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Husbands should consider delaying Social Security benefits

Posted on January 15, 2008 by Jason

USA Today, January 15th, 2007

Here’s some advice for married men who will
turn 62 this year: If you want to make up for all the times you came
home with beer on your breath, left your socks on the bathroom floor or
gave your wife a DustBuster for Valentine’s Day, hold off on filing for
your Social Security benefits.

Many men who are eager to retire may chafe at
this suggestion. This year, the oldest baby boomers are turning 62,
making them eligible for Social Security. About half of those boomers
are expected to claim their benefits as soon as they’re eligible, even
though that means a permanent 25% reduction in benefits.

Retirement experts warn that this strategy could
result in significantly lower benefits for boomers who live for a long
time. Maybe that’s a risk you’re willing to take. But if you’re the
primary breadwinner, claiming benefits early could also jeopardize your
spouse’s financial security.

Here’s why: If one member of a married couple
dies, the surviving spouse can continue to receive her own Social
Security benefit, or 100% of the deceased spouse’s benefit, whichever
is more. If your wife earned less over her lifetime than you did, and
she outlives you, she’ll start receiving your benefits. If
you file at 62, she’ll inherit a reduced amount of benefits for the
rest of her life, says Ron Gebhardtsbauer, senior pension fellow at the
American Academy of Actuaries.

Most “break-even” calculators don’t address survivor benefits, says
James Mahaney, retirement specialist for Prudential Financial. Suppose,
for example, that a break-even calculator shows that your break-even
age is 77 (you can find a break-even calculator at www.ssa.gov). Based
on your benefits alone, that would suggest that you should delay filing
if you think you’ll live past 77, and file early if you think you’ll
die before then.

Read more of this article.

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Who Is Paying for Your Long-Term Care?

Posted on January 15, 2008 by Jason

Senior Spectrum Online, January 15th, 2007

Many
Americans assume that Medi-care, supplemental policies or standard
health insurance policies will cover their long-term care expenses — an
assumption that often leads to severe financial hardship down
the road.

Many people do not plan ahead financially to provide for their care in the event
of frail health. Depending on the long-term care required, costs easily can exceed
$50,000. Paying for long-term care involves multiple considerations, according
to the U.S. Department of Health and Human Services (DHHS).

The chief consideration is whether or not the funding source can only be used
for long-term care costs. Also of concern is the impact on heirs, the rate of
asset accumulation, any eligibility requirements and the risk that the funds
will be insufficient to meet long-term care needs. Additionally, some programs
require financial need or other eligibility requirements.

Surprisingly, most long-term care is paid for by long-term care recipients or
their immediate family. “The most common method is using private funds,” explained
Lauren Shaham, Vice President Member Communications and Media Relations for the
American Association of Homes and Services for the Aging.

“Following that many people use Medicaid.”

Relying on family to provide or finance long-term care provides flexibility but
has the drawback of carrying a moderate risk of financial insufficiency, according
to DHHS. In addition, the person receiving the services often feels serious guilt
over burdening family members.

Read more of this article

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Beat This Retirement Killer

Posted on January 11, 2008 by Jason

The Motley Fool, January 11th, 2007

There’s an invisible force eating away at your retirement every day.
You curse its evil ways every time you grouse, “Back in my day, you
could buy popcorn at the movies for a dollar.” Don’t blame global
warming, or nuclear proliferation, or even the paparazzi. Blame
inflation.

It seems unfair that the mere passage of time can deplete your savings and
give you gray hair and wrinkles. But given enough time, inflation can
really sap the buying power of your savings, leaving you facing a gruesome retirement.

Take a look at the erosion it causes over a moderately long time span.
Let’s assume that Sally Saver invests $50,000 for 20 years. At whatever
rate her money grows, those two decades are enough time to make it look
like she’ll have a lot of money for retirement. But consider what
inflation (which has generally averaged around 3% annually) could do to
her buying power.

