MONEY retirement planning

8 Things You Must Do Before You Retire

sébastien thibault

Getting ready to retire? The moves you make in the months before you call it quits can smooth the way to a secure future.

After working diligently for more than 30 years—so you could set yourself up financially for your golden years—the glow of retirement is finally on the horizon. Alas, it’s not time to relax just yet.

Each day more than 10,000 baby boomers enter retirement. Yet only around one-quarter of workers 55 and older say they’re doing a good job preparing for the next phase, according to the Employee Benefit Research Institute. The last 12 months before you call it a career is especially critical to putting your retirement on a prosperous path. It’s time to get your portfolio, health care, and other finances in order so you can enjoy your new life.

THE TURNING-POINT CHECKLIST

12 Months Out:

Dial back on stocks now. You still need the growth that equities provide, but even a 15% market slide in the year before you retire can erase four years’ worth of income. Cap stock exposure to around 50% in your sixties, advises Rande Spiegelman, vice president of financial planning at Schwab Center for Financial Research.

Raise cash. Your paychecks are about to stop. So as you downshift from stocks, move that money into a savings or money market account to fund at least one year of expenses, says Judith Ward, T. Rowe Price senior financial planner.

Set a realistic retirement budget. Use the worksheet on Fidelity’s free retirement-income planner to list all of your fixed and discretionary expenses. Then use T. Rowe Price’s free retirement-income calculator to see how safe that level of spending is likely to be, based on the size of your nest egg and age.

6 Months Out:

Play out Social Security scenarios. You can claim Social Security at 62, but if you can hold off until 70 your checks will be 76% bigger. Tool around FinancialEngines.com’s free Social Security Income Planner to find the best strategy for you.

Figure out how you’ll pay for health care. Check if your company offers retirees medical, long-term care, and other insurance coverage. If you won’t get health insurance and aren’t yet 65 (when you qualify for Medicare), then compare plans offered via the Affordable Care Act at eHealthInsurance.com. Or use COBRA, where you can stay on your employer plan up to 18 months after leaving.

3 MONTHS OUT:

Begin the rollover process. In a small 401(k) plan, average fund expenses can run north of 0.6% of assets. You can cut those fees at least in half by shifting into index funds at a low-cost IRA provider. See if your plan provides free access to investment advisers to help you decide.

Sign up for Medicare. Nearing 65? You can enroll for Medicare up to three months before turning that age. Also, figure in supplemental plans to cover expenses that Medicare does not, such as dental care and prescription drugs.

Get a running start. Put your post-career itinerary into action. Research volunteer groups that you want to join, reach out to contacts if you plan to keep a hand in work, start a new exercise routine, or begin planning that big trip.

MONEY health insurance

You Can Now Buy Health Insurance at Walmart. Should You?

America's largest retailer is expanding more aggressively into the insurance market, hoping to become the go-to place for all your health care needs. But the store is far from the only place to get your coverage questions answered.

UPDATED: 5PM ET

Want help choosing a health insurance plan? Superstore Walmart is betting that many consumers do—and that they will visit a big-box store for guidance.

The company announced this morning that it is teaming up with the health comparison website DirectHealth.com to house insurance agents in 2,700 of its 4,300 U.S. stores. The agents will help shoppers understand and compare individual insurance plans as well as private Medicare plans, including drug, supplemental, and Advantage policies.

The agents will be in stores from this Friday, October 10, through December 7, a time frame that captures the kick-off of the annual enrollment periods for both individual health plans and private Medicare policies. Medicare open enrollment starts October 15; you can begin shopping for an individual policy for 2015 on November 15.

“For years, our customers have told us that there is too much complexity when it comes to understanding their health insurance options,” said Labeed Diab, president of Walmart’s U.S. health and wellness group, in a press release announcing the program. Since 2005, Walmart has hosted insurance agents from individual insurers in some stores to answer questions and enroll customers in health plans. This new program expands on that.

A bid for more health care business

This move isn’t the first time Walmart has dabbled in health care. The company has been slowly adding retail clinics to many of its locations, letting shoppers get primary care such as strep tests and treatment for ear infections at the store. Walmart’s total number of clinics, though, falls far short of what pharmacy chains CVS or Walgreens offer.

By adding insurance agents to its stores, the retailer appears to be aiming to get consumers to think of Walmart as a one-stop resource for health care. Walmart will not receive commissions on the sale of health plans, the Associated Press reports, but hopes the agents will attract consumers who will then rely on the stores for other health care needs, such as prescriptions. The agents will receive a commission from the insurers whenever a patient enrolls in a plan in the store, The Washington Post reports.

Where else to get help

In announcing the program, Walmart noted that many consumers have difficulty understanding their health plans. While that’s true, Walmart will be just one of many places where you can find guidance. Other comparison websites, such as ehealthinsurance.com and gohealthinsurance.com, already offer online and call-in assistance, though neither have retail locations around the country.

So should you head to Walmart face-to-face help with an individual or Medicare plan? The store will offer individual plans from 300 carriers, and Medicare plans from 13 firms. So you should be able to find options in your area. But keep in mind what other help is out there.

