Even Cylons have trouble finding work. (Photo Credit: CC BY/Nik Hewitt/Best of Both Worlds)

A lower percentage of Americans held jobs last year than at any point since 1983, reports USA Today. After a peak of 49.3 percent employment in 2000, only 45.4 percent of Americans were employed. In addition, only 66.8 percent of men were employed in 2010, the lowest figure on record.

Challenges to U.S. social programs

The dramatic shift in employment numbers over the past decade springs from the three-pronged attack of a bad economy, aging Baby Boomer population and a relative plateau in the number of working women, according to Marc Goldwein of the non-partisan Committee for a Responsible Federal Budget.

“What’s wrong with the economy may be speeding up trends that are already happening,” Goldwein told USA Today.

Considering that jobs have been more difficult to come by since the recession, fewer adults have been working until later in life. Hence, more stress falls upon an already overtaxed Social Security system. Also, from 2000 – when the U.S. had roughly the same number of non-working adults and non-working children under 18 – to today, there has been a shift. Now, there are nine times more non-working adults.

Other key findings from the 2010 Census

Until the 1960s, more than 80 percent of adult men were employed. Since then, U.S. Census data has reflected a long, slow downward slide. When construction and manufacturing jobs began to dry up from December 2007 through June 2009, the percentage of working men plummeted to record low levels.

The trend of women obtaining work helped offset the dwindling numbers of men until the late 1990s, according to USA Today. From 1995 to 2010, the percentage of working women has hovered around 56 percent. Part of the reason women have not experienced the same job decline as men over the past few decades, suggests Heather Boushey, a senior economist at the Center for American Progress, is that women have traditionally been employed in fields like education and healthcare. These professions have been less prone to market fluctuation over time.

“Given how stark and concentrated the job losses are among men, and that women represented a high proportion of the labor force in the beginning of this recession, women are now bearing the burden — or the opportunity, one could say — of being breadwinners,” Boushey told the New York Times.

The expense of looking after retirees

As more than 77 million Baby Boomers reach retirement, the costs of caring for seniors becomes painfully apparent. In today’s dollars at current life expectancies, the National Center for Policy Analysis estimates that it costs $500,000 to care for a senior in post-retirement years. As the average retiree only receives $25,000 a year in benefits (between Social Security and Medicare), the proportion of unemployed Americans who aren’t contributing to the tax base becomes a mathematical conundrum.

Sources

New York Times

USA Today

Unreported health care costs, such as ambulance services and non-approved treatments, add up to more than $300 billion a year in health care costs. Image from Wikimedia Commons.

Health care costs that aren’t reported in many surveys and studies add up to billions. Costs beyond co-payments and deductibles add up, and those costs have hardly diminished since the passage of health care reform laws last year. As the baby boomers are crossing the threshold into retirement, these costs could increase.

Caring for family and friends can cost workers

A recent study by the Deloitte Center for Health Solutions found that unreported costs of health care add up to an estimated $363 billion per year for Americans, according to CNN. The “hidden costs” include alternative therapies and treatments, ambulance services and prescription drugs not covered by health insurance plans, among other things. However, one of the biggest costs is providing care and supervision to loved ones, such as the elderly and the disabled. The study estimates that the cost of providing unpaid home care came with a price tag of nearly $200 billion, as the average person who took time off from work to care for a loved one lost $12.60 an hour, on average. Additional health care expenses are estimated at $1,355 per year.

Elderly facing greater burden

Compounding the rise of health care expenditures and costs above the rate of inflation is the growing population of the elderly. The Centers for Medicare and Medicaid Services, part of the U.S. Department of Health and Human Services, projects that the number of people 65 or older will rise in the next decade, increasing from a projected 40.8 million in 2011 to 50 million by 2018. The elderly pay a steep price for increasingly expensive health care; bankruptcies among people 65 to 74 rose by 178 percent between 1991 and 2007, according to Fox News. Health care expenses have risen by 56 percent since 2002 for retirees, with an average $535 per month expenditure on health care. The only thing that the elderly are estimated to spend more money on than health care is food.

Here come the Baby Boomers

Life expectancy in the United States, according to the Wall Street Journal, has risen to an average 78.2 years — 75.7 years for men and 80.6 years for women. Because the baby boomers are set to start entering retirement, more people will retire and live longer after they do. More people are going to have to provide at home care for their parents and grandparents, spend more out of pocket and miss more work opportunities to do so. The cost of health care is likely to keep rising.

