RetirementRevised

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 offer

Sign 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 week

Bill 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.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit retirementrevised.substack.com

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 retire

* Whether to work part time after you do retire

* When to start your Social Security benefits

* How to deploy your savings in retirement

* How 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 offer

Sign 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 week

The 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?

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit retirementrevised.substack.com

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 offer

Sign 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 out

If 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 forms

A 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 retirement

In 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.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit retirementrevised.substack.com

Source: AARP

This 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 offer

Sign 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.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit retirementrevised.substack.com

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 offer

Sign 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 broker

Jay 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 Buddy

A 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 Fees

Brokers 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.[1] 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 Broker

Given 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!

[1] 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.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit retirementrevised.substack.com

The idea of using your investments to promote environmental and social causes has grown quickly in recent years. Most of the action so far has been among institutional investors, but 401(k) plans were expected to be the next major area of growth - until recently.

Last month the U.S. Department of Labor (DoL) proposed a new rule clamping down on the use of social investing in workplace defined contribution plans. The focus here is on the use of mutual funds driven by environmental, social and governance factors — so-called ESG investing. The new rule would require plan sponsors to demonstrate they aren’t sacrificing financial performance for participants by adding ESG funds. Nothing wrong with that, insofar as it goes - clearly, the most important social good of a 401(k) plan is to build retirement savings for participants.  

But the proposed rule doesn’t recognize that the current generation of socially-conscious funds can deliver top-notch performance along with a dose of social progress. 

The new rule is in proposal form, but it is on a fast track - most likely because the administration would like to finalize it before the end of President Trump’s term. They’re going to get plenty of comments and pushback, so in all likelihood a battle is about to be joined about the future of social investing in 401(k) plans.

Joining me on the podcast this week to talk about all this is Aron Szapiro. Aron is the director of policy research for Morningstar. Before joining Morningstar, he worked on retirement and pension policy issues as a senior analyst for the U.S. Government Accountability Office.

Click the player icon at the top of this page to listen to our conversation. The podcast also can be found on Apple Podcasts, Spotify and Stitcher.

Not a subscriber yet? Take advantage of a special offer

Sign 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.

Interest in moving abroad surges, magazine reports

The idea of retiring abroad holds a certain allure: great weather, new experiences and a fresh perspective on life. And then there are the savings: living abroad can be a way to cut expenses dramatically.

Now, there seems to be a spike of interest in the topic, driven by the current turmoil and chaos in the U.S. International Living magazine reports that since May, it has seen a massive surge in traffic (more than 500%) to its “How to Move Out of the U.S.” coverage:

“Americans are looking to escape. First, there’s the uncertainty surrounding the election, which drives people to consider a ‘Plan B’ should their preferred candidate lose. We saw this same trend in 2016, though to a lesser degree.” says Jennifer Stevens, executive editor, International Living.

“This year, in addition, the pandemic has created huge financial challenges for millions of people whose jobs have evaporated. Worried about staying afloat in the States, it stands to reason that they’re looking right now to explore good-value places abroad where their dollars will stretch further.  

“Plus, it’s clear other countries have handled the COVID-19 situation better than the U.S. has. They are now opening up again while many parts of the U.S. seem headed for a second shutdown. I think that makes people pause and consider: Where would I rather be next time something like this happens? What places seem to have their act together?”

Though Americans face travel restrictions at the moment, eventually those will lift.

People searching for move-overseas information seem to be using this time at home to investigate their options. In greater numbers, they’re using search terms like, “moving out of the U.S.,” “I want to move out of the U.S.,” “moving out of America,” “how to leave America,” and “leaving America”—with the top search volume coming under the phrase “how to move out of the United States.”

International Living has seen a spike in interest in “move to” specific countries as well, among them Belize, Spain, Mexico, Costa Rica, and Italy with traffic up as much as 798.01% over the last three months.

Click here to listen to my podcast interview last year with Dan Prescher, is the co-author of The International Living Guide to Retiring Overseas on a Budget: How to Live Well on $25,000 a Year.

Recommended reading this week

America’s retirees confront the coronavirus in Florida . . . You’re a senior; how to calculate coronavirus risk right now . . . How financial planners can help clients cope with premature retirement.

This is a public episode. Get access to private episodes at retirementrevised.substack.com/subscribe

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.

