Tuesday, June 30, 2009
Some seniors are left vulnerable to abusive lending practices associated with reverse mortgages, according to a Government Accountability Office report on the Department of Housing and Urban Development.
Reverse mortgages allow seniors to borrow against their home equity and pay nothing as long as they live in their homes. Their heirs have to pay the mortgages back.
Salesmen for loan companies often try to cross-sell other insurance products inappropriate for particular seniors. Cross-selling is a major strategy of all major financial institutions, who place heavy pressures on their agents and advisers to do so. Mergers within financial services over the past fifteen years (before the Crash) greatly increased the appeal of cross-selling, which sometimes became a career focus for many executives.
The Washington Post story is by Dina El Boghdady, titled “Reverse Mortgages Leave Seniors at Risk, GAO Says: HUD Defends Programs' Safeguards”, link here.
The actual GAO report is called “Reverse Mortgages: Product Complexity and Consumer Protection Issues Underscore Need for Improved Controls over Counseling for Borrowers”, dated June 29, 2009, and the link is here.
The HUD page for reverse mortgages is here. The page says, “The only reverse mortgage insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage or HECM, and is only available through an FHA approved lender.”
Sunday, June 28, 2009
Ron Lieber has an interesting story in the Saturday, June 27 New York Times, “Et Tu, AARP? Good Guys Cut 401(k)s, Too”, link here. (The story title refers to a famous line in Shakespeare's "Julius Caesar".) The AARP (American Association of Retired Persons) has suspended its 401(k) match for its own associates for at least nine months. Non-profits face the same pressures as everyone else.
I actually applied for a job with AARP in 2004 through its website and found it as competitive as any other organization.
One study says that 29% of employers will reduce their 401(k) match this year during the severe economic downturn.
This morning, I have to give the AARP credit for its column on gay rights, “The Stonewall Riots: 40 Years Later”, here.
Picture: Headquarters of AARP in the late 1980s; I worked in the same building for a consulting firm. That was 20th and M; now they are on E Street in Washington.
Saturday, June 27, 2009
Here we go again, with more discussion of long term care insurance. First, it’s not for everybody, but it is certainly advisable for working-age people who will have assets and who don’t want to “burden” their kids with caring for them.
The Department of Health and Human Services has a basic link called “long term care” here.
NAIC, the National Association of Insurance Commissioners, has a fact sheet here.
This group is said to offer a booklet on long term care, although I could not find the link to order it.
But the most important story appeared on p B6, in a feature called “Personal Business” and “Patient Money”, with an article “Getting Insurance for One’s Frail Years” by Walecia Konrad, who herself has a 92-year-old father. This ties into another internal blog at the paper.
Konrad covers this limitations on what Medicare and Medicaid pay for, and warns that insurance companies underestimated the claims experience they would have, partly because of consumer behavior and partly due to demographics. She gives many tips. Make sure that all kinds of custodial care are covered, and make sure that the triggering event (often two or more kinds of functional disability) is covered. Make sure that Alzheimer’s and various dementias are covered: unbelievably, some policies try not to cover them. Don’t ask for lifetime benefits, and consider a front-loaded policy where you pay while you are still working. Also consider policies that will make monthly cash payouts.
A private group in Oklahoma has been sending out business-reply-mail postcards to request a “2009 Medicare Update”. The card mentions several areas (1) in-home and long-term care prevention (2) Medicare supplement (3) Prescription drug plan (4) Seniors final expense and estate planning.
It looks as though the last item is what they are going after business in. I’ll probably send in the card, but it does seem that private marketing companies are getting personal information (including residence) from Medicare or Social Security, despite HIPAA and all the privacy rules.
The post card starts out by saying “the President has announced the guidelines for Medicare reform.”
The best FAQ page from Medicare itself on 2009 is here. Read what it says about screening tests, like colonoscopy.
Friday, June 26, 2009
Long term custodial care is mostly self-pay, long-term-care insurance or "family responsibility"; mention geriatric care management
It’s important to reiterate that Medicare generally does not pay for many services that tend to be needed for “long term care.” It generally does not cover “custodial care (non-skilled care)”, which is “care that helps you with activities of daily living”.