Two decades later, Sally’s money has grown, but maybe not quite as much
as it appears. She might be shocked to realize that the exorbitant $4
she pays now for movie popcorn will cost more than $7 when she takes
her grandkids to see Shrek 16. Her savings won’t buy as much fun as she planned.

Do some damage control
You can’t prevent all
the damage caused by inflation, but you can do your best to mitigate
its worst effects on your savings. (Slather on the sunscreen and find a
good colorist to attack the other ill effects of time.)

If you take a second look at that chart above, you’ll see that you do
best when your money grows at a higher rate. Your best bet for seeing
your money grow more lies in just one place — the stock market.

Read more of this article.

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2 More Years for a Better Retirement

Posted on January 11, 2008 by Jason

The Motley Fool, January 11th, 2007

When I’ve written before about our collective need to save more for retirement, I’ve often cited my favorite retirement resource: our Rule Your Retirement
newsletter service. In its pages, Robert Brokamp has explained that in
order to make your nest egg last, you should conservatively plan to
withdraw about 4% of it per year in retirement for living expenses. If
you end up with a $1 million nest egg upon retirement, you’d withdraw
$40,000 in the first year to live on.

That might sound not so bad, but many of us can’t count on that $1
million yet. If you’ve got only $150,000 socked away, and you’re eight
years from retirement, you’ll have to earn an annual average of 27% on
your money to hit a million in time. That’s nowhere near a reasonable
amount to expect. Even the market’s historical average annual gain of
around 10% is far from a sure thing. Over the coming eight years, you
might well average 12% — or 7%. Yikes.

A modest proposal
Are you stuck, then? Not
necessarily — there are always things you can do to improve your
position. For starters, note that my example above begins with a static
$150,000 and adds nothing. Over your coming eight years, you can always
keep adding to your nest egg.

Better still, consider this suggestion: Work a little longer. Not a
decade longer (unless you really love your work and can’t think of
anything else to do), but just a few more years. Remember how, with my
initial example, you’d need to earn an annual average of 27%? Well, if
you stretch your retirement to 10 years in the future, instead of
eight, you’d need to grow your nest egg by just 21% annually. Make it
12 years away and you’d need to earn around 17.5%. That’s still too
much to expect automatically, but it’s a lot more reasonable.

Read more of this article.

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Retirement Jobs — an oxymoron?

Posted on January 11, 2008 by Jason

Wealthy Boomer, January 10th, 2007

Today’s subject heading strikes me as the latest in a long series of
oxymorons – like military intelligence or government worker.

The
phrase “Retirement Job” is used in a backgrounder just issued by
Investors Group. The gist of it was that fewer Canadians will be
leaving the workforce “cold turkey” but instead will take a more
gradual approach to retirement. There’s a term for this – Phased
Retirement, which we’ll look at in an upcoming column.

Investors
Group notes that more workers are staying in the workforce longer than
the “traditional” retirement age of 65, and many are choosing a
“hybrid” approach by transitioning from the workplace gradually.   

It
cites recent data from Statistics Canada to the effect one in four
older workers (55 to 64 years) is self-employed and one in five works
part time.  Two-thirds of older workers who work part time do so from
choice compared with only 28% of core-aged, part-time workers.

Read more of this article.

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Reverse Mortgages: Will they help some seniors avoid foreclosure? Perhaps

Posted on January 10, 2008 by Steve

As I’m sure you’re aware there is a rising tide of foreclosures that is threatening up to 2 Million households. This is affecting all age groups and unfortunately it doesn’t look like the Hope Now plan to freeze some mortgage rates will bail out many people. However, some housing advocates and legal-aid attorneys are suggesting a new alternative for senior households: taking out a reverse mortgage and using the proceeds to settle current distressed mortgages.

Reverse mortgages are mortgages whereby the payment streams of traditional mortgages are reversed. Instead of the bank lending you a sum of money to finance a new house and you paying the loan back over time (a forward mortgage), a reverse mortgage is structured such that the bank either makes monthly payments to you, gives you a lump sum or issues you a line of credit (all based on your home equity) and the loan is repaid with interest when you either sell your home or die. The big difference with a reverse mortgage is that it is a non-recourse loan – the amount due on the loan can never exceed the value of your house (which is good for the borrower). The lending bank takes the risk that the loan amount won’t grow faster than the equity in your home.

