Older workers are staying in the job market. Here’s why

According to the Bureau of Labor Statistics, the amount of employees over the age of 65 has risen by 697,000. With over two million jobs being created over the past 12 months with the help of the economy, the older generations are still wanting to be employed. Read this blog post to learn more as to why.


Older workers are sticking around the job market. This is why
The number of workers aged 65 and above increased by 697,000 as the economy created more than 2 million new jobs over the past 12 months, according to data from the Bureau of Labor Statistics in this CNBC article. The spike in the number of older workers represents about 36% of the overall increase, reflecting a trend over the past 10 years. “The norms about working at older ages have changed quite a bit, and I think in a way that really is to the advantage of older workers who want to keep working,” says an expert.

What ‘Rothifying’ 401(k)s would mean for retirees
Clients will not benefit from a switch to a retirement system where contributions would be made on an after-tax basis even if it could result in bigger tax revenue in the near term, experts write in The Wall Street Journal. "Over their lifetimes, workers would accumulate one-third less in their 401(k)s under a Roth system. This is because, with no tax advantage from contributing to a 401(k), workers would save less and those lower contributions would earn less over the years," they write. Moreover, "lifetime tax revenue generated by the average worker under a Roth regime would fall 6% to 10%, compared with the current regime."

Stop 'dollar-cost ravaging' your clients’ portfolio in retirement
Retirees who stick to a 4% withdrawal rule during a market downturn are putting their financial security at risk, as their portfolio would not recover even if the market eventually improves, writes an expert in Kiplinger. Instead, seniors should focus on how much income they can generate from their portfolio, he writes. "[I]t means choosing investments — high dividend-paying stocks, fixed income instruments, annuities, etc. — that will produce the dollar amount you need ($2,000, $3,000, $5,000 or more) month after month and year after year."

Will clients owe state taxes on their Social Security?
Retirees may face federal taxation on a portion of their Social Security benefits — but they could avoid the tax bite at the state level, as 37 states impose no taxes on them, writes a Forbes contributor. "While probably not a big enough issue to warrant moving in retirement, it is something to consider when choosing where you want to spend your retirement," writes the expert. "At the very least, you need to know about Social Security taxation when figuring out how much additional income you will need to have in order to maintain your standard of living during retirement."

8 ways clients can start saving for college now
There are a few savings vehicles that clients can use to prepare for college expenses, but they need to consider the pros and cons, according to this article in Bankrate. For example, clients who save in a 529 savings plan can get tax benefits — such as tax deferral on investment gains and tax-free withdrawal for qualified expenses — but will face penalties for unqualified withdrawals aside from taxes. Parents may also use a Roth IRA to save for their child's college expenses, but these accounts are subject to contribution limits and future distributions will be treated as an income, which can reduce their child's eligibility for scholarships or assistance.

SOURCE: Peralta, P. (18 February 2020) "Older workers are staying in the job market. Here’s why" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/news/why-older-workers-are-staying-in-the-job-market


7 Social Security facts Americans need to know

There are millions of  Americans who depend on Social Security to fund their retirement. Many of the people who depend on social security for their retirement funding tend to overestimate how much money they will receive, or how long the money will last. With the many changes that have occurred to Social Security over the years many Americans are out of touch with how the program works and how it fits into their overall retirement strategy.  Here is a great list compiled by Marlene Y. Satter from Benefits Pro on the top 7 things Americans need to know about Social Security and how it can impact their retirement.

7. Monthly benefits are based on the age at which you collect and the average of your highest 35 years of earnings.

How many years have you paid into Social Security?

The SSA will take your 35 highest paid of those years and average them to come up with what your monthly benefit will be.

Then, depending on whether you decide to go for early retirement (age 62), full retirement age (currently age 66, but rising to 67) or keep working till age 70, that will determine your benefit.

If you retire at age 62, your benefit will be reduced. At the full retirement age you’ll get your full benefit, but if you work till 70 the benefit will keep increasing.

The longer you work and don’t claim, the higher your benefit will be, but it stops growing once you hit age 70.

6. Claiming too early can cut your benefits for life.

If you decide to collect Social Security when you’re 62 (or, for that matter, any time before you hit age 70), your benefit will be paid at the minimum level you earned through your career and won’t rise (except for cost-of-living raises) at all.