The main reference on the Medicare site for long term care is here. There is a particularly telling comparison chart called “paying for long-term care” including items related to long term care insurance, and some special programs in some areas like PACE. The URL for that link is here.
There is a general expectation that family members will provide some long-term care, and that patients will have to pay for care that family members are unwilling or unable to provide. In some states, “poor laws” or “filial responsibility laws” could force adult children to pay for this care if parents become destitute, even if the adult children had no children themselves, and the financial crisis makes it more likely that some states will start enforcing these in the future. Ironically, the childless may be more vulnerable to this problem in the future than those with families, which flips some of our ideas upsidedown.
A professional geriatric care manager can help work out some of the potentially sensitive problems of responsibility. The website for the National Association of Professional Geriatric Care Managers is here.
Wednesday, June 24, 2009
OK, I had my Medicare physical today. I don’t enjoy the twelve hour fast, or finding out that the phlebotomist doesn’t come in on Wednesday so I have to wait even longer for the doctor to draw blood.
They'll ask for your Medicare card, your supplemental insurance card, and your Part D card (for many people the last two are likely to come from AARP), because, they'll say, most drug prescriptions are now filled by mail for lower prices.
But the physical is very simple. There was the delicate exam (prostate, etc), but the rest of it was no different than any other checkup. There was no electrocardiogram this time. There wasn’t even a urine specimen. But the blood test filled four vacutainers. There were a couple of other freebies, like a pneumonia shot, and a prescription for a shingles shot (a booster against the herpes zoster virus). The HIV test is voluntary but recommended.
They call in two days with the blood test. I had dropped a few pounds in the past years, and the nurse said, well, your blood sugar will probably read lower, and that’s good.
There is no glucose tolerance test, but some doctors will probably want to do it.
Oh, yes, there is a referral for the colonoscopy. That will be mandatory, including all that purgative "prep". They give you a sedative during that procedure, so it will be hard to blog about it after the fact. But I’ll try. But I don’t think the inside of my colon will be shown live on Good Morning America. But someone’s will. Dr. Tim Johnson, how about stepping up?
Picture: Note the king of beasts. If it weren't for us, cats would rule.
Tuesday, June 23, 2009
Kelley Greene wrote a detailed article on Roth IRA’s for this past weekend (June 20) Wall Street Journal, “The Journal Report” section, here.
The article has a rather elaborate title “Making a Good Deal for Retirement Even Better: New tax rules are about to give more people access to a Roth IRA, one of the best savings plans for later life. Here’s how the changes work—and how to get ready.”
In general, contributions to Roth IRA’s do not shelter income from taxes, but later many withdrawals will be tax free.
The Wikipedia article explains the advantages and disadvantages of Roth IRA’s compared to traditional IRA’s, here.
One reasoning that the loosening of some rules will help some people is that the values of many traditional IRA’s plummeted during the 2008 financial crisis and recession. So many people may come out ahead by converting money to Roth IRA now when the tax would be lower, and enjoy tax free withdrawals later.
The WSJ article calls the Roth IRA “one of the best deals in retirement planning.”
Much of the improved benefit from the Roth IRA comes from the Tax Increase Prevention and Reconciliation Act of 2006. A group named Stevens & Brand has a detailed discussion how the income limit on Roth IRA conversions bumps up, starting in 2010 (link).
The Govtrack reference for the law HR 4297 in the 109th Congress is here.
Saturday, June 20, 2009
Emily Sachar has a number of interesting legal articles for retired people in the AARP Bulletin, and a particularly interesting one on p 25 of the June 2009 issue (the series is called “The Law: The Issue”) is “Can mandatory arbitration clauses in nursing home contracts be waived?” The link is here.
Admission to a nursing home is a taxing process for both the patient and his or her family, so it’s not surprising that fine print gets overlooked. And a common provision is giving up the right to sue, to agree to mandatory arbitration, as in cases of alleged neglect of mistreatment. Of course, states have oversight agencies (Adult Services) and ombudsmen, but in practice they may be difficult to use.
The case in the article involves a scheme to arrange a sale of a house to pay for the nursing home care. Emily advises that the family request an arbitration clause be removed from a contract.
Friday, June 19, 2009
I got an email this morning asking whether someone who earns both social security and other income can defer some of the tax on “social security income” (it gets complicated, remember – it can get up to 85%) by continuing to contribute to an IRA.