Sources

CNN

Fox News

Center for Medicare and Medicaid Services (PDF – requires Adobe Reader)

Wall Street Journal

More than half of Americans have insufficient amounts saved for retirement. Photo Credit: Miki Yoshihito/Flickr.com/CC-BY

The number of people who feel financially confident about entering retirement are an increasingly small portion of the population. Falling real estate values and a volatile stock market have made soon-to-be retirees fairly nervous. To make matters worse, energy prices could be due for a large increase, and politicians may be gunning for Social Security.

Survey indicates most don’t save enough for retirement

The Employee Benefit Research Institute recently released a survey that found about 50 percent of the people who were surveyed did not feel confident about their finances after retirement, according to USA Today. In the survey, 33 percent said they were “not too confident” and 27 percent they were not confident at all. The survey also found that 56 percent of subjects had less than $25,000 saved or invested for their retirement, not including their homes. And 29 percent had less than $1,000 set aside for retirement. The survey also found that 74 percent of workers planned to find other work post retirement, and 22 percent said they have major debts.

Traditional bedrocks of retirement not so solid

One of the traditional foundations of a solid retirement plan is real estate. Some people finish paying off their homes before retirement and thus don’t have to worry about paying for housing. Homeowners also have the option of pocketing the cash from selling their homes. However, home values have fallen 31 percent since the pre-recession peak, according to CNN. Since it is also being predicted that real estate values will fall again, or “double dip,” people staring down the barrel of impending retirement are not likely to realize nearly as much of a profit from the sale of their homes as they planned. Since very few people ever pay off a mortgage in full, the profit realized from the sale of a home is likely to be very modest in the current market.

Social Security could be in Congressional sights

The climate in Washington D.C. is currently favors cutting spending. The largest single budget item, Social Security, ran a deficit last year for the first time in more than two decades, according to MSNBC and will need an overhaul before it depletes all the surplus cash in the Social Security trust fund in 2037. There is a lot of speculation that the Social Security Administration is going to experience major cuts, especially in benefits, in the near future as the Baby Boomers will put further strain on the national pension plan. Few workers enjoy a traditional pension, or defined benefits pension plan that lasts for life upon retirement. Only 33 percent of private sector workers had that luxury in 2005, according to Forbes. As Social Security becomes less dependable and investments like real estate become less valuable, retirement may soon become a luxury reserved only for the wealthy.

Sources

USA Today

CNN

MSNBC

Forbes

Each year a person waits for Social Security brings a greater risk-free return for retirement than taking the money early and investing it. Image: CC Wikimedia Commons

A growing number of Americans are choosing to take Social Security early. Some baby boomers have been forced to take Social Security early because of losing jobs and spending savings during the recession, while others are compelled to collect Social Security before the program goes bankrupt. Retirement planners say fears of Social Security bankruptcy are unfounded, and Americans who take benefits early are shortchanging themselves.

Why Americans take Social Security early

In 2009, 42 percent of 62-year-olds opted to take Social Security at the youngest age allowed, according to the Brookings Institution. That number is up from 38 percent in 2007 and continues to grow, even though waiting will increase social Security benefits by up to 8 percent each year until age 70. Some of these Social Security recipients have lost jobs and given up on finding another. Others are listening to the debate in Washington about government spending cuts that includes reducing Social Security payments and raising the retirement age. However, proposals for Social Security reform look decades into the future and don’t impact baby boomers approaching retirement age. Financial experts contend that even without changing the system Social Security benefits won’t be affected until at least 2037.

Misconceptions about taking Social Security early

Americans choosing to take Social Security early often lack an understanding about how the program works or the financial consequences. Claiming Social Security at 62 nets cuts benefits by about 25 percent for a lifetime. Some people may think that not claiming benefits at 62 means they have to wait until full retirement age (which will eventually rise to age 67 for people born after 1960) to make a claim. But after age 62, people can start claiming Social Security at the beginning of the next month, so they have 96 more chances until age 70, when benefits are maximized. Another big mistake is people underestimating their life expectancy. When social Security was founded in 1935, the average life expectancy in the U.S. was 61.5. Today Americans live to age 77 on average. By waiting until age 66 to start Social Security, a person living to age 77 will collect more money over time than someone who starts claiming benefits at age 62.