If, on the other hand, you can wait till age 66, you’ll get at least a third more in those monthly checks than you would at 62.

But if you wait till age 70, your benefit will be at least 75 percent higher. That’s according to the Social Security Claiming Guide from the Center for Retirement Research at Boston College.

Oh, and the same goes for your spouse. If you claim early and die, your spouse will be restricted to that smaller benefit for life as well—unless said spouse has a separate career and benefits to draw on.

5. Widows and widowers can claim on their deceased spouses’ records to delay claiming on their own.

A widow or widower can claim a survivor benefit on their late spouse’s record in order to postpone claiming their own benefit—which can be very helpful should they want to delay claiming till age 70.

And, as the Claiming Guide points out, since most survivors are women and women’s benefits are generally lower—thanks to a range of reasons, including less time in the workplace and lower salaries—a husband’s benefit will generally be higher.

If, however, a woman’s benefit would be higher than her late husband’s, claiming on his record would allow her to delay claiming until age 70 to maximize her own benefit.

That said, survivor benefits are available as early as age 60, or age 50 if disabled, but they’re reduced up to 28.5 percent if claimed before the recipient’s full retirement age.

Survivor benefits can also be claimed by a divorced spouse as long as the marriage lasted at least 10 years.

4. Husbands can boost wives’ survivor benefits by delaying claiming.

Since most women survive their husbands—by an average of 6 years, in fact—a husband who wants to maximize his wife’s survivor benefit in the event of his death can delay claiming his own benefit as mentioned earlier.

In fact, a husband can increase the monthly benefit his wife gets as his survivor by more than 20 percent if he delays claiming Social Security until age 66 instead of doing so at age 62, if he waits till age 70 to claim benefits, that rises to 60 percent.

3. Continuing to work after claiming before full retirement age will cost you.

It might seem like a terrific idea to claim Social Security early and just keep working; after all, what’s not to like?

You gain another source of income, you’re still making money and maybe you envision just socking the extra money into savings for later in retirement.

But there’s one (not-so-)little flaw with that idea: Social Security may giveth, but it will also taketh away.

If you did that last year and weren’t already at the full retirement age, you’ve already learned to your sorrow that for every $2 above $15,720 you earned in calendar year 2016, Social Security withheld $1.

And Social Security will do that every year till you hit full retirement age; in that year, it will keep $1 for every $3 you earn above $3,490 each month.

If you wait to pursue that strategy till the year after you’ve hit full retirement age, however, it won’t withhold anything.

The good news is that you don’t actually lose that money; it’s restored to increase your monthly benefits later.

2. Social Security provides half the income for 61% of seniors.

It’s all very well to say that seniors will have Social Security to depend on, but the majority of seniors have few other resources to draw on.

report on Madison.com highlights how essential Social Security is to the majority of seniors, regardless of how long they’ve worked or how much they’ve saved, with some statistics from Social Security itself—and one of those is just how important Social Security is to people’s financial well-being during retirement.

Whether they’ve managed to save more in 401(k)s, IRAs or even an actual pension plan, seniors are still deriving much of their income from those monthly Social Security checks.

1. Social Security provides at least 90% of income for 43% of unmarried seniors.

Lest you think that Social Security is just one leg of the proverbial three-legged stool, keep in mind the statistic above.

Without additional sources of income, unmarried seniors who are almost, or completely, dependent on Social Security checks will almost certainly not have a pleasant retirement—or a healthy one.

See the original article Here.

Source:

Satter M. (2017 August 29). 7 social security facts americans need to know [Web blog post]. Retrieved from address http://www.benefitspro.com/2017/08/29/7-social-security-facts-americans-need-to-know?ref=mostpopular&page_all=1


3 Takeaways From the Medicare Trustees Report

Originally posted at 9:41 am EST,  August 1, 2014 by Drew Altman on http://blogs.wsj.com.

The annual report from the Social Security and Medicare trustees predicted that Medicare will be solvent until 2030, four years later than the trustees predicted last year. That’s thanks to the recent slowdown in Medicare spending and a stronger economy that yields higher revenue through payroll tax contributions to the Medicare trust fund.

The administration and congressional Democrats are taking credit for elements of the Affordable Care Act that have helped to slow the growth in Medicare spending, and they warn against changes to Medicare that they fear would shift costs to seniors and undermine the program.

