Tuesday, December 28, 2010

More talk on making Social Security more progressive -- and quickly

Michael Gerson has another “challenging” column Tueday Dec. 28 in the Washington Post, p A13, called “Face Social Security” in print, and “Social Security reform is the answer to Obama’s – and the nation’s” online, link here.

The essay doesn’t quite support the ambitious (if not bombastic) title. He does say that entitlement reform is more realistic than broad-based tax reform, but admits first that Medicare has the biggest problems, but then writes “While Social Security is a relatively small contributor to future deficits, reforming it would be a large symbol and a logical place to begin.”

True, Social Security doesn’t face immediate default because of an accounting trick – it can use other government IOU’s to coverup shortfalls.

The recommendations are the same – raising retirement age, and reducing benefits according to Means, with a taste of Marx, the way soldiers used to make fun of “pinko” in the barracks.

To the extent that social security and Medicare are supported by “taxes”, they ought to be progressive and part of the general tax system. But this is where the libertarian-side of the GOP had it right: there ought to be more that you own, and that can’t be expropriated.

It is sounding more as though the means testing will be proposed to come (as James Baker used to say, in a different context) “sooner rather than later”.

Gerson’s comments follow Samuelson’s by a day (yesterday’s post). Yes, there’s no way to make Life fair.

Monday, December 27, 2010

On Social Security and Medicare, life will be unfair to -- somebody; Part B premiums rise for "wealthier" benes in 2011 anyway

Robert J. Samuelson has a column on p A15 of the Washington Post, “On fairness dilemma” in print, “On Medicare and Social Security, be unfair to the boomers” today Dec. 27, link here.

He writes “not making cuts would also be unfair to younger generations and the nation’s future. We have a fairness dilemma: Having avoiding these problems for decades, we must now be unfair to someone.”

The gradual raising of Social Security benefit eligibility ages has already been proposed, but he says that quickly (within a few years, as the economy recovers) benefits for wealthier retirees should eventually be cut now. Indeed, admit that FICA is a redistributive tax, not a retirement annuity. He talks about benes paying some of their own Medicare premiums, but we already do that with Part B  ($96.40).

It's actually a bit more complicated than that. In 2011, the standard Part B premium rises to $115.40 (20%). But, Social Security writes "However, there is no Social Security cost-of-living adjustment (COLA) in 2011. So, most people with Medicare already enrolled in Part B in 2010, with income below $85,000 for an individual or $170,000 for married couples, will pay the same premiums in 2011 they are paying in 2010." The presence of accumulated or inherited wealth doesn't seem to matter, just IRS-reported income. (How else could they do it, anyway?) The link is here.

On Dec 19, Samuelson had run a column “Retiree benefits are cheating our children”, about the lack of prefunding for public employee retirement programs.

Friday, December 24, 2010

Local governments push up property taxes steeply to pay for public employee pensions

Jeannette Neumann has a detailed article on the front page of the Christmas Eve Wall Street Journal, “Pensions push property taxes higher; cities tap homeonwers for revenue as workers’ retirement, health costs rise”, link here  (may require paid subscription to see entire article).

There’s no question that politicians have been unwilling to fund municipal and state employee (fire, police, teachers) pensions honestly, so property taxes are rising, in some cases (in PA and IL) by up to 13% in one year, just to pay the promises. And many states are looking more at “defined contribution” strategies for new workers. It’s easy to imagine how this can be twisted into a “family values” argument; our society expects workers to provide their own retirement through earning pensions or now 401(k)’s, can’t depend on “family.”

Another possibility is that local governments will make more of the idea of "commercial use" and could try to charge more for homeowners who operate home based businesses (even blogging), or who telecommute.

Similarly, on Dec. 21, the Washington Post ran an editorial “For Maryland taxpayers and state workers, pension tension”, here. Recently, the DC area media have covered plans in Virginia to switch new workers much more to a defined contribution system.

Wednesday, December 22, 2010

Life insurers push inheritance taxes so they can sell more sheltering products

Timothy P. Carney has written a number of columns on the inheritance tax, including one today on P 19 of the Washington Examiner (“conservative”), “Insurers push death tax to profit from its effects”, link here.

He talks about the AALU, the Association of Advance Life Underwriting, as a player in the lobbying effort, encouraging higher estate taxes so that the life insurance industry can design and build products to help rich people get around them. There’s a slogan, “Leave No Heiress Behind”, an a notion of a “Paris Hilton Effect”. The AALU is at this link  and on its home page it says “Membership in AALU is like an insurance policy. It provides protection against a host of threats to our products. We have a positive story to tell legislators, many of whom misunderstand what you do and the products you sell.”

It's well known that a number of life insurance companies, even as they are acquired by conglomerates, are branded as focusing on "fratenal" markets, including high net-worth individuals and families.

I’m impressed that once you sell things for a living, you lose your right for you own personal voice on public policy matters altogether.

Tuesday, December 21, 2010

PACE program keeps more elderly at home, uses day care

Susan Jaffe has a “Health & Science” story in the Dec. 21 Washington Post, “Caregivers aim to trim costs by helping seniors stay at home; PACE tries to keep frail people out of hospitals and nursing homes”, link here. The acronym PACE refers to “All-Inclusive Care for Elderly”. The article describes how one qualifies (minimum age 55) and how Medicare and Medicaid work in the program. In the example situation given, a driver picks up an elderly person living alone, helps her down the stairs, and takes her to a day care setting and brings her back. The person has to be capable of being left alone at night in some cases.

Elder day care typically has waiting lists and has certain minimal health requirements (like TB tests).

Sunday, December 19, 2010

VA may switch newer employees to partial defined contribution pension program (GOP proposal); Fed used to be like this

Virginia Republican Governor Bob McDonnell is proposing that most state employees hired since July 1, 2010 contribute 5% of their salaries to the pension system, reversing a 27 year period (since 1983) when employees paid nothing. So the plan is going back to partially a defined contribution as well as defined benefit program. Rosalind S. Helderman has the Washington Post blog entry here.

Until sometime in the 1980s (with Reagan’s reforms), federal employees used to have a payroll deduction to contribute to their own retirement, but did not (always) participate in Social Security. My own records show that when I had a GS-4 job at the National Bureau of Standards in 1963-1964, I did make social security contributions, but not when I had a civilian job with the Navy from 1971-1972. I was able to retrieve the retirement contributions when I left and buy a Ford Pinto. I still remember!

Friday, December 17, 2010

Md Congressman Hoyer says Social Security is paid for through 2037

Robert Weiner, formerly of the House Aging Committee, quizzes Maryland Democratic congressman Steny Hoyer in the Washington Post, p. A31 today, Friday, Dec. 17, link here.

Hoyer says that Social Security is paid for through 2037, and 25% short at most after that. It’s not the cause of the deficit. Medicare is much more problematic.

