shAARP Talk: Observations from AARP

USA Today: IRS Runs Into Rebate Delivery Problems

To date, the IRS has issued nearly 30 million stimulus checks, totaling more than $27 billion." And it is the "first time the IRS has used direct deposit to deliver rebates - a step intended to quickly pump money into the struggling economy," but there have been delays. Those "who applied for refund-anticipation loans or who had their e-filing fees deducted from their refunds won't receive their rebates by direct deposit, even if their regular tax refunds were delivered that way." And "taxpayers who filed jointly with a spouse who doesn't have a Social Security number won't receive a rebate at all."

US News And World Report: Proper Diversification Seen As The Most Important Investing Principle

Reshma Kapadia writes that the "the way money is divvied up is responsible for more than 90 percent of a portfolio's performance - not stock picking or even selecting the right fund manager, according to a landmark 1986 study that has been confirmed by several subsequent ones. In other words, getting that allocation right - and sticking to it - plays a bigger role than most investors realize."

BusinessWeek: AARP Survey Highlights Major Retirement Uncertainties Among Boomers

"It looks like fewer of those 78 million [baby boomers] will be either rich enough or young enough at retirement to meet the expectations of businesses catering to boomers released from the workforce." Baby boomers "face falling stock and housing values plus skyrocketing health-care and energy costs. These are all reasons to stay on the payroll. Meanwhile, stock losses have led 14% of retirees to consider returning to work, according to the AARP." And "boomers make up the first generation to fund retirement partly from finite pools of savings instead of wholly from guaranteed-for-life pensions. Says AARP's director of financial security, Jean Setzfand, 'That makes them fundamentally more cautious.'"

Bloomberg News: AARP Finds Seniors Paid Less For Generic Drugs Last Year

"Older Americans paid an average 9.6 percent less last year for widely used generic drugs, the biggest drop since at least 2003, according to a report by the retiree lobbyist group AARP." Spending on health care "has soared as the U.S. population ages and more people face chronic conditions including high blood pressure, cholesterol and diabetes. Lower-priced copies of brand-name drugs offer a valuable alternative, especially since an earlier study found a 7.4 percent price increase last year in the top 220 brand-name medicines, said the AARP, which represents people age 50 and older. 'As the economy continues to tighten, people need to look for cost-savings at every opportunity,' said John Rother, AARP's director of public policy, in an e-mailed statement. 'Often more expensive, brand-name drugs aren't necessarily any more effective than the generic "cousins" that you won't see advertised on TV.'"

UPI: Baby Boomers Financially Unprepared For Disability

"A survey by Harris Interactive on behalf of America's Health Insurance Plans assessed how financially prepared baby boomers are if the primary wage earner in their household became disabled and was unable to work for an extended period of time. Fifty-five percent say they are not at all or somewhat unprepared and 15 percent say they are very or extremely prepared if a disability occurred." Harris conducted the "online survey from April 25-29 among a nationwide sample of 3,607 adults age 18 and older, including 1,182 baby boomers ages 44 to 62."

USA Today: Roth IRA Seen As More Beneficial Than Traditional Savings Account

Matt Krantz writes that the tax-free status of Roth IRA earnings is "a big advantage over a taxable account." There are also no "minimum withdrawals starting at age 70 1/2." Krantz says that while the "the end result is the same as with a traditional IRA" when investing," investors "don't have to pay taxes when you take out the money, giving the Roth a huge edge. You can't count on tax rates being lower in the future, when you take your withdrawals."

There was an interesting piece in the New York Times yesterday from Bob Herbert, talking about the Millennials. Aside from the political conversation, what’s so interesting to me is that Herbert discusses the bleak financial picture for this age group. Combine this with the new research out today from AARP on boomers and the stress they feel about their finances.

Herbert writes:
“The landscape is changing before our eyes. Younger voters struggling with the enormous costs of a college education, or trying to raise families in a bleak employment environment, or using their credit cards to cover everyday expenses like food or energy costs are not much interested in hearing that the government to which they pay taxes can do little or nothing to help them.”

The survey released yesterday found almost 25% of people ages 45-64 are prematurely taking money out of their 401(k)s and other investments. Younger boomers (ages 45-54), in particular, are doing things like postponing paying bills (27%) and even cutting back on medications (17%).