Republicans, however, see little good in the trustees’ report. “Don’t be fooled by the news that Medicare has a few more years of solvency,” Rep. Kevin Brady, chairman of the House Ways and Means subcommittee on health, said in a statement. More fundamental changes to Medicare are needed, many Republicans argue, such as transforming the program to a premium-support or voucher model.

Here are three points that might have been lost in the back and forth over the report by those on the left and the right:

* Contrary to conventional wisdom, Medicare appears to be outperforming the private sector. Medicare spending per capita rose at a 6.1% annual clip between 2000 and 2012 vs. a 6.5% growth rate for private health insurance. And Medicare spending is projected to rise at a 4% per capita rate between 2013 and 2022 vs. 4.9% for private insurance. (The bad news is that GDP per capita is projected to rise more slowly, at 3.7% per year.) Medicare’s problem is less poor performance and more the challenge of meeting the needs of an aging society and seniors who have modest incomes to pay for their health care.

* The ACA is projected to cut $716 billion in expected increases to providers and insurers between 2013 and 2022. Despite claims that cutting payments to providers and private plans could make the sky fall, there is no evidence so far that the industry or beneficiaries have been adversely affected by the reductions. In fact, enrollment has been growing in the private Medicare Advantage plans, which were hit by the most severe and controversial reductions, and the gains are projected to continue. So far, complex schemes to reform the way Medicare pays doctors and hospitals, which many believe hold promise, have produced mixed results in the effort to cut costs. But as $716 billion in Medicare savings demonstrates, the tried-and-true way to save money continues to be shaving a little off payment increases each year, as long as the health-care industry is still in the black and can absorb it.

* Perhaps the best news from the 2014 trustees report is that the country has a bit more time to hope for a more functional Congress that can figure out how best to finance Medicare for an aging population. It is almost impossible to envision the current Congress and administration working together on these long-term challenges.

With liberals and conservatives at odds over Medicare’s future direction and seniors such a strong voting group, it will be difficult to shift Medicare quickly in any direction. But there is good news for now in the trustees report.


Include health care cost in plans

Originally posted August 3, 2014 by Redding Edition on http://www.ifebp.org

The possibility of having to pay major health care costs in the future is a primary concern of planning for retirement these days. Is there some way to plan for these expenses years in advance?

Just how great might those expenses be? There’s no rote answer, but recent surveys from AARP and Fidelity Investments reveal that too many baby boomers might be taking this subject too lightly.

For the last eight years, Fidelity has projected average retirement health care expenses for a couple — assuming that retirement begins at age 65 and that one spouse or partner lives about seven years longer than the other. In 2013, Fidelity estimated that a couple retiring at age 65 would require about $220,000 just to absorb those future health care costs.

When it asked Americans ages 55 to 64 how much money they thought they would spend on health care in retirement, 48 percent of the respondents figured they would only need about $50,000 each, or about $100,000 per couple. That pales next to Fidelity’s projection and it also falls short of the estimates made in 2010 by the Employee Benefit Research Institute. EBRI figured that a couple with median prescription drug expenses would pay $151,000 of their own retirement health care costs.

AARP posed this question to Americans ages 50 to 64 in the fall of 2013. The results were 16 percent of those polled thought their out-of-pocket retirement health care expenses would run less than $50,000 and 42 percent figured needing less than $100,000.

Another 15 percent admitted they had no idea how much they might eventually spend for health care. Not surprising, just 52 percent of those surveyed felt confident that they could financially handle such expenses.

Prescription drugs may be your No. 1 cost. EBRI currently says that a 65-year-old couple with median drug costs would need $227,000 to have a 75 percent probability of paying off 100 percent of their medical bills in retirement. That figure is in line with Fidelity’s big-picture estimate.

What might happen if you don’t save enough for these expenses? As Medicare premiums come out of Social Security benefits, your monthly Social Security payments could grow smaller. The greater your reliance on Social Security, the bigger the ensuing financial strain.

The main message is save more and save now. Do you have about $200,000 after tax saved for future health care costs? If you don’t, you have yet another compelling reason to save more money for retirement.

Medicare, after all, will not pay for everything. In 2010, EBRI analyzed how much it did pay for, and it found that Medicare only covered about 62 percent of retiree health care expenses. While private insurance picked up another 13 percent and military benefits or similar programs another 13 percent, that still left retirees on the hook for 12 percent out of pocket.