The major drawback of a reverse mortgage is that you will lose some or all of the equity you have built up in your home when you move or pass away. But if you are struggling to make high interest payments and face foreclosure, taking out a reverse mortgage may be an option to prevent the loss of your house. The major qualification for a reverse mortgage is that you have built up enough equity in your home and that you and your spouse are both 62 years old – there are no credit or income requirements.

It used to be difficult to find lenders willing to issue reverse mortgages and buy products other than the plain vanilla government-backed HECM (Home Equity Conversion Mortgage), especially at reasonable costs. Now, more than a dozen large banks and mortgage lenders, the largest issuers being Wells Fargo and Financial Freedom, offer a variety of reverse mortgage products, and there are thousands of smaller lenders throughout the nation. Costs have gone down – although they are still high, with fees typically more than 5% of the home value – and some issuers have reduced the minimum age requirement to take out a reverse mortgage to below 62. It has also given people more flexibility. For example, government-backed mortgages are subject to government rules, one of which prevents homeowners from cashing out above a certain limit (borrowing limits are capped based on where the homeowner lives). But private lenders who have stepped into the reverse mortgage business, such as Banc of America Corp., allow homeowners to borrow more than the limit on HECMs.

As competition in the market increases – expect to see lower fees and more innovation in the reverse mortgage market. Large lenders have become interested in creating a secondary market for securities backed by reverse mortgages; they have started to buy these products and plan to securitize them and sell them to investors on Wall Street. This means more available credit for reverse mortgages, which will decrease the costs of these products.

But more choices, especially with the increased availability of proprietary products offered by private lenders, result in more homework for the consumer. It is essential that distressed homeowners who are looking to purchase a reverse mortgage investigate the options available. It is important for the client not to blindly follow a salesperson’s recommendations, and that appropriate and challenging questions are asked to ensure suitability. Don’t fall into the trap of predatory lenders; this is hopefully one of the lessons learned from the subprime mortgage crisis.

Medicare Drug Plan Fuels Health-Care Spending

Posted on January 8, 2008 by Jason

Healthday News, January 8th, 2007

he new Medicare prescription drug
plan was largely responsible for an 18.7 percent increase in Medicare
spending in 2006, which was double the increase in spending from the year
before, U.S. health officials report.

In 2006, Medicare spending reached $401.3 billion, an increase from
$338 billion in 2005, officials from the National Health Statistics Group
at the U.S. Centers for Medicare and Medicaid Services, Office of the
Actuary, said.

“National growth of health-care spending in 2006 was slightly faster
than in 2005, increasing 6.7 percent following growth of 6.5 percent,”
Cathy Cowan, an economist in the National Health Statistics Group at the
U.S. Centers for Medicare and Medicaid Services, Office of the Actuary,
said during a news conference Monday afternoon.

“Expenditures reached $2.1 trillion or $7,000 a person,” Cowan added.
That rate was up from the 6.5 percent rate in 2005. The 2005 rate was the
slowest growth since 1999.

The report appears in the January/February issue of Health
Affairs.

At the same time that the Medicare drug plan increased spending,
spending by Medicaid dropped for the first time since 1965, to $310.6
billion in 2006 from $313.5 billion in 2005. This drop was mostly due to
drug coverage for people who were eligible both for Medicare and Medicaid
being transferred to Medicare, Cowen said.

Richard Foster, chief actuary at the National Health Statistics Group
at the U.S. Centers for Medicare and Medicaid Services, said the cost of
the Medicare drug program, which took effect in 2006, was less than
originally projected.

Read more of this article.

Medicare and Your Retirement:   Learn what Medicare will cover during your retirement, and whether you
will need Supplemental Health Insurance to cover other potential
medical costs.