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Sign 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 risk

Widespread 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 system

The 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 week

Covid-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.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit retirementrevised.substack.com

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 Retirement

Speaking 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.

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These economists want to lock down everyone over age 65

Here’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 week

The 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.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit retirementrevised.substack.com

This week on the podcast, we take a look at what the pandemic is teaching us about ways to improve Medicare. The crisis has put a bright spotlight on weaknesses in many of the systems designed to protect Americans from risks. But older people are more susceptible to serious illness and death from the virus. The problems in Medicare were evident before the pandemic, and now they are becoming even more clear.

My guest is attorney Judith Stein, the founder and executive director of the Center for Medicare Advocacy, which provides education, advocacy and legal assistance to help seniors and disabled people get access to Medicare. Judy is a pioneer in this work and one of the most knowledgeable people in the country on Medicare.

I expect Medicare reform will be on the agenda in Washington after the pandemic recedes. If nothing else, the looming exhaustion of the Part A Hospital Insurance trust fund in 2026 must be dealt with, as discussed in last week’s newsletter. But the pandemic underscores problems in the way that Medicare oversees nursing homes and the rising privatization of the program. We also should deal with the gap in dental, vision and hearing coverage, enrollment simplification 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.

I also addressed this question in my column this week for Reuters.

How will the pandemic impact the finances of Social Security and Medicare?

When it comes to the financial health of retired Americans, nothing is more important than Social Security and Medicare--hands down.

The programs are nearly universal among senior citizens: Last year 64 million Americans received Social Security benefits and 62 million were on Medicare.

Without Social Security benefits, about four in 10 Americans aged 65 and older would have incomes below the poverty line; for about half of seniors, Social Security provides at least 50% of their income. And Medicare is the only health insurance game in town for seniors.

But how is the financial health of these critical social insurance programs holding up during the pandemic--and how will they fare after the emergency recedes? I took at look at the financial outlook for both programs in my latest Morningstar column.

The number of family caregivers is soaring, and their social isolation is growing

A new study from the National Alliance for Caregiving and AARP concludes that the number of unpaid family caregivers increased by 9.5 million from 2015 to 2020 to 53 million people. The report, Caregiving in the U.S. 2020, also reveals that family caregivers are facing growing social isolation.

And - that was before the pandemic. This compelling video report from the PBS NewsHour makes clear how the pandemic has made the job of caregiving more difficult, further isolating people who already faced steep challenges. Hundreds of caregivers reached out to the NewsHour to tell their personal stories; this story features six of them.

Insulin price cap for 2021 leaves experts befuddled

President Trump announced a plan to give Medicare Part D enrollees access to plans next year featuring a maximum $35 out-of-pocket charge. But the move left drug pricing reform advocates disappointed and experts scratching their heads. As STAT reports:

President Trump used a glitzy Rose Garden address, flanked by pharmaceutical company CEOs and patient advocates, to boast of his administration’s successes lowering drug prices and to detract from his political rivals’ efforts on the same issue.

But the news he was touting was modest at best: Drug makers agreed to participate in a minor, voluntary Medicare program that will likely only provide a limited discount on insulin for a small subset of the 60 million seniors with Medicare coverage.

The average diabetic spends nearly $5,000 a year on drugs, according to Merrill Goozner, a journalist and author with deep knowledge of the pharmaceutical industry, who wrote this fascinating essay last winter on why insulin should be free.

Recommended reading this week

To fight COVID19, don’t neglect immunity and inflammation . . . Outbreaks force a harder look at nursing homes . . . Podcast interview with famed investor Charley Ellis on why active investing is still a loser’s game . . .

Not a subscriber yet? Take advantage of a special offer

Sign 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.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit retirementrevised.substack.com

This week, the podcast takes a look at what to do with a 401(k) account left behind with a former employer - should you leave it there, or roll it over to an Individual Retirement Account (IRA)?

I wrote about this topic last weekend for The New York Times - the context being the stunning job losses the country is experiencing now due to the coronavirus crisis.

People stuck in this situation will be looking for emergency lifelines to meet living expenses. And retirement accounts will be a tempting option, as the emergency CARES Act passed in March provides flexible hardship withdrawal options for 401(k) and individual retirement accounts. 