Consider what Medicare doesn’t cover, and budget accordingly. Medicare pays for much, but it doesn’t cover things like glasses and contacts, dentures and hearing aids — and it certainly doesn’t pay for extended long-term care.

Medicare’s yearly Part B deductible is $147 for 2014. Once you exceed it, you will have to pick up 20 percent of the Medicare-approved amount for most medical services. That’s a good argument for a Medigap or Medicare Advantage plan, even considering the potentially high premiums. The standard monthly Part B premium is at $104.90 this year, which comes out of your Social Security. If you are retired and earn income of more than $85,000, your monthly Part B premium will be larger. The threshold for a couple is $170,000. Part D premiums for drug coverage can also vary greatly. The greater your income, the larger they get. Reviewing your Part D coverage vis-à-vis your premiums each year is only wise.

Takeaway: Staying healthy may save you a good deal of money. EBRI projects that someone retiring from an $80,000 job in poor health may need to live on as much as 96 percent of that end salary annually, or roughly $76,800. If that retiree is in excellent health instead, EBRI estimates that he or she may need only 77 percent of that end salary — about $61,600 — to cover 100 percent of annual retirement expenses.


Obama to Propose Cuts to Social Security

Source: http://www.benefitspro.com

By Jim Kuhnhenn

President Barack Obama's proposed budget will call for reductions in the growth of Social Security and other benefit programs while still insisting on more taxes from the wealthy in a renewed attempt to strike a broad deficit-cutting deal with Republicans, a senior administration official says.

The proposal aims for a compromise on the Fiscal 2014 budget by combining the president's demand for higher taxes with GOP insistence on reductions in entitlement programs.

The official, who spoke on a condition of anonymity to describe a budget that has yet to be released, said Obama would reduce the federal government deficit by $1.8 trillion over 10 years. The president's budget, the first of his second term, incorporates elements from his last offer to House Speaker John Boehner in December. Congressional Republicans rejected that proposal because of its demand for more than a $1 trillion in tax revenue.

A key feature of the plan Obama now is submitting for the federal budget year beginning Oct. 1 is a revised inflation adjustment called "chained CPI." This new formula would effectively curb annual increases in a broad swath of government programs, but would have its biggest impact on Social Security. By encompassing Obama's offer to Boehner, R-Ohio, the plan will also include reductions in Medicare spending, much of it by targeting payments to health care providers and drug companies.

Obama's budget proposal also calls for additional tax revenue, including a proposal to place limits on tax-preferred retirement accounts for wealthy taxpayers. Obama has also called for limits on tax deductions by the wealthy, a proposal that could generate about $580 billion in revenue over 10 years.

The inflation adjustment would reduce federal spending over 10 years by about $130 billion, according to past White House estimates. Because it also affects how tax brackets are adjusted, it would also generate about $100 billion in higher taxes and affect even middle income taxpayers.

The reductions in the growth of benefit programs, which would affect veterans, the poor and the older Americans, is sure to anger many Democrats. Labor groups and liberals have long been critical of Obama's offer to Boehner for including such a plan.

Administration officials have said Obama would only agree to the reductions in benefit programs if they are accompanied by increases in revenue, a difficult demand given the strong anti-tax sentiment of House Republicans.

That Obama would include such a plan in his budget is hardly surprising. White House aides have said for weeks that the president's offer to Boehner in December remained on the table. Not including it in the budget would have constituted a remarkable retreat from his bargaining position.

Obama's budget, to be released next Wednesday, comes after the Republican-controlled House and the Democratic-run Senate passed separate and markedly different budget proposals. House Republicans achieved long-term deficit reductions by targeting safety net programs; Democrats instead protected those programs and called for $1 trillion in tax increases.

But Obama has been making a concerted effort to win Republican support, especially in the Senate. He has even scheduled a dinner with Republican lawmakers on the evening that his budget is released next week.

House Republicans, however, have been adamant in their opposition to increases in taxes, noting that Congress already increased taxes on the wealthy in the first days of January to avoid a so-called fiscal cliff, or automatic, across the board tax increases and spending cuts.

Congress and the administration have already secured $2.5 trillion in deficit reduction over the next 10 years through budget reductions and with the end-of-year tax increase on the rich. Obama's plan would bring that total to $4.3 trillion over 10 years.