Still, a search on Hoyer shows that he does favor a more “progressive” system, with less for wealthier retirees, and looks on it as a tax rather than an “annuity.”

Tuesday, December 14, 2010

Can "we" afford to pamper "inherited wealth" in drafting the tax bill? The GOP still thinks so

The “tax bill” compromise has several provisions that some people think are not good for long term fiscal stability. Part of the provision would knock off 2% from the payroll FICA tax that employees pay into social security. Apparently this would not apply to employers or to self-employed people. (Hint: not so good for small business, a GOP pressure point).

According to “conservative” Fox News, House Dems were still balking at extending the estate tax “exemption” into 2011, according to a major story Dec. 13, link here. The bill would set the (incremental) estate tax at 35% for estates of $5 million or more, rather than 45% at a $3.5 million cutoff. Estates between $1 million and $3.5 million apparently stay as they are now (after successive reductions during the Bush years). And it seems that the GOP will block other legislation (even repealing "don't ask don't tell") until it gets its way with this.

In the late 60s and early 70s, as I came of age as an adult, there was a lot of indignation from the far Left about “inherited wealth”, which many thought should be outlawed (sounds Maoist now, doesn’t it). For many seniors today, too old to have been able to buy long term care insurance, inherited wealth pays for long term care, and many seniors haven’t gotten around to spending on themselves before they needed care.

Update: Dec. 19

Ali Velshi hosted a discussion on CNN today. Conservatives said that the inheritance tax interferes with passing on businesses down in families (a measure that Phillip Longman and the population demographics crowd considers critical), since businesses may not have the cash to pay the tax. Liberals called it a "silver spoon tax" (remember Texas governor Anne Richards and the first George Bush?), and said that family businesses can survive the tax with careful family planning.

Comments welcome.  

Sunday, December 12, 2010

Social Security "payback" and "restart", which amonted to a free loan for "unneedy", terminated summarily

According to a story on p B5 of the Saturday, Dec. 11 New York Times, the Social Security Administration has just published rules limiting what amount to “interest free loans”. This was the practice of retirees paying back Social Security the entire amount they had received and restarting at a later age with higher benefits, especially if they go back to work (or expect to live longer).

There had been objection to the idea that social security recipients could have invested the money nd kept the profit, but paid no interest to the government.

Starting now Social Security will allow the practice only once, during the first twelve months of benefits.

Here is the link to the “new rules” from the Federal Register.

The New York Times blog entry by Jennifer Saranon Schultz is dated Dec. 9 online and the link is here.
The comments online are interesting, especially the long missive about the way taking social security benefits early penalizes unmarried women.

In print, there was a comment that people who took advantage of the “scam” (the interest-only “loan”) don’t even need Social Security and that the system should be saved (e.g., means tested) for those who “need” it.

Larry Swedroe has a similar article on Moneywatch, "The End of Social Security's Interest-Free Loan", link here. The Center for Retirement Rearch at Boston College ("Strange but True: Free Loan from Social Security" by Alicia H. Munnell, Alex Golub-Sass, and Nadia Karamcheva had noted that the "loan" had cost Social Security between $5.5 and $8.7 billion (PDF link).

Remember, the IRS never forgives interest (just penalties).  So maybe Social Security shouldn't either.

Saturday, December 11, 2010

CDC: life expectancy in the US has actually fallen slightly!

According to the Centers for Disease Control, life expectancy  dropped to 77.8 in 2008, from 77.9 in 2007 (assuming birth in 2008), with obesity and type-2 diabetes probably a major factor. For many diseases, including heart disease, cancer and stroke, mortality rates fell however, probably because aggressive medical intervention can prolong life so markedly.   Life expectancy in the United States is starting to lag behind many other countries, too. The AOL story by Catherine Donaldson-Evans appeared on AOL Saturday morning and has link here. 

Friday, December 10, 2010

Although Medicare reimbursement cuts are delayed, geriatric physicians don't have a good future

Jerald Winakur, a geriatric physician and professor at the Center for Medical Humanities and Ethics at the University of Texas Health Science Center in San Antonio, has a major article on p A25 of the Washington Post on Friday, December 10, “The Unkindest Cut: Seniors will be the real victims of payment reductions to Medicare doctors”. The link is here.

Although Congress has temporarily staved off a 23% reduction in payments, the long term future for geriatric office practice, he writes, is poor, partly because it tends to be labor intensive. That runs counter to the aim of keeping more seriously ill seniors at home rather than in institutions where, admittedly, delivery of services is probably more efficient and ultimately less expensive.

Wednesday, December 08, 2010

GOP proposals bill require state and local govt's offering tax-free bonds to do conservative pension accounting; could this affect muni bond prices, too?

The Washington Post ran an important editorial Dec. 8 about state pension plans, “Federal policies should help, not hurt, states’ fiscal health”, link here.  In print (p A18) it is called "Pension Reality Check: Congress can help or harm states' efforts to get a fiscal group".  

Three House Republicans (Reps. Devin Nunes (R-Calif.), Paul Ryan (R-Wis.) and Rep. Darrell Issa (R-Calif.) have submitted a bill that would require states and local governments that issue federally tax exempt bonds to file accurate reports on pension liabilities, using conservative accounting methods. The detailed story is on a website called “The Hill” (with a blog called "On the Money") by Peter Schroeder, with link here. It would be called the “Public Employee Pension Transparency Act”, and it should have an HR number in early 2011 with the 112th Congress. It’s possible that concern over the bill might have caused a recent dip in prices for tax-free municipal bond funds, as well as uncertainty over the tax cut extension situation (previous post, Dec. 6).

The Post editorial also criticizes a proposed Public Safety Employer-Employee Cooperation Act of 2009,. S 1611 (here at Open Congress), which could trip up state governments more by giving police and fire unions more power.

Monday, December 06, 2010

Extended tax cuts for wealthy not necessarily good for seniors' bond portfolios

I heard from a financial planner today that the GOP’s insistence in keeping the tax cuts for the “rich” (and the apparent "deal" today between President Obama and the GOP in Congress) is not necessarily the best thing even for relatively well-off retirees, at least those with a lot of tax-free bond funds (especially municipal bond funds), which many retirees have because they are considered “conservative.” The problem is that the demand for the bonds comes down if there is less of a need for a tax break among enough upper-income taxpayers. That’s not necessarily good for a lot of retirees, who might be better off with more valuable assets even if the tax rates could be higher – because the retirees’ actual reported income is generally less.

So the “Democrats” may not have been able to “protect” seniors from the “wrath” of the GOP since its November gains.

Removing uncertainty about the tax cut extensions, however, could help asset prices in the long run.

On the other hand, the government seems to be getting even deeper into debt, and that isn't good.

Friday, December 03, 2010

MSN/Kiplinger: 5 best and 5 worst states to retire; CNBC: raise retirement age to 68?