For jobless workers who don’t need to tap retirement accounts right now, the choice is to leave the money where it is, or roll it over to an IRA. This is an important decision whenever you leave a job.

Joining me on the podcast this week to talk about IRA rollovers is Scott Puritz. Scott is the managing director of Rebalance, an investment firm that helps clients manage retirement assets. Rebalance argues that rollovers usually are the best move - and especially so when you’re shifting out of a high cost 401k plans into an IRA invested in very low cost passive mutual funds. 

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 offer

Sign 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.

House Democrats propose multi-employer pension rescue

House Democrats will take another run at rescuing multi-employer pension plans in the next round of coronavirus relief.

Roughly 10.6 million workers and retirees are relying on pensions from multi-employer plans, which are created under collective bargaining agreements and jointly funded by groups of employers in industries like construction, trucking, mining, and food retailing. There are about 1,400 multiemployer pension plans today.

Before the virus crisis, multiemployer plans covering 1.3 million workers and retirees were considered badly underfunded. Lawmakers have considered a variety of fixes, but had not reached agreement.

The $3 trillion House coronavirus relief bill, coming up for a vote by the end of this week, would require the federal government to set up a fund to rescue financially troubled multiemployer plans. Stay tuned.

Elsewhere, public pension plans had the worst first quarter on record due to the stock market’s volatility.

How Medicare’s new telehealth reimbursement is working

For years, advocates and researchers have urged greater use of telemedicine — delivered by video or phone, through online patient portals or remote monitoring devices — particularly for older adults. But Medicare has been slow to adapt, keeping tight barriers in place that prevented reimbursement to healthcare providers in most cases.

The barriers have come down during the coronavirus pandemic - Medicare is now providing full reimbursement for video and phone visits. Paula Span reports on how that is going in The New Old Age:

Still, by mid-April more than 20 percent of people over 70 had experienced a telehealth appointment since the start of the pandemic, a nationwide survey by NORC at the University of Chicago found. Almost half said they found the experience equivalent to an in-person visit; about 40 percent said it was worse.

In interviews, patients told me of similarly mixed reactions.

Learn more in Paula’s column for The New York Times.

Born in 1960? Your Social Security benefit could be lower

An odd coronavirus-related technical problem threatens a sizeable cut in Social Security benefits for people born in 1960. The issue stems from the way Social Security calculates a worker’s career earnings - a calculation that is critical to determining benefit levels. If the problem isn’t addressed - and I think it will be - these workers could see a permanent reduction in Social Security retirement benefits of around 13.8 percent, according to a research paper by Andrew Biggs, a resident scholar at the American Enterprise Institute and a former deputy commissioner of the Social Security Administration during the George W. Bush administration.

The issue here is falling national average wages this year due to the coronavirus recession. Before averaging past earnings, Social Security indexes your earnings to the growth of national average wages up to the year in which you turn 60. Nominal earnings in any past year are multiplied by the ratio of the national average wage in the year the worker turns 60 to the national average wage in the year the earnings took place. Right now, that is the 1960 birth cohort.

A decline in national average wages in that year reduces Social Security’s indexed measure of all your past earnings - and that leads to the lower Social Security benefit.

Biggs suggests fixing the problem by shifting the entire Social Security system from wage indexing to a formula that calculates benefits as a percentage of inflation-adjusted career-average earnings. Biggs and other conservative policy folks have been arguing for that change for quite a while. But the goal of any pension plan - including Social Security - is wage replacement. And generally, wage indexing produces stable replacement rates over time. Consumer price indexing would lead to declining replacement rates, e.g. benefit cuts.

Instead, Congress should simply add a hold harmless provision to the wage indexing provision. We already do that with the annual cost-of-living adjustment (something I’ll have more to say about soon, because the 2021 COLA is shaping up to be one of those weird years).

A hold-harmless clause for wage indexing would protect workers against the occasional black swan event, like the one we are experiencing now.

Learn more about this issue in Andrew’s paper, or an op-ed he penned on the topic this week for The Wall Street Journal.

Recommended reading this week

McDonald’s workers in Denmark pity us . . . The housing market faces its next crisis . . . How to earn a great risk-free return by paying down debt . . . Fearing covid-19, older people alter their living wills . . .Will COVID-19 make the decline narrative of aging worse . . . How I’m finding purpose in a pandemic.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit retirementrevised.substack.com