•For individual health insurance plans: Unless you qualify for a special enrollment period because you, say, lost your employer-based coverage or got divorced, you are generally locked out from buying a new individual health insurance plan or switching policies until the annual open enrollment period, which this year begins November 15 and runs through February 15. You’ll be able to buy a policy either through your state insurance exchange (find yours at healthcare.gov), an insurer, a comparison website, or an insurance agent.

Once open enrollment begins, many community centers and non-profits around the country will be staffed with counselors, navigators, or other assisters who can offer explain a plan’s details (though many aren’t supposed to tell you which plan is best for you). Find a group offering assistance in your area at localhelp.healthcare.gov. For questions about a plan sold on the public exchange, Healthcare.gov lists the 1-800 number for your state.

Unless you qualify for a subsidized policy under Obamacare (in which case you may be required to buy through an exchange), you should compare policies on the exchanges with those sold directly by insurers. You can find a local insurance agent who can sell you an on- or off-exchange individual policy at nahu.org. Comparison websites also list details for both types of plans, though there’s no guarantee every off-exchange plan available from an insurer will be listed on each site.

One caveat: the in-store agents will be able to explain plan details and help with comparison shopping, but they won’t be able to actually enroll you in an individual plan in the store, according to a Walmart spokesperson. To sign up you’ll need to call Direct Health, Walmart’s partner, or go to the website. (The agents will be able to enroll you in a Medicare plan while you’re in the store.)

Keep in mind that while DirectHealth.com is required by law to list every plan available through the exchange, it won’t necessarily include the full details for each plan. Instead, the site attempts to determine which plans may best suit you, says Michael Mahoney, senior vice president of marketing at GoHealth, which powers the DirectHealth.com comparison site. “We want to make sure people have the right amount of choice without overwhelming them,” he says. You decide if you’d rather see all your options, or only a limited choice.

•For private Medicare plans: You can make changes to your Medicare drug or Medicare Advantage plan starting on October 15. It is a good idea to analyze your current plan and new options every year instead of sticking with what you’ve got, since plans and premiums change and new options appear.

The Medicare Rights Center offers a national help line (800-333-4114) to help seniors understand the program and determine if their income qualifies them for other resources, such as a prescription drug subsidy. Your local State Health Insurance Assistance Program offers one-on-one assistance to Medicare beneficiaries and their families. Find your state’s at shiptalk.org.

The medicare.gov tool run by the Centers for Medicare and Medicaid Services lets you compare plans in your local area. This tool also lists every possible plan available to you, which is not the case with Walmart’s program. For example, a 67-year-old woman who lives in one Northern California zip code and takes no drugs has 11 Part D prescription drug plans options listed on DirectHealth.com. On medicare.gov, that same woman would find more than 30 choices.

 

MONEY Medicare

One Simple Way for Retirees to Save on Prescription Drugs

Hand picking one pill out of a row of pills
If you don't shop around for a drug plan, you may be leaving money on the table. Julie Toy—Getty Images

Just over one in 10 seniors decide to switch Medicare drug plans during fall open enrollment. But nearly half of those who do save money. Here's how to shop for the best deal.

Your Medicare prescription drug plan sent you a letter recently. Chances are, you didn’t read it—and that could be costing you money.

Health insurance companies must send an annual notice of changes for the coming year to Part D prescription drug and Part C Medicare Advantage plans. The notice, which must be delivered to you by Sept. 30 each year, details changes in premiums and co-pays, and lets you know whether your medication will be covered in the year ahead.

The notice comes just before the annual plan enrollment period, which kicks off on Oct. 15 and runs until Dec. 7. It’s your signal that it’s time to re-shop your coverage.

But a study released last fall by the Henry J. Kaiser Family Foundation found that, on average, just 13% of enrollees voluntarily switched their drug plans over four recent enrollment periods. The switching rate is nearly identical for those in Medicare Advantage plans, the all-in-one managed-care option offered to Medicare beneficiaries.

That’s unfortunate, since plenty of people are leaving money on the table. The Kaiser study found that 46% of plan switchers saved at least 5% the following year, mainly on premiums.

Seniors who use traditional fee-for-service Medicare need only check on their drug coverage. Most Medicare Advantage plans wrap in drug coverage, so enrollees can usually make a single shopping trip there, too.

Medicare cost inflation has been moderate for several years, and should remain so in 2015. The average Part D premium will drop from $39.88 in 2014 to $38.95 next year, according to Avalere Health, a research and consulting firm.

But a close look at the 10 most popular plans shows why it is important to evaluate coverage annually. Premium changes will vary significantly. For example, average premiums for Aetna’s Medicare Rx Saver plan will fall 31%, while WellCare’s Classic plan will jump 52%, on average.

Plenty of low-cost options are available. Five of the top plans will have premiums under $30, led by Humana/Walmart Rx, which will have an average premium of $15.67.

“It’s an ongoing pricing game,” says Dan Mendelson, Avalere’s chief executive officer. “The plans always try to price as low as possible and below the market and then they are forced to increase premiums. It means that now, more than ever, people need to go out and shop and take a careful look at what they are paying.”