MSN has a link giving the 5 best and 5 worst states to retire, from Kiplinger. Best: Alaska, Wyoming, Michigan, Pennsylvania, Colorado Worst: California, Rhode Island, New Jersey, Vermont, Iowa. Pay attention not only to state income tax but also to exclusions of social security, sales taxes, medical exemption, and out –of-state investments.

There is an embedded CNBC video “Raise the retirement age to 68?” The commentators did say many retirees were flipping hamburgers, but that we still have a 1930s-style social security system. I thought the deficit commission proposal was age 69 by 2075. I won't be around then!

Wednesday, December 01, 2010

Simpson-Bowles would raise retirement age by 2075, raise wage base, and means test

There was more about Simpson-Bowles tonight on the major networks, with the president’s Debt Commission issuing its final report, which 5 out of 18 commission members can nix. The ABC story by Matthew Jaffe and Arlette Saenz is here.

The plan would increase the Social Security full retirement age to 69 by 2075, probably eliminate most early retirement, increase the wage base covered by the tax, and decrease benefits for wealthier beneficiaries, frankly admitting that Social Security is about wealth redistribution and not savings. Medicare cuts would also occur, hinting that in time families will bear much more responsibility for their elderly, as a legally mandated matter, than they perhaps do now.

Alan Simpson warned that people of future generations may be "sleeping in the streets".

Privately, I've heard predictions that means testing could start in about ten years.

Jagadeesh Gokhale, a Senior Fellow at the Cato Institute, wrote a letter to the Post published today, “Distorting Social Security Privatization Proposals”, link here. The writer notes that there are risks in depending on equity markets (depending on how the investments are regulated), but makes the point that the political risk to retirees in depending on government may be even greater.

Sunday, November 28, 2010

Government retirement security programs may become even more redistributionist

Ezra Klein has an important piece in the Outlook of the Washington Post Sunday, Nov. 28, “Good Reason to be Uneasy about Retirement Security,” link here.

He describes a basic process where the government has pawned deficit reduction back on to companies and worker, and companies have transferred the risk to individuals. He is skeptical about privatization, and admits that social security and Medicare might have to be regarded as wealth-redistribution entitlements and made much more progressive, mainly for the needy. He does give some interesting details about the history of 401(k), and says when it was invented no one had any idea that employers and government would use it as a cost-cutting device.

But he says it is a systemic problem needing big-top thinking.

Social conservatives are going to come back on this one, talking about the loss of the extended family as a motivator or personal identity.

Friday, November 26, 2010

Doctors cutting back on serving Medicare patients

Medicare reimbursement cuts are already “forcing” some doctors to see fewer Medicare patients, and to schedule checkups less frequently, according to a story by N. C. Aizenman today in the Washington Post. The story title is “Doctors say Medicare cuts force painful decision about Medicare patients”, link here.

All of that contradicts my own experience. When I went onto Medicare, I was “forced” to have a complete physical every year, and indeed got a quick hernia repair done (outpatient -- 67 minutes of my life gone!) No, I haven’t done the dreaded colonoscopy yet, nor have I offered my chest to the stress test.

There is some concern that in the past doctors have over-ordered tests out of fear of malpractice, and that specialists are over-compensated in comparison to family practice. In my own case, the family practice doctor’s billed rate ($200 for an appointment physical) is higher than some specialists.

Monday, November 22, 2010

Social Security reform likely to make it more "progressive", more like wealth redistribution than a personal "annuity"

Peter Orszag has a major op-ed in the New York Times, “Safer Social Security”, Nov. 14, where he starts out with “Social Security is not the key fiscal problem facing the nation.” He does say that measured over the next 75 years, the Social Security “deficit” would amount to 0.7% of the economy. The link is here.

There are several approaches possible to reducing the deficit (some of them incorporated into Simpson-Bowles). The most obvious is to increase the maximum social security wage base. Another is to reduce benefits in response to longer life spans. Of course another is to raise retirement ages and early retirement ages. Finally, and the most controversial, and related to “means testing” is to make the tax and benefit structure more “progressive”, offering mathematically more benefits to lower wage retirees and less to higher earners.

It’s the last proposal that has led libertarian-leaning conservatives to favor privatization, and absolute ownership of one’s own contributions, as with a life insurance annuity contract.

But it is the political fact that privatization, proposed during the Bush years, has fallen off the table that makes a "progressive benefit" structure and "wealth redistribution" model more likely.

Ultimately, the debate on social security mixes with a debate on “social responsibility” – whether shared through mandatory public programs like social security and welfare, or by increasing the requirements for personal family and filial responsibility. That makes proposals by Longman and others regarding having children interesting, to say the least.

Check also the letters in the Sunday times. Generally, the public seems to favor raising the wage base tax on the “rich.”

Sunday, November 21, 2010

Clarifying Longman's ideas on Social Security and "other people's children"

Is Phillip Longman right in maintaining that people who didn’t have children and who now receive social security benefits are getting their way paid by OPC, “other people’s children.”

Normally a worker earns his benefits (and sometimes those of his or her legal [opposite sex, for now] spouse) by paying FICA taxes on wages, which function more or less like annuity premiums.

The government (that is, the Social Security Administration) then has a legal obligation to pay the retiree benefits at retirement age (now 66, or allowing reduced early retirement). The “obligation” was earned by the FICA taxes being paid (which usually the employer matched, except in case of self-employment).

However, Longman is right in saying that the government’s ability to actually pay benefits depends on practice on the wages earned by “other people’s children” if you were childless. Without OPC wages (in a “Children of Men” world), the SSA would go bankrupt, and less benefits would be paid according to some court proceeding.

So his proposal to exempt parents from some FICA tax could make sense.

Saturday, November 20, 2010

Longman writes about "demographic seasons" in Foreign Policy Magazine, offers suggestions to reverse graying of population

Phillip Longman, author of “The Empty Cradle” in 2004, has a long piece in the November 2010 Foreign Policy, starting on p. 52. The title is “Think Again: Global Aging: A gray tsunami is sweeping the planet – and not just in the places you expect. How did the world get so old, so fast?” The link is here.  (I have a review of Longman's book on the Book Review blog March 28, 2006.)   Also see the review Jan 22, 2009 of "The Graying of the Great Powers" by Richard Jackson, Neil Howe and others.

Longman, as well as Carlson and Mero, have been arguing that society has gone too far in making procreation a matter of personal choice and “responsibility”, making it too costly for many people to even have children. But here Longman, in an article surprisingly gentle in tone, makes the case that populations grow and ebb with trigonometric curves, just as “baby boomers” age, while fewer kids are there to “support” them. Hence the notion of demographic seasons, and what the religious right calls “demographic winter.” Longman is cautious about the ability of longer-living people to work many more years than now, and reports that disability is increasing rapidly with longer lifespans. He may view some of it as inevitable rather than “morally” preventable by better lifestyles as well as medicine.  He also argues that smaller families may make socieites too risk averse and stagnant.