Why waiting for Social Security makes sense

Some people take Social Security early while they’re still working in order to supplement income and keep health care coverage until Medicare kicks in at age 65. But Social Security benefits collected before retirement age are cut $1 for ever $2 earned above $13,560 — effectively a 50 percent marginal tax rate on income above that point. Other people start collecting benefits early while they’re still working to invest the income for retirement a few years later. But Social Security benefits increase about 7.6 percent a year from age 62 to 70. Investments providing that rate of return with no risk do not exist. The bottom line is that it makes sense to be patient. A couple earning $100,000 a year with $500,000 in retirement savings that starts claiming at 62 can expect about $50,000 a year in Social Security payments. By waiting until age 70 if they can get nearly twice that: $96,000 a year.

Sources

SmartMoney

Science Daily

Funny about Money

Playtime's over. Time to pay up, pops. (Photo Credit: ThinkStock)

As of now, the National Debt Clock reads nearly $13.5 trillion. That’s what the United States government owes to satisfy its debts. Individual debt is separate and equally massive. Atlantic Magazine argues that it can’t be an infinite spiral. As the nation’s annual gross domestic product is only about $14 trillion, someone has to step up to the plate and clear the bases, because they’ve been clogged for too long. Atlantic’s humble suggestion is that the “lazy, self-indulgent, drugged-out, draft-dodging, mincing flower-power hippies” who moved on to Wall Street and began chanting the mantra “greed is good” should clean up the mess they caused. The Baby Boomers, in other words, are on the hook.

Amidst the tongue-in-cheek, a real call for Baby Boomer action

Paying off the national debt seems impossible. “Raising taxes by even 1 percent of GDP would be a triumph of leadership …  and fatal to the career of whomever proposed it,” writes the Atlantic. Yet if Baby Boomers were to pick up the pieces before moving on, it would be quite a parting gift – and it could possibly be handled via estate taxes, suggests Atlantic. The publication cites a 1999 study estimating that $41 trillion will be transferred from parents to children and grandchildren from 1999 to 2052. If just 20 percent of that sum is collected via something related to but rather different than the federal estate tax that may be reinstated in 2011, more than $8 trillion in tax revenue would be generated.

It isn’t taxing the same income twice

The criticism levied by some is that estate taxes are unfair because it amounts to taxing someone’s income two times: when it’s earned and when the person dies. However, this is incorrect, as most of what estate holders have near the end does not consist of wages, but “unrealized capital gains,” as Atlantic puts it. It’s property. If the property isn’t sold, income tax isn’t paid, which is a significant tax loophole. The Atlantic’s suggestion – the “Boomer Tax” – would only apply to capital gains, not wages.

Even the average household can contribute, says the Fed

For those who aren’t convinced, consider a recent Federal Reserve study. Atlantic writes that “the average American household aged 65 to 74 has assets worth more than $1 million.” Factor in illness and increased medical care after that age window and the figure gets cut approximately in half. In other words, it falls below the estate tax threshold of $1 million. If there were a tax on Social Security – which sent out $682 billion in checks in 2009 – America would be that much closer to closing the deficit. There would have to be sufficient incentive to induce the heirs of the deceased to return their Baby Boomer parents’ unused Social Security, however, or the estate holder would spend it down before death. Which could come sooner rather than later if health care rationing were to become the norm, as Atlantic suggests.

While these ideas are decidedly unpopular in the current political climate, Atlantic suggests that they would pay down the national debt. It would be a gift of great magnitude from Baby Boomers to future generations of Americans.

Sources:

Atlantic Magazine

U.S. National Debt Clock

Borrow your way to wealth!

Americans and their aging parents

Neal Cutter, a 63-year old professor in UNC, stated, “I never thought my (93-year old) mother would live this long … and I’m paying $8,000 a month for her nursing home care. I also pay my 19-year-old daughter’s college tuition at $40,000 a year. … I’ll probably have to move money out of my nest egg before my daughter graduates to make ends meet.”