Premiums aren’t the only factor to consider. Fewer drug plans will have zero deductibles next year, Avalere reports. It’s also important to make sure the drugs you take are covered—and under what circumstances.

In many cases, the best deals will be offered by plans using preferred pharmacy networks, so make sure the pharmacy option is convenient for you, because drugs will be more expensive if you use non-preferred delivery options.

Finally, pay attention to how your drugs will be covered if you enter the “doughnut hole,” the coverage gap that begins after you and your drug plan have spent a certain amount for covered drugs. Most plans don’t include gap coverage, and those that do charge higher premiums. But the size of the gap is being shrunk under a provision of the Affordable Care Act, and is scheduled to disappear in 2020.

Next year the gap starts at $2,960 (up from $2,850 this year) and ends after you’ve spent $4,700 (up from $4,550 this year).

Seniors who enter the gap also get discounts on brand-name and generic drugs, and those breaks will be larger next year. Enrollees will pay 45% of the cost of brand-name drugs in 2015 (down from 47.5% this year) and 65 percent of the cost of generic drugs (down from 72% this year).

How to get help

Use the online Medicare Plan Finder tool to find plans that match your needs. You also can call Medicare (1-800-Medicare) for assistance with plan selection.

“If you’re not comfortable going online, they can review your medications and match up plans with you,” says Frederic Riccardi, director of client services for the Medicare Rights Center, a nonprofit advocacy group.

Riccardi advises people to purchase plans through Medicare, rather than going directly to the plan providers. “It creates an administrative record at Medicare of what you wanted to do, in case of any problems with your enrollment.”

Free one-on-one help is available from your local State Health Insurance Assistance Program (SHIP), a network of non-profit Medicare counseling services.

The Medicare Rights Center also offers free counseling by phone (1-800-333-4114).

MONEY Medicare

What You Need to Know About Medicare Open Enrollment

Pharmacy
You can shop for a new drug plan starting October 15. Getty Images—Getty Images

Your once-a-year chance to change your drug coverage or switch plans begins in two weeks. Here's what to expect.

Medicare beneficiaries who want to make changes to their prescription drug plans or Medicare Advantage coverage can do so starting Oct. 15 during the Medicare’s program’s annual open enrollment period. There will be somewhat fewer plans to pick from this year, but in general people will have plenty of options, experts say.

And although premiums aren’t expected to rise markedly overall in 2015—and in some cases may actually decline—some individual plans have signaled significantly higher rates. Rather than rely on the sticker price of a plan alone, it’s critical that beneficiaries compare the available options in their area to make sure they’re in the plan that covers the drugs and doctors they need at the best price.

The annual open enrollment period is also a once-a-year opportunity to switch to a private Medicare Advantage plan from the traditional Medicare fee-for-service plan or vice versa. Open enrollment ends Dec. 7.

Although the Centers for Medicare and Medicaid Services has released some specifics about 2015 premiums and plans, many details about provider networks, drug formularies and the like won’t be available until later this fall. Here’s what we know so far:

Standalone Prescription Drug Plans

The number of Part D standalone prescription drug plans (PDPs) will drop 14%, to 1001 plans. This is the smallest number of offerings since the Medicare Part D program began in 2006.

Even so, “seniors across the country will still have a choice of at least two dozen plans in their area,” says Tricia Neuman, director of the Program on Medicare Policy at the Kaiser Family Foundation (KHN is an editorially independent program of the foundation.)

The drug plan consolidations that are driving the reductions in choices will likely shift many beneficiaries into lower cost plans, resulting in an average premium decline of 2%, to $38.95, according to an analysis by Avalere Health.

But that overall average premium obscures significant price hikes by some of the biggest plans. The average premium for the WellCare Classic plan, for example, will increase 52% in 2015, to $31.46, while the Humana Walmart RxPlan premium will rise 24%, to $15.67, according to Avalere.

Insurers are expected to continue to shift more costs to beneficiaries next year. The percentage of PDP plans with no deductible will decline to 42% from 47%, and, once again, about three quarters of plans won’t offer any coverage in the “donut hole”— the coverage gap in which beneficiaries are responsible for shouldering a greater share of their drug costs.

Underscoring the importance of evaluating plan options, 70% of standalone drug plan members will likely see their premiums increase if they stick with the same plans in 2015, says Ross Blair, senior vice president for eHealthMedicare.com, an online vendor.

Seniors, though, have historically not voluntarily switched plans in great numbers during annual enrollment. Between 2006 and 2010, on average only 13% did so, according to a 2013 analysis by researchers at Georgetown University, KFF and the University of Chicago.

Medicare Advantage

Enrollment in Medicare Advantage plans continues to grow: 30% of Medicare beneficiaries are now in the private plans, which typically are managed care plans that often provide additional benefits such as vision and dental coverage. Concerns that Medicare Advantage plans would disappear in large numbers as the health law gradually reduces their payments to bring them in line with the traditional Medicare program have proven unfounded to date. In 2015, the number of plans will drop by 3%, to 2,450, continuing a gradual decline.