Longman acknowledges that children have a moral and perhaps (in many countries, including the US) legal obligation to support their parents, and toward the end he summarizes the major opportunities. Parent-friendly workplace and government policies in countries like France and Sweden are not all that effective, and we don’t want a fundamentalist moral system (like the Taliban’s) to force everyone into rigid social roles in order to maintain a tribal population (he admits that wouldn’t cut it here). So he suggests returning to the idea of the family enterprise, to build back the notion that children are an economic asset as well as responsibility.

That does certainly invoke the notion of filial responsibility laws, or a cultural norm of “filial piety”. If young adults understand they will be held as responsible for their parents as they are their own kids, they might realize they can’t “afford” to remain childless. That certainly could reverse the moral norm of the past few decades, that family responsibility is chosen merely by having heterosexual intercourse. It could radically change the way we have come to view personal sovereignty. Ironically, depending on how one sees other things, it could support the idea of gay marriage and gay parenting, but, as Jonathan Rauch has written, they would have to “be used” if won legally or politically. It seems that man has becoming less social a creature than he once was, and writers like Longman want to reverse that.

Longman has made specific suggestions about social security: forgive 1/3 of the FICA tax for each child (for a married couple?) up to three children, for making the sacrifices of parenthood. He says this would help women and mothers especially. Ask John Boehner about this suggestion!  (We're broke!  Maybe deny benefits to all non-parents out of 'means tesing'??)

It’s curious that right next to this magazine at Barnes & Noble I saw (and picked up) the current Time Magazine issue (Nov. 29) “Who Needs Marriage?” A Changing Institution (story p 48 by Brenda Luscombe, link based on the Pew Report (previous posting),  But few commentators "connect the big dots" of an aging population and declining interest in marriage. It's pretty easy to imagine what Maggie Gallagher and Jenifier Roback Morse will come up with on this one. CNN: "we build our marriages on quicksand."  Does it take a village?

Correlated post: "Bill on International Issues" blog, Nov. 26, 2010, discusses NYTimes article on dementia epidemic in South Korea.

Thursday, November 18, 2010

Eldercare needs may affect the "social contract" in ways few see yet

There is a lot of talk about the Pew Report on the decline of (traditional) marriage, as in this direct link. Nevertheless, living in a social unit regarded as “family” is still very important to a majority of people, who will consider a number of committed social arrangements as families, even though in modern society the monogamous commitments are of a more serial nature. And many people (a significant minority of adults) spent much of their adult life economically productive while “standing alone” and prefer it that way.

But the exponentially growing need for eldercare may turn the tables on the uncommitted life. Think back about a half century, when many families were larger than they are today. People who didn’t marry and have children (often mainly women) were expected to remain close to home to become available to take care of their parents and other blood relatives. The pejorative term for such an arrangement was “family slave”. While such family members were taken for granted, the demands for eldercare tended to be short term; once the elderly were ill, they tended to not live long, and end of life was a natural and expected result. Medicine was less advanced, and lifestyles (smoking, high fat diets, etc) tended to limit lifespans. Of course, over decade, things changed, as women sought and won equal opportunities in the workplace (and exceeded men in school), and as LGBT were forced, somewhat by older legal sanctions, to make the single lifestyle work, which it often did in a wealthier and more tech-oriented society. But extended families began to break apart in Diaspora, while life spans increased, because of both better medicine and better health habits. Extended life spans could mean longer lives without disability (we all expect Jimmy Carter and Queen Elizabeth to make it to 100 fully active), it also meant that many seniors would be incapacitated and need many more years of long term care than they would have in past generations, when they just would have passed away sooner. Not all of this is the result of desperate and expensive life-extending treatments; much if it is accomplished simply, by much closer management of medications, many of which have become less expensive.

The media has reported dire predictions of increase in Alzheimer’s Disease, partly because many people will not die of other things sooner, and partly because lifestyle and social habits may be exacerbating the appearance of dementia at advanced age. All of this means a potential impact on the “social contract” that goes beyond merely calculating the math of long term care insurance, Medicare and Medicaid (and government deficit spending). The need to have people around to physically deliver the care and become open to the emotional bonding and “joining in” will grow rapidly, perhaps uncontrollably. Like it or not, the “religious right” may be doing a service with the talk of “demographic winter.”

This column has already noted that many states with pressed budgets are likely to notice the filial responsibility laws on their books. That can certainly mean that adult children of parents without adequate long term care insurance or savings have not choice but to give up or sacrifice their own lives t perform care themselves (it gets beyond the talk of the “sandwich generation”). But in practice, it’s likely to lead to a rethinking of the way we view our basic rights to select our adult relationships and give or withhold consent to bonding and intimacy. Other cultures have certainly regulated people’s inner lives (arranged marriages) and even ours has, not too long ago, viewed parenthood within marriage as a vehicle for imposing demands of loyalty and affection on others within the family, a power which they achieve only by carrying on lineage within marriage themselves.

Adults today value their rights to selectivity in choosing significant others, more on the basic of psychological polarity than older notions of adaptive complementarity as laid out for them by others (their own family and parents and church) That can sometimes lead to resistance to relating to those who are less intact until we make a conscious decision that we want to (usually by having our own children, sometimes adopting). But eldercare may force us back to the view that “complementarity” is a basic moral obligation of every one in a community, transcending the act of an individual choice (with its libertarian, modern interpretation). Elders and other disabled individuals may be able to “survive” much longer than we had thought if others are willing to sacrifice some of the “calling of their own shots” to remain bonded to them in extended family units, as they had been understood in the past. That could even affect the way filial responsibility is implemented in the future.

Tuesday, November 16, 2010

PBGC payouts increas 22% in FY2010, but it gets tougher (800000 retirees under the agency now)

The Pension Benefit Guaranty Corporation (PBGC) announced Monday that it paid out 22 percent more to retirees in FY2010 (ending Sept. 30) than it had in FY2009, about $5.6 billion to 800000 retirees. Yet, it treaded water, with a deficit of $23 billion, by better return on its trust fund, and by more disciplined treatment of companies nearing bankruptcy.

There are new rules forcing companies to put more money in their pension funds during plant closings and layoffs. 35 companies kept pension plans intact during restricting, including Visteon (a spinoff from Ford), Lear Corporation, LyondellBasel Industries and Smurfit-Stone Container Corporation.

The PBGC has had to attack a corporate strategy in some industries, like steel, where companies terminate pension plans to relieve themselves of debt.

The New York Times story by Mary Williams Walsh is “As payouts rise, new tactics by the US Pension Insurer”, link here.

British, Australian researchers claim to have quick test in middle age for future risk of Alzheimer's; does it do any good?