Seems like young and old alike are struggling today, even sometimes with the same challenges – meeting basic needs.

I know many have stopped paying attention and are planning their summer vacations. But West Virginia had a Democratic primary and the exit polls continue the trend we’ve seen nearly everywhere – 50 plus voters are half of those who are showing up. In West Virginia, exit polls have 55 percent of the electorate over 55 50 and 63 percent citing the economy as a key issue. A new question also centers on the recession and 89 percent of those who showed up yesterday said they are impacted by the economic downturn.

Sooo… I hear two things here – it’s the economy and it’s 50 plus voters will show up in the fall.

You may have heard that the presidential candidates are interested in holding joint forums with voters. AARP is offering to host them and have sent a letter out to the campaigns telling them. Why you ask? Because going beyond the partisan differences is important, it’s the only way were going to get anything done. It’s also why AARP formed Divided We Fail with a bunch of different organizations who have all come together agreeing to find common ground.

We’ll keep you posted on all of the candidate’s responses.

BusinessWeek: Researchers See Success In Boosting Retirement Plan Participation

BusinessWeek reports on Dartmouth researchers attempts to "develop a program designed to motivate employees of companies to sign up for retirement saving initiatives." The researchers used a "social marketing approach to saving for retirement...that targeted groups" at Dartmouth "that were less likely to save." Researchers claim that "Dartmouth employees electing retirement plans more than tripled in a 30-day period after the program's launch. More organizations are seeking help in this area. Keller is working with the Financial Industry Regulatory Authority (FINRA), National Endowment for Financial Education (NEFE), and AARP to help them apply social marketing to financial planning for their members."

AP: Tentative Budget Agreement Would Ignore Tough Decisions On Medicare, Medicaid

The AP reports the majority Democrats "are leaving grim decisions on automatic tax increases to the next president and the newly elected Congress under a freshly negotiated House-Senate blueprint for the upcoming budget year." The fiscal 2009 budget plan "worked out in private talks between House Budget Committee Chairman John Spratt Jr., D-S.C., and his Senate counterpart, Kent Conrad, D-N.D., awards an approximately 4% increase on average to non-defense Cabinet budgets passed by Congress each year. But it makes no effort to rein in the rapidly rising cost of federal benefit programs such as Medicare."

UPI: Con Ed's Early Retirement Option Resembles Loan Shark Scheme

An early retirement option for New York Con Ed employees was allegedly a deal that resembled a loan-shark scheme, attorneys said Tuesday. Employees said a buy-out offering early retirement from New York's Con Edison Co., turned out to be a loan that required sizable deductions from their pension checks, the New York Post reported. Lawyers filed a class-action suit in federal court in New York City. ... Plaintiffs said when the loans were made, there was no mention of interest charged. However, the retirees found monthly checks were reduced at higher-than-expected rates."

The word today from Lindsay Thomson:

In “Driven to the Brink: How the Gas Price Spike Popped the Housing Bubble and Devalued the Suburbs,” a new report out from CEOs for Cities, author Joe Cortright writes:

“For decades, the growth of suburban housing was predicated on cheap gas. In effect, the low price of gas made sprawl economical. While predatory and sub-prime lending have been blamed for the housing crisis and have certainly contributed to the problem, another economic factor has been almost entirely overlooked in the timing and the geography of the nation’s housing market implosion. The rise in gas prices from less than $1.10 in early 2002 to more than $3 today has dealt a major blow to consumer purchasing power and weighs most heavily on those metropolitan areas and those suburbs where people have to drive the farthest. Indeed, the decline in housing markets is strongly correlated with auto dependence.”

Ahem, make that nearly $4 a gallon. Poh-ta-to, po-tah-to, right? Unfortunately not … AARP has long promoted livable communities – places with a range of transportation options and accessible housing that can enable people of all ages and abilities to live independently and be engaged in community life. Looks like we can add rising gas prices to our list of reasons why livable communities just make sense.

New survey out today that says boomers are feeling the pinch of the sluggish economy. 81% of Americans 45 plus say the economy is in fairly bad or very bad condition. Even more upsetting, one in ten is borrowing to pay everyday expenses and more than a third of them are helping their children pay bills.

For boomers (45-64) almost a quarter are prematurely taking money out of their 401(k)s and other investments. For those 65 plus, almost six out of 10 are having a harder time paying for food, gas and medicine.