“You still have lots of plans and robust selection,” says Caroline Pearson, vice president at Avalere Health, a research and consulting firm. Some parts of the country appear to be harder hit by plan reductions than others, including the Southeast and mid-Atlantic regions, Pearson says.

Medicare Advantage coverage has always been concentrated in health maintenance organizations, and this trend will continue in 2015. The number of HMOs will increase by 1.5%, to 1,747, while the number of preferred provider organizations will drop by nearly 9%, to 541, according to Avalere. About two-thirds of Medicare Advantage beneficiaries are currently in HMOs, while 31% are in PPOs.

The average premium will increase by $2.94 to $33.90, but nearly two-thirds of beneficiaries won’t see any premium increase, according to CMS. Like standalone drug plans, however, fewer Medicare Advantage drug plans will offer no deductibles and gap coverage, according to Avalere.

“It’s one example of how plans are tightening up coverage,” and pushing more costs onto consumers, says Pearson.

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

MONEY Ask the Expert

How to Live Well on Less by Retiring Overseas

140605_AskExpert_illo
Robert A. Di Ieso, Jr.

Q: I hear a lot about people retiring overseas to make their retirement savings go further. My wife and I are pretty adventurous. But can we really save money retiring in another country?

A: Retiring abroad isn’t for everyone—but more and more people are doing it. Nearly 550,000 Americans receive their Social Security benefits abroad, up from nearly 400,000 in 2000, according to the Social Security Administration. That’s a small number compared to the 43 million people over 65 receiving Social Security benefits. Still, 3.3 million of America’s 78 million Baby Boomers say they are interested in retiring abroad, according to Travel Market Report.

The growing interest in overseas living isn’t all that surprising, considering the worries of many pre-retirees about making their money last. There’s no question that you can live well on less in many countries. But to make that happen, you’ll need to plan carefully, says Dan Prescher, an editor at International Living, which publishes guides on the best places to retire overseas.

For most Americans, the biggest savings are a result of the lower prices for health care and housing overseas, says Prescher, who lives in Ecuador with his wife Suzan Haskins. The couple co-authored a book. The International Living Guide To Retiring Overseas On A Budget.

Most countries have a national healthcare system that cover all residents, and monthly premiums are often less than $100. It’s relatively easy to become a resident of another country, which typically involve proving you’ll have at least a modest amount of income, perhaps $1,000 a month.

But quality of health services varies, so research carefully, especially if you have medical problems. Even in countries with well-rated health care systems, the best services are centered around metropolitan areas. “Larger cities have more hospitals and doctors. The farther out you go, the quicker the quality falls off,” says Prescher.

Though Medicare doesn’t cover you if you live abroad, it’s still an option, and one that you should probably keep open. If you sign up—you’re eligible at age 65—and keep paying your premiums, you can use Medicare when you are back in the U.S.

Home prices, property taxes and utilities can be significantly lower in Mexico and countries in Central and South America, which are popular with U.S. retirees. In Mexico, you can find a nice three-bedroom villa near the beach for as little as $150,000, says Prescher.

But you’ll pay a premium for many other needs. Gas and utilities can cost a lot more than in the U.S. And you will also pay far more for anything that needs to be imported, such as computers and electronics or American food and clothing. “A can of Campbell soup can easily cost $4.50,” says Prescher. “You have to ruthlessly profile yourself, and see what you can or can’t live without, when you are figuring out your spending in retirement.”

Then there are taxes. As long as you’re a U.S. citizen, you have to pay income taxes to the IRS, no matter where you live or where your assets are located. Even if you don’t owe taxes, you must file a return. If you have financial accounts with more than $10,000 in a foreign bank, you must file forms on those holdings. In addition, the new Foreign Accounts and Tax Compliance Act (FATCA), which requires foreign banks to file U.S. paperwork for ex-pat accounts, has made many of them wary of working with Americans. You may also need to pay taxes in the country where you reside if you own assets there.

Check out safety issues too. Use the State Department’s Retirement Abroad advisory for information for country-specific reports on crimes, infrastructure problems and even scams that target Americans abroad.

The best way to find out if retiring abroad is for you is to spend as much time in your favorite city or village before you commit. Go during the off-season, when it may be rainy or super hot. See how difficult it is to get the things you want and what’s available at the grocery store. Read the local papers and check out online resources. In addition to International Living’s annual Best Places to Retire Overseas rankings, AARP writes about retiring abroad and Expatinfodesk.com publishes relocation guides.

The most valuable information will come from talking to other ex-pats when you’re visiting the country, as well a through message boards and online communities. “You’ll find that ex-pats have to have a sense of adventure and patience to understand that things are done differently,” says Prescher. “For many people, it’s a retirement dream come true.”

