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  • Archive for 2015

    Grandma’s Wisdom: Lessons about Saving and Retirement

    Sunday, September 13th, 2015

    By Kassie Barroquillo, former WISER Research Associate

    September 13th is Grandparents Day – a day when we can celebrate our grandparents and those people in our lives who fill that role. One reason to celebrate is because grandparents can provide us with wise advice based on their own years of experience. This year, WISER asked grandmothers at all stages in their lives for advice they would give their grandchildren on saving and retirement.

    Saving Early

    Linda, a grandmother of a four- and a five-year-old, said, “Every time you get any money try to save some back, even if its small amounts.” She also added that she hopes her granddaughters start saving early, so they can retire. Penny wanted her two grandchildren, seven and nine, to remember that “no amount is too small to begin saving.”

    Want to help younger children learn about the importance of saving and planning for the future? WISER has a children’s book called “Sonja Meets Her Future Self,” which teaches kids the valuable lesson of Save, Spend, and Give.

    Budgeting

    Barb, who has three grandsons between the ages of three years and three months, said they should add retirement savings to their budget. Gayle, who has three grandchildren between the ages of 10 and 19, added that they should discern between “what you need versus what you want.”

    WISER has two budget worksheets, if you want to start building your own budget: Simple Budget Worksheet and Detailed Budget Worksheet.

    When the Grandkids Grow Up

    Retired grandma to a four- and a five-year-old, Barbara, said “My advice is to save money, comparison shop, buy quality items, and to save a portion of all your pay for a ‘rainy day’…and always take advantage of employer savings programs like 401k.” She also added that if you have the means, use a financial advisor. Michelle, who has two grandchildren, ages two and four, echoed Barbara, “Definitely invest in a 401k for retirement!”

    WISER has an entire page dedicated to 401k’s here! Don’t have access to a 401(k) Plan? Learn more about other ways to save for retirement.

    A Little Advice from my Grandmas

    I asked my own grandmas what advice they would give me. My Grandma Greta has 13 grandchildren, three great grandchildren, and one on the way, between the ages of two and 38. She said I should be sure to “have enough money saved to plan for inflation. It is more than you think it’s going to be.” She also said I should consider investing in property.

    Learn more about inflation and ways to invest your savings in The Beginner’s Guide to Saving and Investing.

    I am the oldest of my Grandma Wilma’s four grandchildren at 26, with the youngest being 13. She said, “Save money in a 401k or IRA while you are working. I’ve been saving my money the entire time I’ve been working, so I will be able to live, hopefully, without depending on anybody.” She added that she always had money taken out of her paychecks and always put it in a retirement fund. Most importantly she never borrowed from it.

    To find out more about IRAs and what happens if you borrow early, see this page from WISER.

    Thanks to the grandma’s who contributed their words of wisdom and happy grandparent’s day to all!

     

    Understanding Social Security Benefits in Cases of Divorce and Widowhood

    Friday, July 17th, 2015

    Social Security CardNational “my Social Security Week is taking place July 19 – 25, 2015. This is a great time to become familiar with your Social Security benefits. Social Security is an important source of retirement income, especially for women.  According to the Social Security Administration, women represent 57 percent of all Social Security beneficiaries age 62 and older and approximately 68 percent of all beneficiaries age 85 and older.

    Two of the most common life events that can impact your Social Security benefit are divorce and widowhood; both experiences are emotional as well as unexpected, and they often have a huge effect on a woman’s financial life. Understanding how your Social Security benefits will change and planning ahead can help you or others you know to better navigate these difficult situations.

    Social Security & Divorce

    Although more women are participating in the workforce, the wage gap and years women spend as unpaid caregivers means that women often earn benefits that are lower than their husband’s or ex-husband’s benefits.  When you decide to apply for retirement benefits, the Social Security Administration will calculate the benefits for which you are eligible—your own as a worker, yours as a spouse or ex-spouse (or widow or ex-widow).

    The good news is that a divorced woman can apply to receive Social Security divorced spousal benefits without filing any special papers at the time of divorce, and it doesn’t matter if her ex-husband has remarried. What does matter is if you were married to your ex for at least ten years and are currently unmarried. If you remarry, you generally cannot collect benefits on your former spouse’s record unless your later marriage ends, either by death, divorce or annulment.