This is tough news for the state of the economy. But it may be even tougher for politicians. Almost three-in-four (74%) say their elected officials are not doing enough to help people caught in the economic squeeze. Sounds like a warning to me.

AP: Boomers Cutting Back On Expenses According To AARP Survey

"The economic downturn is hitting roughly one in 10 middle-aged and older Americans especially hard, compelling them to borrow money for everyday living expenses and to seek help from family, friends or charities, according to a survey released Tuesday by the AARP. In the telephone survey of 1,002 adults 45 and older, nearly four in 10 said they had helped a child pay bills or expenses." As opposed to "older people, a greater percentage of younger baby boomers, those 45 to 54, said they were cutting back on medications, prematurely withdrawing retirement funds and postponing paying bills. 'For the younger boomers, it's been an especially rude wake-up call,' said Jim Dau, a spokesman for the AARP, a nonprofit that advocates Americans 50 and older."

CNN/Money: Report Warns Of Looming Cash Shortage In Health Care

"At the end of May, global management consultancy AT Kearney is to publish a paper, Healthcare Out Of Balance, warning healthcare systems in developed nations, including the U.S., U.K. and Europe, are simply not sustainable as it is becoming increasingly hard to fund expensive treatments for aging populations." At a seminar in London, the author of the report said that "today's healthcare systems were designed for the postwar 'baby-boomer' generation, when there where typically six or seven working people for everyone in retirement. That will have dwindled to about three by 2020, he said."

MarketWatch: Changes In Employee Benefits Have Major Effect On Retirement Status

"Older workers who receive employer-sponsored coverage and don't expect to have job-based retiree coverage are 16.5 percentage points less likely to retire in any given year than workers with access to health insurance from another source, according to a study released last week from benefits consulting company Watson Wyatt." Also, "the decision to retire often hinges on the status of the broader U.S. economy," and with the advent of 401(k)s, "the incentive to retire when markets are up may run counter to employers' need to ramp up production during a boom time," which shows what one Wyatt researcher called a "perverse incentive."

AP: Study Finds Many Make Costly Retirement Mistakes

"Despite extensive efforts to educate workers about saving for retirement, many employees are not doing a good job of managing their company-sponsored 401(k) accounts, a new study indicates." A review of "nearly 1 million retirement portfolios found that 69 percent have inappropriate risk or diversification of holdings and 36 percent have worrisome concentrations of company stock. In addition, one-third of savers aren't putting enough aside to qualify for the full company matching contribution." Those mistakes are "especially pronounced among young and low-paid workers, according to the study by Financial Engines, a Palo Alto, Calif.-based firm that provides investment advice and managed accounts for defined contribution plans like 401(k)s."

CNN/Money: Higher Tax Rates In Future Seen As Inevitably Lowering Retirement Savings

Janice Revell reports, "Today's low rates can't last. The tax cuts of the past decades were supposed to lift economic growth (which they did) and hike tax receipts faster than federal spending (which they did not). Not even close. The resulting tsunami of federal debt is one reason to expect your taxes to rise over the next quarter-century." Add in the retirement of the Baby Boomers and "if today's low tax rates remain in place, a staggering 76% of all federal income tax revenue in 2050 will be soaked up by" Medicare and Social Security. This fact "has major implications for your retirement savings strategy." In the face of a "very real possibility that you'll be in a higher marginal tax bracket when you retire," workers "should be saving in vehicles that allow you to pay taxes today, instead of putting them off until tomorrow," like Roth IRAs and Roth 401(k)s.

BusinessWeek: America Moving To Adapt To Older Drivers

"The oldest baby boomers start turning 65 in less than three years, but car-crazed American society isn't ready, and neither are the boomers themselves." For future use, "GM is working on 'vehicle-to-vehicle' communications, which could for instance warn a driver that cars in a line several cars ahead are applying their brakes. GM is also making more widespread use of simpler features like larger, more legible numbers and letters in its instrument panels." Besides safety, the issue of when and "if older drivers should lose their licenses could be the stickiest issue of all, looming with the new wave of elderly drivers." And while "[p]eople are conscious of the need to plan financially for retirement, but they often overlook the likelihood that sooner or later, they won't be able to drive," which presents "a problem for retirees in suburban or rural settings."