TIME politics

Lawmakers Push Increased Access to Emergency Contraception

Bipartisan U.S. Budget Deal Said to Ease Automatic Spending Cuts
Sen. Patty Murray (D-Wash.), who introduced a bill to increase access to emergency contraception. Bloomberg—Bloomberg via Getty Images

Bill comes ahead of a midterm elections in which women are expected to be a key voting bloc

Updated: September 23, 4:40 p.m. ET

Five Democratic senators introduced legislation Tuesday that would require any federally-funded hospital to provide emergency contraception to rape survivors.

The Emergency Contraception Access and Education Act of 2014 was introduced by Sen. Patty Murray (D-Wash.), with Sens. Elizabeth Warren (D-Mass.), Barbara Boxer (D-Calif.), Richard Blumenthal (D-Conn.) and Cory Booker (D-N.J.) signing on as co-sponsors. The bill would ensure that any hospital receiving Medicare or Medicaid funds provides accurate information and timely access to emergency contraception for survivors of sexual assault, regardless of whether or not they can pay for it. It would also require the Secretary of Health and Human Services to disseminate information on emergency contraception to pharmacists and health care providers.

“As we saw in the aftermath of the Hobby Lobby decision, and as we’ve seen in state legislatures across the country, Republicans are intent on standing in the way of women and their ability to make their own decisions about their own bodies and their own health care,” Senator Murray told TIME. “This means, now more than ever, it is our job to protect these kinds of decisions for women, their families, and particularly for survivors of sexual assault. Emergency contraception is a critical part of these family planning choices and it’s time Republicans join us in supporting this safe and responsible means of preventing unintended pregnancies.”

“It is unacceptable that a survivor of rape or incest can be denied access to emergency contraception in the emergency room, and therefore forced to carry a pregnancy caused by her attacker,” Planned Parenthood president Cecile Richards said in a statement. “Decisions about emergency contraception, like all forms of birth control, should be between a woman and her doctor, not her pharmacist, her boss, or her Congressman.”

The bill may face opposition from congressional Republicans, and comes just two months before the midterm elections, in which many expect women to be a decisive voting bloc.

TIME Healthcare Policy

Getting Poor to Get Help: How a Tragic Accident Trapped My Family in Poverty

Trapped in America's Safety Net
Trapped in America's Safety Net Courtesy University of Chicago Press

Campbell is the author of the new book, Trapped in America’s Safety Net: One Family’s Struggle.

When Andrea Louise Campbell's sister-in-law was horribly injured, she and her family had to spend down their money and assets to get the medical care they needed

Nearly one-third of American households live in or near poverty. The causes are myriad – and much contested. Those on the political right tend to cite the personal shortcomings of poor individuals while those on the left blame systemic barriers to upward mobility. But as my family has painfully learned, there is another shocking cause: government policy.

In February 2012 my sister-in-law Marcella was in a car accident on her way to nursing school, where she was working towards a career which she hoped would catapult her and my brother Dave into middle-class security. Instead, the accident plunged them into the world of American poverty programs. Marcella is now a quadriplegic, paralyzed from the chest down. She needs round-the-clock personal care and assistance. The only source – public or private – for a lifetime of such coverage is Medicaid. But because Medicaid is the government health insurance for the poor, she and my brother must be poor in order to qualify. (Medicare does not cover long-term supports and services, and private long-term care insurance is time-limited and useless to a 32-year-old who needs decades of care). Thus, Marcella and Dave embarked on a hellish journey to lower their income and shed their modest assets to meet the state limits for Medicaid coverage.

To meet the income requirement, my brother reduced his work hours to make just 133 percent of the poverty level (around $2,000 per month for their family). Anything he earns above that amount simply goes to Medicaid as their “share of cost” – a 100 per cent tax.

Worse: the asset limit. In California, where they live, they can own only $3,150 in assets beyond their home and one vehicle. They’re “lucky,” a social worker tells Dave: if not for the baby (Marcella was pregnant at the time of the accident; the baby miraculously survived), the asset limit would be $3,000. As if you can raise a child on $150. This asset limit was last raised in 1989. It has fallen by half in real value since then.

Dave and Marcella began to liquidate. Under California rules, retirement plans are not exempt from the asset test. Marcella had to cash in a small 401(k) account from a previous job, paying the early withdrawal penalty to boot. Dave had to abandon his hobby, working on old cars, which violated the asset test. He sold them all, keeping a 1968 Datsun pickup because its tiny value didn’t impinge on the asset limit. The pickup is 45 years old, weighs less than a Miata, and has no modern safety features. The only able-bodied adult in the family has to drive to work in an unsafe vehicle. And they had to empty their bank account, watching their hard-earned security disappear.

As Dave and Marcella spent down their assets, they had to keep track of every penny. They could only put the money into the exempt items, the house and the used wheelchair van they bought for Marcella. They could not use the money to pay credit card bills, household bills, or Marcella’s student loans from her undergraduate degree. And they are barred from doing any of the things the middle class is constantly advised to do: save for retirement. Create an emergency fund. Save for college with a tax-free 529 plan. Just $3,150 in assets – that’s it.

What happens in an emergency? One day the van’s wheelchair ramp stopped working. The repair cost $3,000—the sum of their meager assets. Fortunately their tax refund had just come in and went straight back out to pay for the repair. We don’t know what they’ll do next time.