    If you meet these requirements, you can collect a benefit up to 50% of your ex-spouse’s Social Security benefit. (Of course, there is an exception if you remarry after age 60; in that case you can still claim a divorced spousal benefit if you meet the other requirements.) Finally, if your ex is deceased and you are unmarried, you can collect survivor’s benefits, which would be 100% of your ex-spouse’s Social Security benefit.

    Social Security & Widowhood

    Widowhood is an experience that many of us do not like to think about, but for most married women, it is highly likely that they will become widows one day. Women are four times more likely than men to outlive their spouses, and 85% of women over the age of 85 are widows[i].

    Widows depend on Social Security for a larger percentage of their total income. For 20% of women over age 80, Social Security is their sole source of income[ii]. If you are the widow or widower of a person who was eligible for Social Security benefits, you can receive survivors benefits at your full retirement age or reduced benefits as early as age 60. You can also begin receiving benefits as early as age 50 if you are disabled and the disability started before or within seven years of the worker’s death.

    For younger widows, you can receive a survivors benefit at any age if you take care of the deceased worker’s child who is under age 16 or is disabled and receives benefits on the worker’s record.  Similar to a divorced spouse, if you remarry after you reach age 60 (age 50 if disabled), your remarriage will not affect your eligibility for survivors benefits.

    An important fact to keep in mind, too, is that each individual can only receive one Social Security benefit. If both you and your spouse receive a Social Security benefit each month and your spouse dies, you can continue to receive whichever benefit is higher, but not both! This could cause a reduction in total household income after a spouse dies, despite the fact that living expenses often remain the same.

    WISER has additional information and resources available at www.wiserwomen.org, including a feature article, Making the Most of Social Security Retirement Benefits if You’re Divorced. WISER also encourages everyone to set up an online account through “my Social Security” on the Social Security Administration’s website.  You can use this account to access your online Social Security statement, keep track of your earnings and verify them every year, get an estimate of your future benefits if you are still working, and get details about benefits for your spouse and dependents’ if you die. You can also get an estimate of your disability benefits if you were to become disabled.

    Setting up an online Social Security account is easy and takes only a few minutes, so do it today! It’s a great way to celebrate National my Social Security Week and get to know your benefits.

     

    This blog is part of an ongoing series for the “Campaign for a Secure Retirement:  Helping Millions of Americans Plan and Save for Retirement;” the Campaign is a joint educational retirement campaign to encourage retirement planning and saving and to promote the online Social Security Statement, available through my Social Security, as an important retirement planning tool. 

    [i] Society of Actuaries & WISER, Impact of Retirement Risk on Women, 2014.

    [ii] Government Accountability Office (GAO), Women’s Retirement Security report, July 2012.

    Five Things You Better Know about Medicare

    Thursday, May 28th, 2015

    managing money in retirementMedicare is celebrating its 50th anniversary this year as the nation’s federal health insurance program, playing a vital role in the lives of most people age 65 and over.  In fact, Medicare currently covers 49 million Americans. Many people, however, do not know the very basic but important facts about the program. Here are five things you need to know about Medicare (and a few that will save you from the glitches that can cost expensive lifetime penalties!):

    1.     Medicare is not a “one size fits all” program.  

    While collectively referred to as Medicare, the program is actually made up of different parts: Part A covers inpatient hospital care, skilled nursing facilities and some home health care. Part B covers doctor visits (but not all routine exams), medically necessary supplies and equipment, physical and occupational therapy, outpatient mental health services and other outpatient hospital services. Part D is an optional program, but you need to enroll in Part D if you want to receive coverage for prescription drugs.

    Important decisions are involved as you enroll in each of these Parts, including whether or not you need or want supplemental insurance. Many people will buy supplemental insurance to cover health expenses not covered by Medicare Part A and B. Medigap Supplemental Insurance and Medicare Advantage Plans (sometimes referred to as Part C) are two options, but you need to do your homework and learn how these plans differ as lower out-of-pocket costs may also place more restrictions on physician and hospital choice.

    2.     Medicare is not free!

    Medicare is not a fully subsidized program; much like with private insurance, you have to pay premiums, deductibles and co-pays. The amounts can vary depending on income.

         •     Part A does not have a premium, but it does have an annual deductible and co-payments. The deductible in 2015 is $1,260.