Pensions a ticking time bomb

Posted on January 8, 2008 by Jason

Los Angeles Daily News, January 8th, 2007

California state and local governments are facing
liabilities of $118 billion or more over the next 30 years to fund
promises of generous health-care benefits for retired public employees,
according to a state commission report released Monday.

The findings result from the first comprehensive statewide
effort to measure the massive looming liabilities amid growing concern
that the debt could bite into government coffers unless officials start
setting aside billions of dollars every year.

And the commission, created last year by Gov. Arnold
Schwarzenegger, said the growing liabilities mean governments need to
begin investing now to build up a permanent fund rather than simply
paying out of pocket every year.

“I think the worst case is that our children and
grandchildren will be saddled with this bill,” said commission Chairman
Gerald Parsky.

“If the policymakers don’t feel that it’s the highest
priority, then they have to accept the fact that at some point in the
future, it’s going to impact the ability to provide other services,
other things that may be beneficial to the state, to the next
generation.”

Read more of this article.

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SIX KILLERS: ALZHEIMER’S DISEASE; Finding Alzheimer’s Before a Mind Fails

Posted on January 5, 2008 by Jason

The New York Times,  January 3rd, 2007

For a perfectly healthy woman, Dianne Kerley has had quite a few
medical tests in recent years: M.R.I. and PET scans of her brain, two
spinal taps and hours of memory and thinking tests.

Ms. Kerley,
52, has spent much of her life in the shadow of an illness that
gradually destroys memory, personality and the ability to think, speak
and live independently. Her mother, grandmother and a maternal
great-aunt all developed Alzheimer’s disease. Her mother, 78, is in a
nursing home in the advanced stages of dementia, helpless and barely
responsive.

”She’s in her own private purgatory,” Ms. Kerley said.

Ms.
Kerley is part of an ambitious new scientific effort to find ways to
detect Alzheimer’s disease at the earliest possible moment. Although
the disease may seem like a calamity that strikes suddenly in old age,
scientists now think it begins long before the mind fails.

”Alzheimer’s
disease may be a chronic condition in which changes begin in midlife or
even earlier,” said Dr. John C. Morris, director of the Alzheimer’s
Disease Research Center at Washington University in St. Louis, where
Ms. Kerley volunteers for studies.

But currently, the diagnosis
is not made until symptoms develop, and by then it may already be too
late to rescue the brain. Drugs now in use temporarily ease symptoms
for some, but cannot halt the underlying disease.

Many
scientists believe the best hope of progress, maybe the only hope, lies
in detecting the disease early and devising treatments to stop it
before brain damage becomes extensive. Better still, they would like to
intervene even sooner, by identifying risk factors and treating people
preventively — the same strategy that has markedly lowered death rates
from heart disease, stroke and some cancers.

Read more of this article.

Groups Warn Seniors: Beware of Reverse Mortgages

Posted on January 4, 2008 by Jason

Waldo County Citizen, January 4th, 2007

The U.S. senior community is warming up to reverse mortgages, but
the product’s increasing popularity also is breeding a new crop of
unscrupulous brokers, lenders, and loan agents who are taking advantage
of the nation’s elderly.

In general, reverse
mortgages allow home owners who are 62 and older to borrow against
their home equity without having to repay the money until the home is
sold or the borrower dies or permanently moves out.

But
the mortgages have some groups concerned. Speaking at a recent hearing
before the Senate Special Committee on Aging, legislators and consumer
advocates warned that, without better loan counseling and tougher
government oversight, a flood of older home owners could be pressured
into taking out inappropriate loans — just as millions of mortgage
borrowers were persuaded to accept subprime loans that are now going
into default at a rapid clip.

“We have gone
through a savings and loan collapse, a stock market bubble and are
currently in the middle of a lending mess,” noted Sen. Claire McCaskill
(D-Mo.) at the hearing. “Our goal is to make sure that the reverse
mortgages don’t become the scandal of the next decade.”

Read more of this article.

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