An British online newspaper, The Mail, in a story by Fiona MacRae, reports on research in Britain on a reaction time test on people in their 40s which corresponds to findings of small amounts of plaque in turn related to the plaque found in autopsies of people who have died of Alzheimer’s Disease. The link is here. The British story predicts that routine screening could be available in two years and be regarded as like a blood pressure test. In the United States especially, there would be fear that insurance companies would use the test for discrimination, particularly if the GOP rolls back Obama’s health care reform to protect people with pre-existing conditions (which is not yet all that effective). People with the lesions performed inconsistently on the strobe-light-based reaction time test, whereas people with no lesions performed the same all the time (whether slow or fast). The news story headline called it an “Instant Test” and spoke of “Routine Screening”, somewhat callously. I recall this sort of talk with HIV tests twenty years ago.

Screening would make sense only if medications were available to prevent the disease from developing eventually, which is going to become necessary anyway to forestall a massive eldercare crisis, in the entire developed world. Some comments on the story reflected that sentiment.

People with a family history of Huntington’s already face a similar dilemma (as in the WB show “Everwood”), as a genetic test can predict whether someone will develop the disease in middle age.

AOL (Nov. 16) had a similar story by Deborah Huso that called it a “30 second test” and read “Future risk could be determined in your 40s”, link here. Some of the research has been conducted in Australia, too.

Sunday, November 14, 2010

MD, VA state employee pension fund melting away

The seriousness of state pension systems in Maryland, and slightly less so in Virginia, was analyzed in the Washington Examiner Sunday Nov. 14.  Hayley Peterson’s story is “Md. Facing $33 billion pension gap, analysts say”.  The Pew Center on the states will report on both states in February 2011.  In Maryland, pension contributions and general fund payments will not account for the increase in teacher pensions. Virginia’s situation is slightly more flexible because it has a local board system. The link is here. 

Thursday, November 11, 2010

Current deficit commision plan could means test top 50% of social security recipients, but when?

The latest specifics on social security changes include gradual raising of the full retirement age to 69, and eligibility for early retirement to 64. It’s not clear how long this would take.

The biggest story (Lori Mongtgomery) appeared Thursday morning in The Washington Post, “Deficit panel leaders propose curbs in Social Security, major cuts in spending, tax breaks, link here, all related to the Bowles-Simpson Blueprint, balancing the federal budget by 2015 or by 2040, depending on who you ask.

The wage base would rise from $106,800 to $190000 in 2020 (ten years out). Benefits would be cut for the top 50% in wealth, but it’s not clear whether the law would look at total assets (how?) or just income tax returns. It’s also not clear how soon means testing could start, but it may be sooner than we had thought, maybe 2015. The view of social security FICA payments as “annuity premiums” (rather than intergenerational wealth transfer) does not seem to be holding up. Another way to look at it is that benefits for low-income wage earners could increase while they decrease for high-income earners, but again that defeats the idea of "annuity" (it sounds like "expropriation"), which is one reason why many people called for privatization.

Social security reforms would be aimed at making the system solvent without the accounting gimmicks (double entries) that let social security balance off the fedral debt.

Other changes include elimination of tax expenditure deductions, and perhaps mortgage interest tax deductions.

Also, a supposed “Sustainable Debt Act” could trigger automatic and sudden reductions in social security and Medicare benefits. The link from the Peterson-Pew Commission on Budget Reform is here.

USA Today has a similar story here.

AOL also has a similar story with a scare headline "Debt Panel Calls for Huge Cuts in Social Security," link here, but the story details don't support the scare.

Wednesday, November 10, 2010

Slate has letter and reply about the limits to "filial piety"

Here’s a “lonely heart’s” letter and response by Emily Yoffe on MSN Slate about the moral boundaries of filial responsibility, “A son’s burden: should he support the abused and drug-addicted brother who abused and abandoned him?” link here.

I’ve covered filial responsibility laws (and “filial piety”) on this blog (particularly back in July 2007), and in practically none of the 28 states that have them would an adult child be required to support a parent who had abused or abandoned him or her.

The letter, however, points to the heavy social expectations of family loyalty and solidarity (and the imputed rewards for marital parenthood) in many elements of society, that seem to be beyond the reach of an intellectual examination of the law. Here, the grandparents are offended, and the son reports being pressured to help raise a half-brother to keep him out of foster care. This sort of thing happens in families more often than the media generally reports, except that Hollywood loves the theme. (Remember “Raising Helen”? Remember “One True Thing”?) Note here in the letter and response the discussion of what the young man has to “give up”.

Filial piety is a moral issue that does not relate easily to the idea of choices and consquences and "personal responsibility" in the usual sense. If is more about belonging to a community (or family), and that for some people translates into perceiving society as imposing "unfunded mandate" obligations on persons, almost like male conscription used to be. Ironically, in a world where we try to stop teen pregnancy and couples postpone babies for education and career, the best "defense" against filial responsibility is to have children yourself.  Otherwise "the buck stops with me."

Monday, November 08, 2010

New prostate cancer "vaccine" ups the ante on Medicare cost containment; also, the Epill

Check the Washington Post article Nov. 8 by Rob Stein, “Review of prostate cancer drug Provenge renews medical cost-benefit debate”, link (website url) here. I guess it’s time for me to cover a “male problem” in my column. My own PSA (at 67) was reported higher (540 over the normal max 400) in September 2010 and I was urged to see a urologist. I haven’t done that yet. Most prostate cancers (with a few exceptions) are indolent and the male will die of something else, but it can certainly explode suddenly. My father died in 1986, just before his 83rd birthday, after prostate cancer “blasted” but he was ill only four weeks; he was never disabled or inactive or dependent for any significant time. He did not want the most aggressive treatments possible (very unpleasant to contemplate for some men). That’s the way I would want it.

The “vaccine” (a misnomer) Provenge is said to extend life for four months or more, but is very expensive. Probably Medicare will eventually cover it, but the debate on Medicare cost control could lead to “rationing” and not covering some treatments with only short term benefit. The Centers for Medicare and Medicaid Services (CMS) will examine the drug, and it is not supposed to consider cost, but in practice it may.

Also, today, ABC Good Morning America had a segment on a device that text-messages caregivers when an elder living alone takes medication, Epill link here. Is this a bit like a medical alert device, commonly offered with security systems?

Saturday, November 06, 2010

NY Times analyzes whether social security is really a "pension" or "annuity"

A “High & Low Finance” article by Floyd Norris in the Business Day section of the New York Times on Friday, Nov. 5 (p B1, left side) tackles the question of whether social security is like an annuity. The title is “Is it really a pension? It’s a problem” and the first sentence becomes “Is Social Security a pension plan?” which is not quite the same as an annuity. The link is here.

See where he can go with this?

Generally, Norris agrees, that since high earners get a little more because they contributed a little more, it seems that way. But studies show that upping the social security ceiling (which also contributes to the notion of social security as being like an annuity) does not proportionally benefit higher income earners.