Let me remind readers, go to a tax adviser or attorney for a definitive answer on your individual situation. All I can do is provide the references to the rules, which can be complicated.
The IRS publication relevant to this question seems to be 915, with a PDF online at the following URL. With any question like this, always go to the original federal government publication if possible.
Note particularly the preliminary questionnaire on p 3, and then the worksheet on p 7. I don’t see anything about contributions to an IRA or similar plan from coincidental wages. There is mention of items like savings bond interest and adoption benefits being added in.
If you work, you can tax-defer up to a certain maximum of your wages (but not pension, investment, or social security benefits themselves) in an IRA, and the maximum increases at age 55.
I guess the short answer seems to be “yes and no”. It doesn’t look as thought the IRS considers IRA contributions in computing taxability of social security benefits, because you can defer only wages. But your total tax bill will or may still be substantially less if you work and defer some of your wages. So it sounds like a matter of semantics.
MSN Money Central covers this problem here.
Remember that Social Security applies an Annual Earnings Test until you reach full retirement age. It looks like I covered the rules for this concept on Feb. 27, 2006 on this blog. Here is the URL for the social security’s own rules, in baby talk, again. I don’t see anything there about deferring taxes on benefits. After full retirement, your benefits may increase over what they would have been if some were deferred because of the Annual Earnings Test.
As a general rule, it’s better to work if you can, and tax the tax deferral as allowed by law or IRS rules on part of your wages. You’ll come out ahead in the end that way. More people are having to work longer given increased life spans, family responsibility, and the recession.
Thursday, June 18, 2009
Medicare initial physical: My take used to be "never go to the doctor" (you know what happened to Letterman)
When I went to renew my prescription of the “chemical angioplasty” drug atenolol (which is so cheap anyway) this time the doctor’s office said, nothing doing. It seems that when you turn 65, not only does Medicare pay for one complete introductory physical, it is almost mandatory. Until 2004, however, Medicare had not paid for “routine physicals”.
I found a link describing what the physical comprises. About.com has a similar link here. AARP has an explanation here (your Part B coverage has to begin after Jan. 1, 2005). It will certain include a 12-lead electrocardiogram. I think it will probably involve scheduling a colonoscopy.
When I worked for ING (I was “retired” at the end of 2001 during the post 9/11 downsizing) the company paid a wellness bonus for taking an annual physical, which I actually took (in Minneapolis) just before the layoff announcement. There were about $400 of covered bloodwork, including liver, kidney, heart hormones, prostate hormones, etc. That’s when the beta blocker started. I was 58 then. In fact, until my 40s, my blood pressure had always been very low.
What I dread is the “David Letterman” situation. You go to the doctor, and you don’t go home. You know what happened to Letterman in January 2000 (admittedly, he wasn't a "senior" yet). Emergency coronary bypass surgery. He didn’t even have many symptoms, and he wound up in the defaced zipper club. Even Esquire made light of it with rotoscopic drawings of his new chest. A weekend angioplasty, as what happened to Charles Gibson (ABC news anchor) is all right; he went back to work in a couple days and showed the angioplasty photos on television.
And then there’s the issue of prostate. Most men will develop some prostate cancer, and most of the time it is very slow growing and they will die of something else eventually if nothing is done. Rudy Giuliani had his treated aggressively, but I don’t know what subtype he had.
My own father died and passed to his reward, of suddenly and widely metastasized prostate cancer at age 82 on New Years Day 1986. He had a long active life (still substantially longer than average for his time) and had been ill only for four weeks. I think he knew what the radical treatments could be, and felt a sense of shame at the idea, and preferred the quick result that happened. Prolonging the end with such treatments violated his own personal moral convictions, and I know only too well what his convictions were, as he raised me. His had been a life to celebrate, up to the very end, with no real medical hardships, no soap-opera-like emotions. The funeral was not a mourning, but a remembrance of an epic life that had spanned eight decades of American history and seen almost everything. It was a life that would shape my own values for a world that would change, oh so radically, to seem almost like another planet by now.
I think that medicine needs to take a deep breath, and do a lot less sometimes, and give the patient the choice to resist undignified body snatcher invasions. But Medicare, along with the malpractice threat, and along with a strange perversion of pro-life ideology and familial emotion, is subjecting many seniors to humiliating ordeals that they probably really don’t need. With chemotherapy, for example, sometimes “cure” is worse than disease.