As described by the administration official, the budget proposal would also end a loophole that permits people to obtain unemployment insurance and disability benefits at the same time.

Obama's proposal, however, includes calls for increased spending. It would make pre-school available to more children by increasing the tax on tobacco.


Benefits at the edge of the fiscal cliff - 4 areas to watch

Source: eba.benefitnews.com

As congressional leaders and President Obama attempt to hammer out a deal to prevent the nation from going over the “fiscal cliff” — a series of tax hikes for individuals and businesses that economists say could imperil the fragile recovery — HR/benefits professionals can prepare now, write benefit attorneys Diane Morgenthaler and Ruth Wimer, partners at law firm McDermott Will & Emery. Just in case we go over the “fiscal cliff,” Morganthaler and Wimer’s report outlines four benefit and payroll areas that should be top of mind for practitioners.

Payroll taxes

The 2% payroll tax cut from 2011 and 2012, which lowered employees’ Social Security payroll taxes, will expire, effective Jan. 1. Although the increase is on employee contributions, the increase also affects an employer’s withholding obligations, Morgenthaler and Wimer note. At the same time, they write, a new 0.9% Medicare payroll tax increase applies (from 1.45% to 2.35%) under the Patient Protection and Affordable Care Act on wages over $250,000 for married taxpayers filing jointly and $200,000 for single taxpayers. Again, though this increase is not an employer liability, employers must be prepared to withhold the additional 0.9% from wages for any employee with wages over $200,000.

Adoption assistance

The income tax exclusion for amounts paid by an employer under a qualified adoption assistance program is also set to expire on Dec. 31, Morganthaler and Wimer write. A qualified adoption assistance program allows an employer to reimburse an employee on a tax-free basis for as much as $12,650 in 2012 for expenses related to the adoption or attempted adoption of a child. Qualified adoption expenses include reasonable and necessary adoption fees, including court costs, attorney fees, traveling expenses and other direct adoption-related expenses.

Flexible spending account contributions

Under PPACA, employee contributions to health care flexible spending accounts will be reduced to $2,500 per year for plan years beginning in 2013, the attorneys note. This new limit must be documented in a flexible benefits plan by Dec. 31, 2014, regardless of the fiscal year of the flexible benefits plan, and this change must be retroactive to the beginning of the 2013 plan year.

Educational assistance

Certain reimbursements for employer-provided educational assistance will expire at the end of 2012. Section 127 of the Internal Revenue Code allows an employer to reimburse an employee on a tax-free basis up to $5,250 for certain educational expenses provided through a non-discriminatory educational assistance program. Even if employer-provided educational assistance programs no longer have tax subsidies in 2013, employers can still provide some type of educational reimbursements in a more limited manner if the educational reimbursements qualify as a business expense and meet certain requirements, such as enhancing the employee's performance but not qualifying the employee for a new position or career.

So, what now?

With the uncertainty of the approaching fiscal cliff, Morganthaler and Wimer write that employers should consider advising employees of the ambiguity surrounding educational assistance and adoption assistance benefits for 2013 and the possibility of a 2% payroll tax increase. Even if tax extensions for education assistance, adoption assistance and the 2% payroll tax increase are adopted in a new tax bill, the attorneys say employers should note that it is unlikely that the new limits on health care flexible spending accounts and/or the new 0.9% payroll tax increase for high-income employees will be altered or eliminated.


Working after age 62?

BY RICH WHITE

May 3, 2012

Source: Benefitspro.com

Social Security retirement benefits may begin at age 62 (at the earliest) and some pre-retirees believe they will face a dilemma over whether to keep working or start their benefits at 62.  If your clients are concerned over this choice, tell them to relax.

Any benefits Social Security withholds (because of work income) from ages 62 through 66 will be credited back at the full retirement age of 66. The “earnings limit” for 2011, for people age 62-65, is $14,160. For every dollar earned through work above this limit, Social Security withholds 50 cents. This continues until Jan. 1 of the year in which reach full retirement age (currently 66) is attained, when the limit increases to $37,680 and withholding reduces to 33.3 cents per dollar over the limit. After the 66th birthday, there is no earnings limit.

Most people who think they will earn over the limit should simply delay the start of benefits until their 66th birthdays. In addition to permanently increasing monthly benefits (compared to starting at 62), this also preserves the ability to earn Delayed Retirement Credits for deferring the start date past the 66th birthday.