On the other hand, social security was originally sold as having it both ways. It was a bit like savings, but it was also a way for the working to take care of the elderly. In fact, social conservatives have blamed social security for tearing apart extended families by removing family responsibility from the individual, a misplaced criticism, I think. (Think of Jennifer Roback Morse and her criticism of the “laissez-faire family” but I’ll come back to that.)

John Boehner, anointed soon as House Speaker, says “we’re broke” and to retirees with other means “we can’t afford to pay what we promised you.” That’s expropriation. Ohio is the second most important state in my own history, and it prides me that one of its sons is House speaker. But I’d like him to talk more about ownership and privatization (even like most other Republicans, including George W Bush, and including “The Log Cabin”). I wish Mr. Boehner would pay a visit to the glass tower – the Cato Institute (link ) – on Massachusetts Ave before taking power. It’s time for laissez-faire again.

Friday, November 05, 2010

Low interest rates and low returns make it hard for people to save enough for retirement

Here comes another dire warning that Americans need to save more principal for their retirement, in the MSN New Investor Center, “Warning: Retirement Disasters Ahead”, republished from Brett Arends of the Wall Street Journal, link here .
The basic problem? People approaching retirement make less on their principal. Interest rates are low. Bank of America recently renewed a 7 month CD for me at just 0.45% annual interest (at least the early withdrawal penalty is limited by the interest earned).

Stocks are again priced high relative to earnings (especially this week because of recent GOP election gains, along with rhetoric from Boehner and others on cutting deficits), and bonds are higher than is sustainable.

The article notes compound interest (like you study it in middle school math) is less effective now. 10000 saved every year for 30 years would generate $760000 at 5.5% but only $420000 at today’s 2.5%.

Pension fund managers face the same kinds of problems. The article suggests that higher returns could come from stock buybacks, and emerging overseas markets.

Wednesday, November 03, 2010

Will GOP carry out its "threats" on social security? (Look again at Boehner on means testing)

The first day after the Republican rout in the House and Senate gains, there were some offhand comments about social security. Rand Paul , Michele Bachmann, and John Boehner seemed to be floating the same general comments.

Paul has talked about raising the retirement age for younger people, not too radical. Bachmann has talked about “notching up eligibility requirements”, rather vague. Boehner has also talked about the retirement age increase and CPI indexing, but the scariest idea is means testing, which at least in some of his remarks sounds like they could be put into place right away.

Maybe the ploy is to get Americans to accept the idea of “owned private accounts” – regulated and managed to keep principle safe – but safe from means testing or any kind of expropriation. That really was a hidden appeal of President George W. Bush’s proposals a few years ago. Nobody wants to admit it, but “means testing” is a bad word and third rail because it sounds like such a slippery slope. (Look at my situation, which I won’t describe here in detail, but there are so many ways that other moralists or pundits could interpret it, that they (or the government) could do anything to me they wanted.) Maybe the public missed this point in recoiling from privatization (suddenly Bush’s ideas don’t sound so bad). The folks at the Cato Institute get this, but it doesn’t seem like anyone else does.

Some news accounts today discussed just the idea that the GOP might shut down a proposd $250 extra social security payment to seniors next year since there will be no COI raise again. But that seems superficial.

Other reports suggested that the GOP might help "wealthier" estates by extending exemptions on the inheritance tax over $1 million.

Tuesday, November 02, 2010

Medicare rules on paying for skilled nursing care challenged by 2 federal court rulings

Generally, the rule for eligibility for Medicare coverage for skilled nursing care has been that the patient is expected to get better. At least that’s the popular, vernacular explanation. But federal courts in Pennsylvania and Vermont, in widely different cases, have said that such a standard is too strict and that patients may qualify for coverage for skilled nursing care if necessary to maintain stable condition and prevent deterioration that would cause Medicare more medical expenses later.

The New York Times story is by Robert Pear, “Medicare standards are too strict, 2 Courts find”, p A19 on November 19, link here.  One case involved a woman, 81, with hip replacement surgery, and another involved certain home health care services to a 66 year old woman with strokes. Some medical problems, such as multiple sclerosis, may require extensive skilled care just to prevent or delay deterioration.  But not all maintenance care would be regarded as skilled care.

The Obama administration had actually followed the stricter interpretation of the law, often quoted to patients. A group of 17 House Democrats have written the administration urging rules changes. The current political climate, however, may not seem encouraging unless more courts force the issue.

Monday, November 01, 2010

Can family caregivers be paid for their time?

Unpaid family members indeed form a backbone for elder caregving in the United States, and demographics may stretch the demand for paid services to the breaking point, so it is said. Neverthtesll, given the sacrifice involved, it’s appropriate for family members to ask if it is legitimate to be paid for their services.

The general answer is a guarded yes. There are three major potential sources. One would be the elder’s own savings, if they are sufficient. The adult child would need to consult with a lawyer and draw up the necessary powers of attorney and perhaps create a living trust. The adult child(ren) should also consult a tax advisor. It’s also possible in some states to be paid by Medicaid if there are insufficient assets, and some long term care insurance policies are structured to allow family caregivers to be paid about the same rate as home health.

The best document on the topic seems to come from the “geriatric care manager” site here, an article called "Family Caregiver Agreements", from NAPGCM (National Association of Professional Geriatric Care Managers), by Linda Fodrini-Johnson.

There’s a lot here. For example, the reference suggests drawing up a contract. Consider whether free room and board is included. Tax laws generally allow this to immediate family members, but it could be a sensitive matter if the adult child insists and maintaining “independence” (ask a tax professional). In some cases, it may be appropriate to pay room and board (which is taxable to the parent) and be paid for services (which is taxable wage income reportable to the IRS and to social security, included in social security records like wages from any employment). There could be other issues to consider here: If the adult child is receiving unemployment, there could be conflicts (with number of hours worked a week); if the adult child is between 62 and full retirement age and drawing social security, there could be issues with the Annual Earnings Limit. Be careful if estate funds are used if they are likely to be used up, as Medicaid lookback periods and state filial responsibility laws [which generally presume an adult child most prove he or she could “support” a parent and himself or herself if demanded to do so, as if the elder were a conventional dependent] could come into play. And there can be issues about the compensation itself, for example, if there are other siblings or potential heirs sensitive to the estate. If agency caregivers are brought in, the adult child should probably not be paid for services given by the hired caregivers, but could be paid for other work not done by caregivers, such as financial management (bills), medication, property management (repairs), anything that takes time and draws of education or professional skills. (He or she could also be paid for human resources or supervision time if he does not use an agency to provide the caregivers but handles their payroll, withholding tax, immigration I-9, performance appraisals, etc; this is sensitive and can lead to other conflicts). The over all arrangement should be fair (itself a subjective concept because most federal and state laws leave a lot of wiggle room for interpretartion); otherwise there could be risk of being reported for elder abuse or comingling. The appropriateness of compensation can involve other factors, too: whether professional management services are used, and whether hiring agencies are used, both of which account for some time that the adult child might want to be compensated for.

