Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI)—paying monthly benefits to retirees and their families and to disabled workers and their families. There is also a payroll tax for Medicare that is 1.45 percent each for employees and employers; there is no earnings ceiling for Medicare taxes. The total tax for both programs is thus 15.3 percent. Self-employed wage earners must pay this entire amount. Here's the history of Social Security taxes.
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Smart Tips for Parent-Child Family Finances
Tweet Share on Facebook March 4, 2011 CommentFiguring out smart ways to convey money and assets to family members does not require a huge estate or sophisticated trusts. Especially during these hard economic times, it can make sense to use some basic tools to help the folks you love, while paying Uncle Sam as few tax dollars as possible.
[See 10 Ways to Boost Your Social Security Checks.]
Gifts. Before exploring more extensive ways to transfer wealth, make sure you've taken full advantage of gift tax rules. You can give up to $13,000 a year to as many individuals as you wish, and what they receive will not be taxed as income. Your spouse can do the same, providing the easiest way to convey family assets to relatives without creating tax liabilities for them. For details, check out IRS Publication 950: Introduction to Estate and Gift Taxes.
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Reverse Mortgages Face Another Makeover
Tweet Share on Facebook March 2, 2011 Comment (5)Reverse mortgages are set for their second major change in less than a year. Growing problems with loan defaults—estimated to have increased in recent years to about 5 percent of all outstanding reverse mortgages—have prompted regulators at the U.S. Department of Housing and Urban Development to begin drafting new oversight rules. They would require loan applicants to demonstrate their ability to pay property taxes and home insurance premiums on their properties. The rules would apply to the government's home equity conversion mortgage (HECM) program, under which nearly all reverse mortgages are made.
[See 10 Ways to Boost Your Social Security Checks.]
Reverse mortgages have been hailed by supporters as a way for cash-strapped seniors (the youngest borrower in a household must be at least 62 years old) to tap a portion of the equity in their homes and free themselves from future mortgage payments. Under the terms of a reverse mortgage, the loans are, in effect, paid off to lenders using the remaining equity in the home that has not been paid to homeowners. Homeowners can stay in their homes as long as they're able, even after these repayments and loan fees have exhausted all of the remaining equity in the home.