My physical is June 24. I keep my own fingers crossed.
Wednesday, June 17, 2009
Christine Dugas has a story today in the “21st Century Retirement” column of the “Money” section of USA Today, on Wednesday June 17, “For boomers, recession is redefining retirement: New reality: work more, spend less”, link here.
The story, early on, mentions the “sandwich generation”: boomers providing for teenage kids entering college, and at the same time caring for parents who live longer, often with significant disability, than was common for past generations.
Add to that the recession and financial crisis: our whole culture lived beyond its means, and built in some systemic risks that came crashing down, most visibly in the housing and mortgage areas.
That led to my comment yesterday: while recognizing the touching personal stories often presented in the media, we have to step back and realize that we have some big public policy choices to make.
The USA Today story has a chart “belted by the fall” showing the loss in retirement savings between January 2008 and May 2009. Surprisingly, age 61 to 65 fared better, probably because seniors tend to be more conservative and cautious and tended to have less exposed investments. (My own loss was in that range, and some of it has recovered in the past two months, since the new administration came in.) Younger workers have time to make up losses in “Suze Orman” style with dollar cost averaging and should continue to invest in as diversified a manner as possible for their own retirement.
Tuesday, June 16, 2009
The Washington Post, in the Health Section, featured today (Tuesday June 16) an article by Paula Span on caregiving. The long title is “Their Parents’ Keepers: As the elderly live longer, with more ailments, children step up to the difficult task of care and often find it unexpectedly rewarding”, with link here. The link is here. The title for the continuation page is “Middle-aged Americans adjust to caring for their parents.” The article is a “special” to the Washington Post, adapted by the writer from her new book “When the Time Comes: Families with Aging Parents Share Their Struggles and Solutions” from Springboard Press, with website here. The title of the article sounds inspired by the controversial New Line Cinema film “Her Sister’s Keeper”, but this, of course, is about caring for our parents. The visitor should read Paula Span’s article thoroughly, as it speaks for itself. I will order the book from Amazon and review it soon on my books blog. Paula Span had also offered a major (and eye-opening) article on caregiving in the May 10 Washington Post Magazine, already discussed here. (Ms. Span is a Washington Post writer.)
Span points out that the amount of demand for caregiving by adult children, along with the growth of caregiving businesses and facilities, has been a rather sudden demographic development. Medicine has delayed deaths from heart attack and stroke, and to some extent has delayed disability. But because of the way medical practice works out many senior adults will face longer periods of disability than they would have experienced in past generations.
Will the caregiving industry and long term care insurance business be able to keep up with demand? It sounds like a big order to expect, and this is somewhat of a demographic shock, especially to single adults (especially men) who have not undergone the emotional preparation by marrying and having their own children. It’s interesting to me that the ideology (as it has developed since the Reagan 1980s) of hyperindividualism and “personal responsibility”, that views family responsibility as starting with the voluntary “choice” to have children, seems to break down over this demographic challenge, already noted by Phillip Longman and others who argue for a new “social contract.”
Span writes, for instance, “The out-of-pocket costs of caring for older adults averaged more than $5,500 a year, a recent national survey found, causing a third of caregivers to dip into their savings, cut back on home maintenance, or reduce saving for their own futures.” I can wonder what Suze Orman would say about this.
I’m writing about this with an impersonal tone because I want to point out that this is becoming a huge public policy – and public health – problem. I see articles like this, then (like Smallville’s character Jimmy) put “two and two together” with other issues, and wonder where we are heading. We have created a situation that is likely unsustainable, as caregivers may neglect their own health and create an unending chain of dependency, breaking down all of the libertarian aspirations of just ten years ago. I’m surprised that we don’t fold this in to the health insurance debate, which the president spoke about to the AMA yesterday. One other likely development is that many of the 28 states with “poor” laws or “filial responsibility laws” (check the label for this blog on the left side of the page) will try to start enforcing them, given their recession strapped budgets.