I found several other sources, such as this “Suite 101” here, home care here, and “Caring” here. Generally they assume that the adult child is doing physical personal caregiving as well as management.

Pictures: From Jon Stewart's Washington DC rally.

Sunday, October 31, 2010

Financial planners face ethical dilemmas when candidates show dementia or Alzheimer's

The New York Times has a story in a series called “The Vanishing Mind” on Sunday, Oct. 31, “Money woes can be an early sign of Alzheimer’s”, by Gina Kolata, link here.

Spouses and more often adult children have first learned about parents’ Alzheimer’s disease by because of emptied bank accounts, collection notices, or even foreclosures.

The article gives the story of an obstetrician-gynecologist in Miami whose son, a CBS correspondent, found out he had lost everything through a complicated series of events.

Worse, there was a case where an adult son got guardianship of his father in Wyoming, but a neighbor got another lawyer to rescind the custody, and then got the will changed. It’s surprising—and scary -- that the legal community would allow a third party to pull something like this.

The article discusses the ethical quandaries that financial planners face if they suspect clients have diminished capacity, and the law in the area seems to be evolving slowly.

However, some banks have partnered with geriatric care management companies to develop financial supervision and watchdog mechanisms to report suspected abuse to adult protection authorities.

Friday, October 29, 2010

Freezing pensions and switching to defined contribution plans not a panacea for public employees

R. Dean Kenderdine, Executive Director of the Maryland State Retirement and Pension System, has an important Letter to the Editor of the Washington Post on Friday, Oct. 29, “Wrong ‘fix’ for Md. Public pensions”, link here. He argues that switching to a defined contribution plan for new employees does not completely fix the funding problem, because it denies the older defined benefit plan future contributions and can cause it to have to liquidate assets.

He gives a useful link to the Maryland Public Employees’ and Retirees’ Benefit Sustainability Commision.
The writer refers to an Oct. 13, 2010 Washington Post Editorial, “Maryland’s Silent Tsunami: Martin O’Malley and Robert Ehrlich stay mum on massive pension bill”.

Thursday, October 28, 2010

Virginia social security offset again discussed by AARP

The AARP Bulletin has a story on p 26 of the September 2010 DC Area bulletin, “Benefit cut hits needy”; the online title, in the Virginia section under “states”, is “Social security recipients stunned by reduced unemployment benefits; little known ‘offset’ clause triggered by plummeting unemployment trust fund”, link here.

In January 2010 the trust fund for unemployment benefits in Virginia fell to below 50% of that amount projected to be needed for the year. That triggered a law that reduces a person’s unemployment benefit by 50% of the person’s social security benefit. It is much life the hated “social security offset” of some private defined benefit pension plans.

However Virginia does not reduce unemployment benefits for those receiving both unemployment and private pensions.

Since 2002, 17 states have repealed offset laws, but Virginia is one of five states with such provisions. I see that I have an earlier story about this here April 17, 2010, based on an earlier AARP account.

When I was unemployed and “retired” in Minnesota (in 2002-2003), I collected full unemployment after severance expired, and having a pension did not affect unemployment benefits.

People who started social security benefits early would seem to be penalized under Virginia’s systems (whereas private employers sometimes deduct an offset based on what you can receive regardless of whether you take it). A good question would be whether one could stop the social security benefit in order to receive the full Virginia benefit, but probably not many retirees could afford that.

Wednesday, October 27, 2010

If GOP wins House back, we'll see Majority Leader John Boehner's (confusing) ideas on social security

The media are all speculating about the prospect of Representative Jon Boehner of Ohio becoming the House Majority Leader for the 112th Congress, since Democrats seem to be doing badly in the House races, at least in October.

Once again, it’s good to reiterate Boehner’s calls for raising the retirement age to 70, indexing to the CPI, and eventual means testing, apparently starting with workers in their 50s now. (Would he let these workers "privatize" and take ownership of their already-collected contributions to keep them from expropriation?) An article by Michael O’Brien on “The Hill” site has a typical story with a video from a Pittsburg paper:

As I’ve noted, social security benefits are largely, although not wholly, funded by worker’s own contributions through FICA taxes based on earnings, so they already have the attributes of private annuities.

Boehner’s own site doesn’t seem to say this, and actually has an interesting article on the preservation of retirement pensions to union employees of the bailed out GM, but not to salaried retirees of Delphi, as in this entry. Boehner has also noted that in general workers have more control over their retirement income than in the past, a contention that one could certainly dispute.

The Eight District is north of Cincinnati. The picture, however, is the Oberlin Inn (recent trip).

Saturday, October 23, 2010

Time Magazine covers Alzheimer's; note Gibbs's backpage on caregivers

The October 25, 2010 issue of Time Magazine, which I consumed on an Amtrak train round trip to New York recently, is largely devoted to Alzheimer’s Disease, which a lead story by Alice Park (“Alzheimer’s Unlocked: After years of disappointing vaccine and drug trials, researchers are finding new ways to interrupt the memory-robbing disease, just in time for an anticipated explosion in cases”, p 53.
The most important piece appears on the back page, by Nancy Gibbs, “The Coping Conundrum: The longer we live, the more important elder care becomes. But who looks after the caregivers?” link here (requires subscription). Gibbs’s first sentence refers to the biological life cycle as if the answer to a biology test question, that we spend our final days being gently lowered, just as in our childhood we are raised up by our parents, as in that Josh Groban song.

She gives alarming statistics on women and Alzheimer’s and notes that the majority of caregiving for it, unpaid and much of it unchosen, falls on women. Another sidebar on p 55 by Patti Davis, regarding Ronald Reagan’s family, says “Particularly in a disease like Alzheimer’s, in which parts of a person die off gradually, it’s been my observation that men tend to back away in discomfort. Women, on the other hand, inhabit the experience fully…” That’s partly because, even in a free individualistic culture, men are brought up to see disease in moral terms.

Indeed, many people age into the late 90s or over 100 without much disability; but the demographic prognosis as the baby boomers retire is dire: people will spend many more years of their lives in disability (not just Alzheimer’s) than did previous generations, and there are fewer children to care for them, and institutions will be stretched. True, a lot more can be done in the CCRC area, as there is plenty of real estate market incentive to build more of them (an irony given the mortgage crisis).

Much of the Time issue deals with early testing and future opportunities for prevention. This raises new questions, about insurance or employment discrimination, for example, related to future genetic or neurological tests. It also says that, even given our debt-ridden economy, we can’t back off on research. Alzheimer’s has replaced AIDS (ironically, in the view of someone who survived and buddied the 1980s) as likely our number 1 public health problem.

