Sunday, July 29, 2012
The “Sunday Review” section of the New York Times on July 29 has an interesting column by futurist Thomas L. Friedman, “Coming soon: The big trade-off”, with the explanatory caption, “As baby boomers age, we can pay for nursing homes or for nursing Afghanistan”. The link is here.
My first reaction is that we may have to pay for both.
Friedman makes a case for investing in home and “village” care for disabled seniors (including those with Alzheimer’s , which, according to demographics, is going to explode). He discusses a lot of smart technology innovations, such as one that I have imagined: clothing with sensors (and microtransmitters) woven into the clothing fabric, to monitor heart performance and even blood chemistry. A fitted shirt could function as a Holter monitor.
He also mentions the practical burden on and risk to family caregivers. It’s more than a financial issue – although the recent attention to filial responsibility laws (with a case in Pennsylvania, reported here May 22 and May 24 2012) will make the money aspect more pressing. It’s also about getting the care done – since there is mounting evidence that the home health industry often doesn’t hire and compensate caregivers totally legally. People, otherwise unmarried or childless or inexperienced in social intimacies (and more often than in the past, men) will be drawn into these very physical and sometimes humiliating matters regardless of any ideas about choice or “personal responsibility”. Our priorities and rules are changing.
Sunday, July 22, 2012
The New York Times has an op-ed on p. 5, Sunday Review, by Teresa Ghilarducci, “Our Ridiculous Approach to Retirement”.
She says that 70% of Americans nearing retirement have less than $30000 in savings. Typically, a retiree needs 20 times his best wage (less if a home is paid off or a spouse works). That would mean that to continue a $100000 a year lifestyle, including social security, one would need $2 million in wealth accumulated. That would probably include buying a long term care policy.
The economics professor (from the New School of Social Research in New York ) says that the US should layer a mandatory private retirement annuity program with guaranteed returns on top of social security (which could be gradually means tested). So, in a liberal school, she is making a somewhat conservative (or Cato-like) proposal for partial privatization.
The link is here.
Thursday, July 05, 2012
MSN has a story about a report from the Organization for Economic Cooperation and Development, showing that the United States falls below many other western and advanced nations on “replacement rate” for retirees. That number refers to the percentage of pre-retirement income earned after retirement (from social security and pensions) to before (from wages).
Complicating the analysis is the fact that the United States doesn’t have mandatory private pensions, whereas many European countries do.
European countries face a more severe “demographic winter” crisis than does the US because their birthrate among original populations is lower.
The report doesn’t include the effect of inheritance (and investment income based on that).
The replacement rate from public pensions (some of which replace social security) in the US is 50%.
The link for the story about OECD (34 countries) analysis is here.
OECD’s pension report is here.
Tuesday, July 03, 2012
Business Insurance has some details about the ways some large companies are reducing their pension obligations, particularly GM.
GM is “replacing” its pension obligation with an annuity product managed by Prudential, and retirees will get their checks or direct deposits from Prudential. This is supposed to save GM $26 billion.
GM retirees also can choose to get a lifetime lumpsum benefit and invest it themselves in an annuity of their choice.
With this strategy, the insurance company manages the interest rate “risks” and takes it off the backs of the employer with the pension obligations. This could be helpful to municipalities.
The link for the story (June 17) is here.
Monday, July 02, 2012
ConEd labor dispute over changing pensions to 401k's could impact electric power stability, recovery
A labor dispute at ConEd, including a lockout, based in large part over ConEd’s plan to freeze its pension plan and convert over to a “defined contribution” style 401(k) arrangement, is hinting at possible disruptions in power service in the New York region, ironically the day after a major derecho storm caused massive power disruptions from New Jersey down to Virginia. In theory, a similar kind of incident could happen in New York (and there was a massive failure in 2003).
Management employees may be filling in with the “dirty work” in manholes, and management retirees have been called back.
It’s not clear whether any ConEd employees are helping with power restorations in the mid-Atlantic, but a lockout could produce some disruptions in the restoration indirectly.
The Wall Street Journal story by Pervais Shall Wani on July 1 is (website url) here.