         •     Part B has a premium and the amount you pay is based on income. In 2015, the monthly premium for Part B for those whose income is $85,000 or less is $104.90. Higher income seniors pay a higher premium. There is also an annual deductible, which in 2015 is $147.00. Co-payments apply to most Part B services.

         •     Part D also has a monthly charge that varies depending on which plan you choose. The average Part D premium is $31 a month, and you usually also have to pay out-of-pocket for a percentage of your prescription drug costs.

    It is also important to know that your Part B premium is automatically deducted from your Social Security benefit! Many people do not realize this and are surprised when their monthly Social Security benefit payment is less than they expected.

    3.     Medicare does not cover all of your possible health care needs.

    The recent healthcare reform increased the number of free preventive services available to Medicare beneficiaries such as the annual free “wellness” visit to develop or update a personalized prevention plan. Beneficiaries also get a free cardiovascular screening every five years, annual mammograms, annual flu shots, and screenings for cervical, prostate and colorectal cancers.

    But Medicare does not cover routine dental care, eye care, or hearing aids, and perhaps most importantly: Medicare does not cover most long-term care, and covers only limited home health care and nursing home costs (usually following a hospital stay). So even if you are eligible for Medicare, you need to also be thinking about and planning for your possible long-term care needs.

    4.     You risk a possible penalty if you do not sign up for Medicare once you are eligible.

    You are eligible for Medicare when you turn 65.

         •     If you are already receiving Social Security benefits, you will be automatically enrolled in Parts A and B (and you can choose to turn down Part B if you’d like).

         •     If you have not started taking Social Security, you will have to sign up for Parts A and B (or Medicare Advantage) during your initial enrollment period. The initial enrollment period to apply for Medicare is 3 months prior to your 65th birthday, the month of your 65th birthday, and 3 months after your 65th birthday (for a total enrollment period of 7 months). To ensure coverage starts by the time you turn 65, sign up in the first three months you are eligible.

    If you miss signing up during that initial enrollment period, you can sign up during the general enrollment period (that runs from January 1 to March 31, and coverage will begin on July 1), but you will have to pay a 10% penalty for life for each 12-month period you delay in signing up for Part B! The penalty does not apply if you delayed enrollment because you were actively employed and covered in a workplace plan or covered by an employed spouse’s workplace plan (but read this next point carefully!)

    5.     There are special rules you need to know if you have health insurance through your employer at the time you are eligible for Medicare.

    If you are still working and have insurance through your employer when you become eligible for Medicare, you may want to delay signing up for Medicare. If this is the case, you also have an 8-month Special Enrollment Period to sign up for Part A and Part B that starts the month after the employment ends or the group health plan insurance based on current employment ends, whichever happens first. Usually, you don’t pay a late enrollment penalty if you sign up during a Special Enrollment Period.

    This is another important item to note: COBRA and retiree health plans are NOT considered coverage based on current employment. That means you are not eligible for a Special Enrollment Period when that coverage ends. So it is important to also understand how COBRA and Medicare work together:

    •     If you have Medicare first and then become eligible for COBRA upon leaving your employer plan, you can have both. But remember that Medicare pays first and COBRA pays second, so you do not want to drop Medicare to take COBRA—without it you have no primary insurance, which is like having no insurance at all.

    •     If you have COBRA first and then become eligible for Medicare, your COBRA coverage may end. Since you will not be fully covered with COBRA, you should enroll in Medicare Part A and Part B when you are first eligible to avoid a late enrollment penalty.

    To learn more about Medicare and other resources available, check out WISER’s Medicare Basics fact sheet, and visit www.medicare.gov and www.medicarerights.org. The website, www.mymedicarematters.org also provides an easy online guide for exploring coverage options, costs, and the enrollment process.

     

    This blog is part of an ongoing series for the “Campaign for a Secure Retirement:  Helping Millions of Americans Plan and Save for Retirement;” the Campaign is a joint educational retirement campaign to encourage retirement planning and saving and to promote the online Social Security Statement, available through my Social Security, as an important retirement planning tool. 

    WISER

    About Us

    WISER is a nonprofit organization that works to help women, educators and policymakers understand the important issues surrounding women's retirement income. WISER creates a variety of consumer publications including fact sheets, booklets and a quarterly newsletter that explain in easy-to-understand language the complex issues surrounding Social Security, divorce, pay equity, pensions, savings and investments, banking, home-ownership, long-term care and disability insurance.

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