Other cultures have dealt with this issue without the diversion from “family centeredness” to cognition-based ("selfish" or perhaps "objectivistic") hyperindividualism that has developed in the West. China, for example, has a long tradition of filial piety, and its one-child-per-family policy may come into a collision course with that tradition. Other cultures, especially in the Islamic world, expect emigrants to support relatives (that means parents and siblings, not just their old children) back in home countries. So this is potentially a problem with international repercussions.
Monday, June 15, 2009
On Monday, June 15, 2009 The Washington Times has a front page story about a particularly galling result from the General Motors implosion and government-orchestrated bankruptcy. The story, by William Ehart, is titled “The Bondholders: GM deal erased many average Americans’ savings”, with link here.
The story starts with a picture of an 84 year-old retiree in Arlington who lost many of his retirement savings because GM will not have to make good on bonds (other than a small fraction of new ownership) that were sold by professional funds and investment banks to average investors. This is a different problem from the retirement pension, which appears likely to remain intact given the mechanics (and probable future bailout) of the PBGC and the arrangements. It’s also a different problem from retiree health insurance. This has to do with the principal value of bonds in GM held by “average Americans”, auto industry employees and others, which have dwindled to near zero.
There was a political calculation with the bankruptcy: the jobs of auto workers and suppliers, often of working age, had to be weighed against the welfare of retirees as well as political debts owed to autoworker and other unions. It’s typical “Democrat” stuff.
I’m not sure where Chrysler bondholders fall into this picture, but there may be similar problems.
It’s always dangerous for people to count on stocks or bonds in any one company or industry to pull them through retirement, no matter how dominant the company is at a particular time. It takes a long time to get to stable retirement, plenty of time for a lot to go wrong. Do not count too much on the value of your employer’s contributions in its equities or debts. Diversify. Use dollar-cost-averaging. Remember, with Enron, there were problems in that employees had not been permitted to transfer the securities to other vehicles. If this sounds like a Suze Orman smackdown, well, it is.
Of course, this story appears in one of the country’s main “conservative” rags, and it’s a pretty easy subject for attacking the underlying political constituencies and mechanics of the Democratic party.
Friday, June 12, 2009
AARP, EBRI present study on the need for savings to cover health expenses, even given Medicare, especially for women
Carole Fleck has an article about the increasing dire straits of seniors’ savings, especially females, in the AARP Bulletin on June 11. The formal title is “Health Costs Could Gobble Retiree Savings, Especially for Women: Study finds women especially at risk of outliving their resources,” link here based on a study by the Employee Benefits Research Institute (link).
A woman at 65 would need $98000 in savings to have a 50% chance of recovering all her lifetime medical expenses, even if she has Medicare and employer-sponsored Medicare supplement, which is becoming less frequent. Women outlive men by 5.2 years and are likely to spend much more in medical expenses. The study doesn’t even include long term care costs, which may balloon out of control. Long term care insurance (often covered on this blog) is touted as the “system’s” answer to increasing need for custodial care, but it has a long way to go.
The study said that women over 65 spend 32% of their income, compared to men who spend 21%, on medical expenses. Women are much more likely to fall into poverty.
Thursday, June 11, 2009
The New York Times has a (June 11) article in a series called “Caring and Coping: The New Old Age” called “Can Dementia Be Prevented?” The author is Anne Underwood and the blog link is here.
The short answer seems to be, yes. The prevention is a combination of mental activity and especially physical activity and healthful habits.
The biggest risk of dementia may come from ordinary vascular risks, including high blood sugar (glucose intolerance and insulin resistance migrating toward Type II diabetes) and coronary artery disease, which eventually leads to plaque and clots and the risks of small strokes. A healthful circulatory system flushes away certain proteins that might eventually become amyloid plaque. So all the lifestyle issues apply, with a low fat, low refined carb diet being desirable. Not all dementia is formal Alzheimer’s; vascular dementia (from heart and circulation problems) is also increasing in frequency, and the two may interact (check Wikipedia).
The other factor is mental activity. The article mentions crossword puzzles, and one can imagine the benefit of chess or games, or of computer skills (even the research it takes to write a blog like this one). Some people do better with a lot of social stimulation, especially from family (read about aboulia). But here we have an apples and oranges thing. People vary in how much social activity they need. Some people badly need it to stay sharp and motivated, where others are harmed by too much of it.