What would help folks like Marcella and Dave?

True universal health insurance. A universal social insurance program for long-term care, not just Medicaid. And one modest change: no asset test. Policy is already trending in that direction. Under the Affordable Care Act, those newly eligible for Medicaid face no asset test. (Unfortunately those in the original eligibility categories, including the disabled like Marcella, are still under the old rule.) About half of the states have no asset test for any Medicaid recipient; perhaps someone realized that trying to ferret out the tiny amount of resources most Medicaid applicants have is inefficient. As for Dave and Marcella, I suppose they might move to a state with more generous rules. However, no state helps with wheelchair renovations. Lacking the assets to buy a new house elsewhere, they must remain in the home their friends renovated for them on an entirely volunteer basis.

It’s bad enough that America’s system of social supports is so limited. That the government also forces some of its citizens to get poor to get the help they need is an abomination.

 

Andrea Louise Campbell is professor of political science at the Massachusetts Institute of Technology. She is the author of Trapped in America’s Safety Net, out this month.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

MONEY Health Care

Why Health Care Spending Is Going Up—But Not Skyrocketing

A stronger economy and more insured Americans should help push up health care spending in the coming years, according to a new government report. But don't expect a return to the high pre-recession growth rates soon.

National health spending will increase modestly over the next decade, propelled in part by the gradual rebound of the U.S. economy and the growing ranks of Americans who became insured under the health law, government actuaries projected Wednesday.

But those growth rates are not as high as what the country saw for the two decades before the Great Recession crippled the U.S. economy at the end of 2007, according to the report from the Centers for Medicare & Medicaid Services Office of the Actuary and published in the journal Health Affairs.

The actuaries estimate that health spending grew just 3.6% in 2013, the fifth year of historically low rates of spending growth. But it will accelerate to 5.6% in 2014. They also forecast that the average growth rate for 2015-2023 would be 6%. That is up just slightly from last year.

The findings also suggest that health care will outpace growth in the gross domestic product over the next decade. Health care’s share of GDP, which has remained fairly stable since 2009, will rise from 17% in 2012 to more than 19% in 2023.

While some health care analysts and Obama administration officials have said the Affordable Care Act is reducing costs, CMS actuaries are no longer measuring the effects of the law on health care spending.

“We are no longer quantifying the impacts of the Affordable Care Act on national health spending,” Andrea M. Sisko, the lead author on the study, told reporters at a briefing on the findings. “Now that the Affordable Care Act has been in place for well over four years, it is becoming increasingly difficult to accurately estimate … what the world would look like in the absence” of the law.

Sisko also said it is too soon to estimate the impact of the health law’s delivery system changes on the nation’s health care system.

Paul Ginsburg, a public policy professor at the Schaeffer Center for Health Policy and Economics at the University of Southern California, said the report illustrates that “the recession and the very slow recovery from the recession are important determinants of health spending trends …. There’s a been a lot of debate over the past year or two about how much of the slowdown we’ve experienced has been from the business or the economic cycle and how much is due to real changes in health care. My sense is it’s both. This very steep recession and this very slow recovery from it, especially when you look at the very low growth in wages, is something that has definitely depressed health care spending. The implication of higher deductibles, of greater cost sharing, that’s important as well.”

Better economic conditions, the aging of the baby boomer generation into Medicare and increased number of people with insurance are expected to result in greater demand for health care goods and services, increases in health coverage and faster rates of spending growth, in particular for private health insurance, the researchers said.

Those trends, the researchers said, will be countered by somewhat slower growth in Medicare payment rates mandated by the health law, cuts made to hospitals and doctors in the congressional budget-cutting efforts and the increasing use of higher deductibles in private insurance plans that have cut down on consumer health spending.

The number of uninsured people is projected to fall from about 45 million in 2012 to 23 million by 2023, according to CMS actuaries.

Other key takeaways from the CMS report include:

– Medicare spending growth slowed from 4.8% in 2012 to 3.3% in 2013. That was caused by the automatic 2% payment cuts known as sequestration and other payment adjustments, especially reductions in federal payments to the private Medicare Advantage plans that offer an alternative to traditional Medicare. Late last month, the Congressional Budget Office estimated that lower costs for medical services and labor will help reduce both Medicare and Medicaid spending over the next decade.

Continued movement of baby boomers into the program and more spending on older beneficiaries will cause Medicare expenditures to rise 7.9% in 2020, according to the CMS report.

– Medicaid’s growth rate is expected to rise from 3.3% in 2012 to 6.7% in 2013, reflecting the health law’s Medicaid expansion—which is optional for states—and the effect of the law’s temporary payment increase for primary care physicians, among other factors. The researchers forecast that Medicaid spending will spike nearly 13% in 2014 but the growth rate will fall back to 6.7% the following year.

– In 2014, private health insurance premiums are projected to grow 6.8%, largely a result of higher per-enrollee spending and increased insurance coverage through the health law’s online marketplaces, or exchanges, and individually purchased insurance. For 2016-23, average premium growth for private health insurance is projected to be 5.4% per year.