Thursday, October 21, 2010

John Hancock will raise long term care premiums by 40%

Kimberly Lankford of Kiplinger’s Money Power has an article on p 23 of The Washington Examiner on Thursday Oct. 21, “What should you do about your long-term care policy?” This refers to (another) announcement from John Hancock that it would raise premiums for long term care by up to 40%.

Hancock says that the “duration” of claims from 1990 to 2010 has been much higher than expected. That’s because people can live longer with modern medications and good home health care. Hancock has already stopped selling policies with lifetime benefits as of June 2010.

Policyholders can pay higher premiums for the same coverage, or they may reduce the benefit period or the monthly or daily benefit amount.

We haven’t seen a political debate on better tax-free “savings accounts” for long term care, but I am surprised that conservatives (and libertarians, or those of the Steve Forbes ilk) haven’t been pressing more for such a discussion.

Time Magazine has a major issue on this with Alzheimer’s that I’ll cover later.

The online version of Examiner doesn’t have this story yet. I’ll provide the link as soon as it appears. An earlier article by her had appeared in February, here.

Monday, October 18, 2010

Maxmimizing spousal social security benefits is complicated business

Liz Pullman Weston from MSN Money has a nice article “5 Ways to Wreck Your Retirement”, or maybe it’s not so nice, link here.  Seriously, the most important tip is #3, about failure of married couples to take advantage of social security spousal benefits properly. In general, the strategy involves using both spouse’s records (assuming they both worked) at different times, and letting at least one spouse wait until the maximum age 70-1/2 to start withdrawing. There’s also a file and hold strategy that she discusses which one spouse can use. The missing piece is of political importance: as of now, same-sex couples can't use this, even in states with gay marriage.

The other good advice is to look at non-monetary factors, such as what you really want to do with the rest of your life. Maybe it’s make your movie.

Friday, October 15, 2010

Obama administration acts to make sure investors get full information on 401(k) costs

On Oct. 14, 2010, The White House, in a blog posting by Jared Bernstein, announced that workplace 401(k) providers would be required to disclose their investment expenses to investors (employees and retirees), so that they can make much more informed choices. This should address the “investment class” vs. “retail class” problem.

The blog link is here.

The Department of Labor (Employee Benefits Security Administration, EBSA) actually has its own news release of this day, link here. It is the “final rule to improve transparency of fees and expenses to workers with 401(k)–type retirement plans.”

Tuesday, October 12, 2010

Social security privatization is the best prevention against means testing and expropriation

Phil Kerpen has an important op-ed in The Washington Times, “Social Security Demagoguery won’t help Democrats; ownership is only route to protect workers’ pensions”, link here

Kerpen characterizes social security as a “transfer program” but later gets around to talking about it in terms of “return on investment.” He talks about demographics but also says that a privatization bill (Rep. Paul D. Ryan of Wisconsin and then-Sen. John Sununu of New Hampshire) can be set up so that the worker is guaranteed that his return cannot be worse than in the current public program.

Ultimately, a privatized program based on legal ownership of an account is the only way to make sure one’s promised benefits cannot be expropriated by “means testing.”

Sunday, October 10, 2010

No Social Security COLA in 2011; for second year in row

The Associated Press is reporting that there will be no Social Security Cost of Living Increase (COLA) in 2011. This will make the second straight year without a COLA in the benefit amount for retirees, despite the fact that prior to 2010, COLA’s had been applied every year since 1975.

Political analysts consider this bad news for the Democratic Party at midterm.

The AP story is by Stephen Ohlemacher, with link here.

In 2009, predictions had been made that the COLA might not increase in 2010.

The problem is low inflation, or deflation, which is hard to believe given the increase in health care and higher education costs.

Thursday, October 07, 2010

Tips on inheriting a 401(k), gift tax (from Mary Beth Franklin)

Here’s a video from Bukisa on what happens if you inherit a 401(k), a Kip Tip, with Kevin McCormally, of Kiplinger, talking to Mary Beth Franklin. In the past, only a spouse could keep the tax-deferral; now any named beneficiary can. Also, when you have to take it out isn’t necessarily at 70-1/2, it is based on your actuarial life expectancy.

Here is a Kiplinger article from the end of 2009 on a little known area, the gift tax, which could help prevent inheritance taxes, which could become more significant in 2011. The link is here. You have to be   concerned about look-back period rules, however, if you wind up needing long term care and have given away too much money.

The Washington Examiner today (Oct. 7) ran a Mary Beth Franklin article on p 23, “Your Money: The Bottom Line on 401(k)’s”. I couldn’t find it online yet. But she recommended being aware of the quality of your employer’s 401(k) plan, and if it is unfair, with too many retail fees, only allow the employer to deduct and match the minimum amount, and manage the rest yourself.

Wednesday, October 06, 2010

Public backlash against government pensions building

Government workers’ pensions – that is, state, county and municipal workers—are becoming the most visible target as states and local government scramble to balance their budgets, in another story today in the Washington Post by Michael A. Feltcher, link here.

The backlash against local civil servants continues, as government compensation and benefits have long been passing those in private business. Although the problem sounds novel, as more governments find their pension funds don’t follow acceptable accounting, it has gone on a long time. Back in the 1970s financial crisis in New York City (the “Ford to City: Drop dead” story), it took the teachers’ union to help settle it.

But today more local governments have to raise retirement ages and increase retired employee contributions, and reduce future benefits.

The tsunami of bad news about government employees' pensions rushes in.

Tuesday, October 05, 2010

Public employees double dip into pension, unemployment; is this wrong?

Red Tape chronicles published a story, linked from MSNBC this morning, about 20 public employees with huge incomes (for doing little or nothing) and huge pensions, while states face enormous budgets that could affect Medicaid and other services (as well as families indirectly, as we have pointed out here.) In California, a worker could quit, take his huge pension, get another job, lose that job, and collect unemployment too.

The story is here (authored by Bob Sullivan).

Actually, in Minnesota in 2002, I was told that I could not collect unemployment and severance at the same time, but I could collect the (private, not government employment) pension at the same time. However, I was able to start unemployment after the eight months severance ran out. When I read the rules myself later, it looked less clear. But there were situations where you could collect more mathematically if you waited until after severance to file.

Sunday, October 03, 2010

You can undo a Roth IRA conversion by Oct. 15, and some people benefit from doing so

The AARP has reminded members that Oct. 15 is the deadline for “undoing” a Roth IRA conversion (back to a traditional IRA), and some people may find it to their eventual tax advantage to do so, particularly with accounts that have lost value, or people finding themselves in lower tax brackets.

The AARP reran a Sept. 30 story in the New York Times by Jennifer Saranow Schultz, here.

Relatively few investors realize that such a reversal switch is possible.

The AARP site today seemed to show that it likes pro football.