This leaves Americans to defer their own retirement savings, tapping into their 401k accounts and savings. They are also looking for installment loans to help with emergency medical bills. Although health-care costs can be large, it’s daily care that also strains families. The average assisted-living facility charges $35,000 yearly for relatively healthy elderly people to live there. The price for a nursing home is far greater, averaging out at $75,000 annually, but that’s only in moderate cities. Expect to pay well over the $100,000 mark for more popular areas.

How to avoid costs

One way to avoid large health care costs is the relatively new long-term-care insurance policy. This type of coverage takes care of assisted-living, day care and in-house nursing care. The only problem is that it needs to be started when the parent is healthy.

Michael Boone, financial planner, confirmed that “You should consider it when you’re in your early 50s…it’s critical to figure out how you want to handle this risk early on.” The premium pricing varies greatly depending on age, so getting long-term-care insurance early is key. For example, a 55-year-old healthy male looking for coverage will pay about $1,258, whereas a 65-year-old man would pay $2,200. A 79-year old man would start at $6,400.

Looking to Installment loans

Because of the costs, many Americans are looking to installment loans to carry their parents’ emergency health expenses. This type of loan can prove beneficial to the qualified applicant because it gives them the funds to take care of the emergency expense. Depending on how much they qualify for, all or part of the payment can be taken care of relatively easily and quickly.

Sandra Pendleton of Niles, Illinois stated, “Installment loans helped me to face a large bill for my father’s emphysema complications. Without qualifying I would have had to dip into my 401k, which is something I’m trying to not do.”

Elder American care

As Americans age, new ways of handling debt and emergency bills need to be found. Like with any financial plan, there are unforeseen things that people need to be aware of and have solutions for. One way to handle bills is to use installment loans, dip into savings, or use 401k retirement funds. Hopefully with the new health care reform policies, there will be more viable options available.

Start your quick installment loan application HERE!

Baby boomers may need extra savings, personal loans and family help to make it through their retirement. The bailout of 2009 was huge. It was supposed to spur on the economy and return the lending and auto industries to successful operations. Though its long-lasting effect has yet to be seen, another aspect of the economy is now calling for help. It’s the Social Security system that is the next big problem for the government to tackle. According to the Congressional Budget Office, for the first time in a quarter of a century the Social Security system is taking in less in taxes than it is putting out in benefits. The system is the biggest social program around today and that makes it a priority warranting quick action. It needs help from the Treasury to avoid bouncing benefit checks.

The negative Social Security fund

The government hasn’t officially announced that the Social Security fund is negative, but the numbers have been released to calculate proof. The interest that Social Security earns on its trust fund for 2010 will be $120 billion and the overall Social Security surplus for 2010 is $92 billion. That leaves a $28 billion deficit in the year’s fund on September 30th, the end of the fiscal year. Though some would argue that interest isn’t factored into the equation, there is good reason for that. Interest includes IOUs the fund gets on holds of government securities, but it isn’t liquid and, therefore, pays no money into the system to count on.

Social Security hasn’t been negative since the 1980s when the same issue arose. The Greenspan Commission report resulted and created money by instructing Congress to trim benefits and raise taxes. The moves created cash surpluses, but those have been used for the last 20 years to help finance the rest of the government. Though it was predicted the surplus would last much longer, the reality is that the cash-strapped government went through the money quicker than hoped.

Social affect of the deficiency

Social Security currently makes up more than 50% of a retirees’ total income. That’s bad news for people who were relying on Social Security benefits, along with personal loans and family aid to make monthly payments. Add to their problems the fact that housing values are down, savings are depleted and credit is sparse, and that creates a difficult retirement for the average senior citizen. To make it through the recession most seniors tapped heavily into their cash reserves and no longer have the funds needed to sustain themselves without help.

A few years ago, it would have been simpler to fix the issue. The government could have used Social Security’s cash surplus to buy non-Treasury securities. Government-backed mortgage bonds or high-grade corporate could have substantially helped to cover the shortfall of funds. Now, that is no longer an option.

The future of seniors in retirement

Only time will tell how the government will overcome the shortfall of Social Security. With the huge number of retirees counting on their benefits, and a new generation entering the system monthly, something will need to be done quickly. Creating a new stimulus may be the only option to fuel the fund. Until then, seniors may need to rely on personal loans, savings and family help to make it through retirement.

Start your Personal Loans application HERE!