– For 2016-2023, faster increases in disposable personal income and greater enrollment in private health insurance will contribute to the projected 6.1% spending growth per year for health care services, faster than the 4.7% average growth expected for 2013-15. But those conditions are likely to change, researchers warned.

“Consistent with the historical relationship between health spending and economic cycles, these projected changes in the economy are expected to influence health expenditure growth with a lag,” resulting in a projected peak growth in health spending of 6.6% in 2020, CMS said.

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

MONEY Social Security

Maximize Your Social Security Benefits…By Not Freaking Out

Seniors doing yoga on the beach
Lyn Balzer and Tony Perkins—Getty Images

A financial planner explains why, when it comes to retirement income, being patient can pay off in a big way.

About a month ago, a client walked into our office and announced that he had decided to take his retirement package being offered at work. We had to work out a number of issues related to his company’s retirement benefits. Finally, when the subject of Social Security came up, my client said, “I want to start taking the benefit as soon as I can, before they stop it.”

His opinion of Social Security is common. Many retirees believe that Social Security may run out or that Congress may legislate away their benefit.

We pushed back on this. First, the actuarial analysis shows the Social Security fund is pretty secure; it is Medicare that we all need to be worried about. Second, we feel that for a current retiree, the benefit amount is fairly safe; the only possible changes might involve a lower increase in the annual benefit. We agree with most experts that making changes to current benefits is a non-starter.

Our client was persuaded. Then he asked us a question we hear a lot: “When should I start taking Social Security, at age 66 or 70?”

The answer is not straightforward. If our client — let’s call him Jack — started taking Social Security at age 66, he’d receive a monthly benefit of $2,430. But your initial benefit increases the longer you postpone taking it, until you reach age 70. If Jack delayed taking the benefit until he turned 70, the initial amount would be $3,680, or 52% more per month.

Since Jack has other forms of retirement income, he doesn’t need the monthly check as soon as possible to live on. Instead, Jack’s goal is to get as much back from Uncle Sam as possible.

If Jack started his benefit at age 66, he would receive approximately $116,700 by age 70. (He’d actually get more, since benefits are adjusted annually for inflation. But for the sake of simplicity, I am ignoring inflation and other complicating factors.)

If he waited until age 70, he would be receiving $1,250 more per month, but he wouldn’t have received any money over the prior four years. It would take around 94 months to recoup the $116,700 he did not earn by waiting.

In other words, Jack would have an eight-year breakeven point if he waited until 70. If Jack dies before age 78, he would have received more by taking the benefit at age 66; if he lives past 78, he would be better off to wait until age 70. Federal life expectancy tables say a male 65 years old has a life expectancy of age 82. So if Jack has average health, the odds suggest he should wait until age 70 to take his benefit.

Jack’s wife — we’ll call her Jill — is 65, and has been retired for a couple of years. Jill’s Social Security projection looks like $2,120 monthly at age 66 or $3,200 at age 70. Jill’s breakeven also projects to be at age 78, yet her life expectancy is age 85, so the odds that she will be better off waiting until age 70 are greater than Jack’s.

But they both shouldn’t necessarily wait until 70 to take their benefits. Why? Because Social Security offers married couples a spousal benefit option.

This takes us into a different kind of strategy with our clients, something advisers call “file and suspend.”

It is possible to start taking a spousal benefit at age 66 (as long as your spouse has filed for his or her own benefit amount) and let your personal benefit increase to the maximum amount at age 70. The strategy is to have both spouses wait until 70 to take their own benefit, but for the spouse with the lower benefit amount to take a spousal benefit from age 66 up to age 70. For this to work, the spouse with the higher benefit amount needs to file for his or her benefit—then suspend receiving his or her own benefit until age 70.

For Jack and Jill, the file and suspend would work as follows: Jack, the spouse with the higher benefit, files for benefits at age 66, then immediately requests the benefits be suspended; that’s “file and suspend.” Then at age 70, he requests his benefits, which would be approximately $3,680 a month.

Jill files for her spousal benefit at age 66. This allows her to delay her own benefit while collecting a spousal benefit of around $1,250 a month. Then at age 70, she cancels the spousal benefit in order to collect her full benefit of $3,200 a month.

This scenario would provide them an added benefit of almost $60,000 in those first 4 years!

All Social Security scenarios have a breakeven age, so it is important to take an honest look at your health when evaluating all your options. The most important factor is your own cash flow need when you retire. If Social Security is going to be one’s sole source of income in retirement, waiting until age 70 is probably not an option.

But for those who can, delaying benefits is a useful tool. Outliving your money in your 80s or 90s is a real possibility. Postponing Social Security to allow for the highest possible benefit can mitigate that longevity risk.

—————————————-

Scott Leonard, CFP, is the owner of Navigoe, a registered investment adviser with offices in Nevada and California. Author of The Liberated CEO, published by Wiley in 2014, Leonard was able to run his business, originally established in 1996, while taking his family on a two-year sailing trip from Florida to New Caledoniain the south Pacific Ocean. He is a speaker on investment and wealth management issues.