There is emerging research in treating or preventing dementia with all kinds of stimulation, physical and social, to rewire brain circuits. But the results are likely to vary enormously among patients based on genetics, age, personality, temperament, and many other factors.
Wednesday, June 10, 2009
The American Benefits Council has a page listing all the major actions going on with pension changes, here. The categories are legislative, regulatory, judicial, press releases, and an archive.
SHRM (Society for Human Resources Management, in Alexandria, VA) has a link to an ABC statement (5/22/2009) to the effect that “freezing a pension plan is better than laying people off,” link.
Monday, June 08, 2009
"Indiana wants me"-- no, its pension funds want Chrysler to pay back its debt before Fiat takes over
The Indiana State Police Pension Trust and Indiana State Teachers Retirement Fund had bought about $17 million in Chrysler’s debt, and would recover only about $12 million if the administration’s and TARP’s plan for Fiat to buy most of Chrysler were to go through.
The natural question is why pension funds buy questionable debt as an investment – since pension funding is becoming a source of anxiety to retirees and a big political issue. The answer seems to be that in ordinary bankruptcy law the pension funds were still considered “senior lenders” who should have held a preferred place in line in this “sheriff’s sale” of Chrysler.
The funds claim that the administration and court have ignored normal bankruptcy law, endangering the stability and faith of pension funds around the country who have invested in other troubled industries with the expectation that normal bankruptcy procedures are followed.
The Bloomberg story by Tiffany Kary, Linda Sandler and Christopher Scinta is rather detailed and is here.
Jeff Bennett has a story in the Wall Street Journal newswire here.
Justice Ruth Bader Ginsberg issued a brief “stay” on the sale to Fiat today. Fiat could back out if the deal were not completed by June 15, leading to a Chapter 7 liquidation of Chrysler and a much sharper effect on suppliers.
Remember that 1970s song “Indiana Wants Me, But I Can’t Go Back There” with the police sirens. I spent the summer of 1970 in Indianapolis on a work assignment on my first job, still dodging frost heaves in the roads. I remember "Washington and Meridian." How old long memories come back.
Attribution link for the Soldiers and Sailors Memorial in Indianapolis.
Note: On June 9, NBC Nightly News reported that UAW retirement fund had been treated preferentially by the bankruptcy settlement with Fiat, so the struggle seem to be between pension funds and their union or political connections. This cannot be good.
Wednesday, June 03, 2009
Today Heritage Foundation president Edwin Feulner, on the Perspectives page of the June 3 Washington Times, wrote a piece called “Urgency vs. duty of Constitution” and suggested that lawmakers raise retirement age and “focus future benefits on those who need them”, which, for a conservative, sounds odd, admitting that FICA really be accepted as a “tax” and not an annuity premium. But he also suggested the transition to managed private accounts. Feulner writers that Congress would have to invest $7.7 trillion today (several times the size of last fall’s bailout, and more than twice “what the federal government would spend this year on everything it buys”) to make good on all of social security’s promises for the next 75 years.
It does seem that the means testing is focused on future retirees. But it raises another ethical question. Some retirees could work today, even in the bad economy, of benefits were “expropriated” from them, but they might be forced to pander themselves in areas that they do not believe in to make ends meet. There is a bit of pride in this.
The link for the column is here.
Note: It's OK to look directly at the Sun in my "star trek" picture. It seems a bit M-star-like to me.
Monday, June 01, 2009
Media: GM was a "club" for retirees; OK, we need a sustainable "transportation industry", not just an auto industry
The MacNeal-Lehrer news hour on PBS has a blog entry in which “retired auto workers ask union chief Ron Gettelfinger their questions,” link here. There’s a video there that I won’t try to embed this time.
The radio show mentioned the characterization of General Motors as having become a “club for retirees” with five times as many retirees as employees, but only employees have a vote in ratifying contracts.
But retirees did make the point that what we need is a “transportation and energy industry” (a la Thomas Friedman – in a hot, flat and crowded world) and not just an “auto industry.” Most everybody gets this now.
Retirees have already lost some health (and especially dental) benefits, but it seems as though much or most of their pension base will ultimately be protected by the bankruptcy court, the PBGC, or ultimately by political pressure on the administration and Congress (yes, that could mean more bailouts).
What we had was a system that had become unsustainable.
Attribution link for Wikimedia Commons picture of Detroit skyline.