Rising Health Costs a Factor in Inequality

Inequality is frequently in the news. A new study puts an interesting spin on this now-familiar topic: rising health costs are a significant reason for wage inequality. The cost of employer-provided health insurance is a larger share of lower-paid employees’ total compensation than it is for the people higher up in the organization. Since insurance costs have been increasing faster than total compensation, squeezing out pay raises, the nation’s lowest-paid workers feel it most. For people with earnings at the 30th percentile of all U.S. workers, total compensation, including the cost of employer health insurance as well as actual earnings, increased by just 9 percent in inflation-adjusted dollars between 1992 and 2010, according to data in a new study by…

August 2, 2016

Finally Retired? Now What?

It was Gerry Smythe’s final confirmation he had never quite felt at home working in the Oklahoma airplane manufacturing plant.  When well-meaning coworkers bought a cake to celebrate his and another person’s retirement, they got Smythe’s name wrong on the sign inviting everyone to the break room. At age 63, he until recently was one of the nation’s 10 million older Americans working in physically demanding jobs in difficult conditions. He felt worn down by the factory noise, carbon dust, and standing all night on collapsed arches to assemble cabin floor beams for Boeing 777s.  His requests for a transfer away from the hard floor never went anywhere, he said. “It wasn’t really the job – I kinda liked t…

July 28, 2016

Impact of Raising Austria’s Pension Age

Like the United States, many European countries are concerned about shoring up their pension systems for their aging populations.  In 2000, Austria took action by introducing a series of small increases in the earliest age at which workers can begin receiving their federal pensions. This reform is gradually phasing out early eligibility entirely. Raising the earliest claiming ages, from 60 to 65 for men and from 55 to 60 for women, will cause them to converge, next year, with the pension program’s standard – or “normal” – retirement ages. Prior to the reform, workers who had signed up for benefits before their normal retirement age received only mild reductions in their monthly benefits.  The reform, in addition to gradually raising t…

July 26, 2016

Inner-City Teen Interns Are Better Off

High school students who participated in Boston’s summer jobs program in 2015 work on a public beautification and landscaping project. It’s a spring rite in Boston.  The mayor’s office and private and non-profit employers hustle to get ready for a program employing more than 10,000 inner-city teens for the summer. A new study of the summer 2015 participants shows that the high school students made remarkable strides, compared with the kids who applied but were not accepted for the limited number of slots available in the program.  New York and Chicago have similar, large programs. The Boston teens, who are mostly either black or Hispanic and from low-income neighborhoods, improved their job readiness, from showing up on time to developing their…

July 21, 2016

Social Isolation a Real Danger for Elderly

Social isolation kills – literally. In this video, Professor James Lubben, founding director of Boston College’s Institute on Aging, discusses numerous research studies showing that people who lack a social network of friends or family are more likely to neglect good health practices and to experience psychological distress, cognitive impairment, the common cold, and even death – “it’s on a par with smoking,” he said. Seniors become particularly vulnerable to becoming isolated as they decline physically, but isolation then makes them more vulnerable to worsening health. Social health should “be as important as mental health and as physical health,” said Lubben, who also is a professor of social work here at Boston College. Summers are a fun and busy tim…

July 19, 2016

Financial Anxiety Amid Economic Growth

The economy keeps chugging along, unemployment has been bobbing at or below 5 percent all year, and wages have been creeping up. Yet anxiety is rising, according to a newly released survey by Northwestern Mutual.  In February, 85 percent of Americans said they had “financial anxiety,” particularly about how they would pay for an unexpected emergency or medical bill. And here’s how financial anxiety affects them: 70 percent say it reduces their “happiness,” their mood, or their ability to pursue their dreams, passions, and interests. 67 percent say it impairs their health. 61 percent say it has a negative effect on their home life. 51 percent say it has a negative effect on their social life. For more than half,…

July 14, 2016

What’s New in Public Pension Funding

A small group of researchers at the Center for Retirement Research, which sponsors this blog, produces a large volume of analysis of the nation’s state and local government pension funds. Their work isn’t typical of the personal finance information that appears in this blog. But it turns a bright light on the financial condition of the pension funds that millions of state and local government workers and retirees rely on. The bottom line, according to these studies, is that while some funds are in poor condition, many more are managing. The following are short descriptions of the Center’s recent reports, with links to the full reports: The big picture is updated in the new brief, “The Funding of State and…

July 12, 2016

More Americans Are Upper Middle Class

Yes, income inequality has risen dramatically over the past 35 years. But something else has happened that might surprise you. The size of the upper middle class is expanding, as Americans migrate up from the ranks of the middle class and poor, according to a new analysis from the Urban Institute. Economist Stephen J. Rose uncovered this finding by defining how much income families needed in 1979, just before inequality really took off, to be counted as rich, upper middle class, middle class, lower middle class, or poor. He anchored his class divisions largely around incomes relative to the federal poverty level. For example, he set the income floor for the upper middle class at five times the poverty lev…

July 7, 2016

Parents, Start Student Loan Homework!

Here’s a reminder that parents should start their homework this summer to minimize college loan repayments over the long haul. A few basic decisions can add or subtract thousands of dollars. A little help came last week, when the interest rates on all federal student loans were reduced. Despite the declines, the rates for the PLUS loans available to parents remain much higher than the loans available to their offspring – taking out a PLUS loan will nearly double the interest paid on $50,000 over 20 years, compared with an undergraduate Stafford loan. This is an argument for having prospective students take out the loans, rather than the parents.  As for paying them back, financial advisers tend to agree that…

July 5, 2016

401(k) Investment Options: Less is More

There’s plenty of evidence of the unfortunate consequences for employees overwhelmed by too many investment options in their 401(k) plans. Studies find that confused employees might not join the plan at all, select investment funds that are not well diversified, or throw up their hands and put an equal amount in each fund offered by their employer. And as employers add more options, the new funds often carry higher fees and produce lower returns. A new study took the opposite tack, examining how employees reacted when one large U.S. employer reduced the number of investment options. The results were lower fees and less turnover, saving employees an average of $9,400 over a 20-year period. Further, their new portfolios were less…

June 30, 2016

Not All Baby Boomers Can Work to 70

There’s one problem with expecting all baby boomers to delay retirement beyond their 60s: it might not be fair. That’s because people with lower incomes and less education die younger than the well-to-do with more education. Think about what would happen if everyone retired at, say, 70. Those with less education and a lower socioeconomic status (SES) would enjoy fewer years in retirement than people with higher SES. This gap in retirement duration has also widened in recent decades. That’s because the lowest SES group has seen much smaller improvements in their life expectancy, according to economists at the Center for Retirement Research, which supports this blog. Their study tracked adults surveyed by the U.S. Census Bureau over time and…

June 28, 2016

Our Readers’ Favorite Blogs

It’s the time of year when we highlight blogs that attracted the most page views over the previous six months, according to Google analytics. Today, we’re listing a “baker’s dozen” – 13 blogs – popular with our readers, instead of the usual top 10.  This allows us to highlight some interesting themes that were apparently on readers’ minds: Many retirees weighed in with their comments on two blogs about how and why they’re taxed: How Federal Taxation Drops for Retirees Why Most Elderly Pay No Federal Tax A new feature called “Boomers: Rewriting Retirement” that profiles people who are either approaching retirement or recently retired made the list: A Familiar Dilemma: to Work or Retire Squared Away tried something els…

June 23, 2016