MONEY First-Time Dad

Why Millennials Aren’t Lazy, Spoiled or Entitled…

Luke Tepper

...At least not any more than other generations are.

Mrs. Tepper and I spent the better part of the past week trying to induce our six-month old son Luke to sleep through the night. After a parade of co-sleepers, swings, night feedings and magic sleeping suits, it was time — our doctor told us — to go medieval and let the little guy cry in his room until he woke up the next morning.

The (seemingly) endless sobbing was difficult to endure, but within a few nights, Luke slept all night. He did it! And so did we.

Luke’s accomplishment not only put our minds at ease, it helped stroke our parenting egos. Now when other parents ask us how he’s sleeping, we’ll be able to look them dead in the eyes and with not a small amount of satisfaction say, “We got him to sleep like a log.”

Parenting, much like sports and everything else, is competitive. If you think your kid is cuter than mine, well, we might just have a problem. Of course, this is silly. Whether a kid sleeps through the night, rolls over, or cries incessantly is largely a matter of luck and circumstance. Some parents happen to have a newborn that sleeps well, while others don’t and there are millions in between.

The mistaking of luck for skill, the conflation of happenstance for personal achievement, is pervasive in our society. You even see this play out in the management of mutual funds. In fact, I think this natural phenomenon is one reason that older generations think mine is narcissistic, instead of simply unlucky.

More than a few readers have responded to my articles with a common refrain that kids today are given much more than older generations — and thus are much more willing to spend and less principled in saving. And that this deficit accounts for Millennials’ current economic struggles.

Fine, though older generations complaining about the lives lead by their children and their children’s children is just as much a cliché. Nevertheless, a few facts and figures may help to enlighten the perception of today’s young adults and help align the views of those from different ages.

We Grew Up During the Great Recession

Millennials graduated college in the teeth of the worst economic downturn since the Great Depression. While people of all ages felt its impact, Millennials were a little more vulnerable — if not economically, then psychologically — than other groups.

In a recent speech, the chairman of the White House’s Council of Economic Advisers highlighted just how rough the Great Recession was on Millennials. “While the unemployment rate for those over 34 peaked at about 8%, the unemployment rate among those between the ages of 18 and 34 peaked at 14% in 2010 and remains elevated, despite substantial improvement,” Furman said.

Graduating into a recession leads to lower wages, which has been especially true for those who had the misfortune of turning 22 in 2008. In fact, per a recent Pew Research Center survey, “Millennials are the first in in the modern era to have higher levels of debt, poverty and unemployment, and lower levels of wealth and personal income than their two immediate predecessor generations had at the same time.”

We Pay More to Raise Our Kids Than You Did

If you had kids in 1985, and the mother of those kids worked, you paid on average $87 (in 2013 dollars) a week in child-care expenses, according to Pew. In 2010, the figure grew to $148. That means, on average, working mothers today pay over $3,000 more a year on child care than their mothers paid for them.

Of course, child-care expenses, like real estate, differ zip code to zip code. We live in Brooklyn and teamed up with another family to hire a nanny. The total cost to us? Almost $400 a week.

And it doesn’t look like families like ours well get help anytime soon. A few months ago, the International Labor Organization put out a report which found that the U.S. and Papua New Guinea are the only two countries in the world that have “no general legal provision of maternity leave cash benefits.”

Not only is it more expensive to raise your kids now, but we live in one of the two countries in the entire world that doesn’t offer any help.

You Are More Entitled Than We Are

Despite the fact that some think that seniors have earned their Social Security and Medicare benefits, entitlements have always been a transfer of wealth from the working to the elderly. Ida May Fuller was a legal secretary who retired in the end of 1939 having paid $24.75 in social security taxes. A couple of months later, she received the first retirement check and would go on to accumulate almost $23,000 in Social Security benefits.

Ida is not alone. According to the Urban Institute, a couple that earned $71,700 (in 2013 dollars) a year from 22, and retired in 2015, will receive more than $1 million in lifetime benefits (including Social Security and Medicare.) This despite paying nearly $650,000 in lifetime entitlement taxes.

Now, I’m fine paying taxes to fund a social program that has so effectively reduced elderly poverty and improved the lives of millions of people. I just don’t want those recipients of public funds to think of my generation as entitled.

Look, so much of our success is defined by luck.

If you graduated college during the Carter or Reagan presidencies, you entered an economy that was adding between 150,000 and 250,000 jobs a month. Over the past 14 years? Not so much.

Of course, you can’t do much to control your macroeconomic environment. The only thing non-policy makers can do is hope — hope that in 28 years your son is luckier than you were.

So when you think about Millennials in terms of living at home and deifying self-aggrandizing behavior, remember the economic hardships that we endured and you didn’t. Remember that others who receive Social Security and Medicare may not have really earned those funds. Remember “there but for…” and appreciate the luck you have in this world.

Taylor Tepper is a reporter at Money. His column on being a new dad, a millennial, and (pretty) broke appears weekly. More First-Time Dad:

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