We can also be sure that husbands will predecease their wives. Well, truth be told, we aren't certain that's the case. But odds are high that wives will outlive their husbands. In fact, 80% of women live longer than their spouses, and often by many years, on average 14, according to the U.S. Census Bureau.
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Given those facts, it would seem that husbands would do more to make sure that their wife's transition to widowhood doesn't result in poverty. But that's not the case, according to a report by Boston College's Center for Retirement Research.
Despite the old-age poverty rate being about one-third of its mid-20th century level, the poverty rate for widows remains high. In fact, nearly three-in-10 non-married women 65 and older are poor or near poor.
"Of all the factors associated with poverty in old age, the most critical is to be a woman without a husband," according to the Center for Retirement Research report.
That's a big problem given that nearly 800,000 women become widows each year and that there are more than four times as many widows as widowers in this country, or 11.3 million versus 2.6 million. Read the report (PDF).
Why are widows poor?
"One reason is that widowhood creates economic hardship, as Social Security benefits and pensions from employer-sponsored plans drop," the report says. "In addition, those most likely to be widowed have lower incomes than intact couples even before they lose their husbands. Their lower incomes reflect less education on the part of both the husband and wife and poorer health on the part of the husband than couples that remain intact."
So what should husbands - assuming they truly love their wives - do about these certainties?
1. Delay retirement
The first order of business is to address Social Security and pension benefits. "The most obvious reasons for a decrease in women's income upon widowhood pertain to Social Security and pension benefits," according to the report. "When the husband dies, the couple's Social Security benefit is cut by between one third and one half. The couple's private pension benefit either disappears completely or is reduced."
One way to offset that problem is for the husband and wife to retire later.
"Retiring later may provide for a higher employer pension benefit, if applicable, and offer the opportunity to sock away additional savings for retirement," said Wendy Roy, director of survivor financial counseling services at Ernst & Young, in an e-mail. A higher earnings level can also lead to a higher Social Security benefit.
2. Start a business together
In some cases, it might make sense for a husband and wife to start a business together. This enables them to spend time together, but it also gives them a chance to open a company retirement plan, including an individual 401(k) plan, said Jacob Herschler, vice president at Prudential Annuities Marketing.
3. Cover health-care costs
Make sure health-care costs are covered, including Medicare Part B, Medicare Part D and long-term care.
If the husband and wife are still working, they should consider buying long-term-care insurance policies, either through their employers or in the open market, Herschler said. They should especially consider doing so when they are healthy enough to qualify and when they are in their 50s or 60s when the premium costs are lower. In addition, husbands and wives should consider how they will fund health-insurance costs if they retire before becoming eligible for Medicare.
4. Talk finances
Husband and wife should work as a team on all financial matters of the household, said Paul McClatchy, vice president of financial planning at eMoney Advisor, a unit of Commerce Bancorp, in an e-mail.
"No matter if it includes the household budget, a new car purchase or saving for a future goal; both ought to be involved in the decision-making process," he said. "Too many times one spouse bows out of this responsibility by stating that 'they just don't have the head for numbers.'"
It's fine if one spouse is more comfortable with running the household finances, but the other spouse ought to know at least what thought process went into making financial decisions. Most importantly, both spouses ought to know where the important financial documents are kept, including wills, deed to the house, and insurance policies.
Also, there are many good programs couples can use to help with household finances, including Quicken or Microsoft Money.
5. Fund a spousal IRA
Husbands, if their wives don't work, ought to considering a spousal IRA or Roth IRA for their wives, said Herschler. A nonworking spouse can make a deductible IRA contribution of up to $4,000 for 2007 ($5,000 if age 50 or older as of the end of 2007) as long as the couple files a joint return, and the working spouse has enough earned income to cover the contribution.
6. Delay taking Social Security
Another way to increase Social Security benefits is to delay taking those benefits. For instance, a husband could increase his Social Security benefit by 5.5% to 8% per year by waiting until age 70. To be sure, couples will need to find ways to replace that income during what's called the "bridge period."
But a recent Prudential Retirement research report presented at the Wharton Pension Research Council symposium suggests that older Americans could withdraw money from their IRAs to replace the Social Security income until it's needed.
The big benefit of delaying Social Security is this: A widow or widower, at full retirement age or older, generally receives 100% of the worker's basic benefit amount, plus the delayed retirement credits, according to the Social Security Administration. This Web page describes survivor benefits.
"Social Security has undergone significant changes that make the value of delaying the receipt of Social Security benefits greater than in the past," according to the Prudential Retirement research. Read the report.
"Specifically, the increase in the full retirement age and delayed retirement credits can result in significantly greater benefits from delaying Social Security... With the additional benefits of survivor protection, inflation adjustments, low expenses, and customization options available, delaying Social Security (for at least one member of a retiring couple) and taking income from personal retirement savings during the 'bridge period' becomes a very efficient strategy of providing retirement income."
7. Consider buying a deferred annuity
A deferred annuity may be worth considering if there's concern that the surviving spouse would have difficulty managing investments to generate the stream of income necessary to support her standard of living, said Ernst & Young's Roy.
Of course, due care would need to be exercised in selecting the appropriate product to insure that it fits appropriately within the couple's larger retirement-planning strategy. It's also important that the spouse understands the product, its benefits and its potential pitfalls.
8. Look at asset titles, beneficiary designations
Re-titling of assets may reduce the time and cost associated with probate and, if done correctly, could play a role in insuring that each spouse takes advantage of their respective estate tax credit.
An effective estate-planning strategy is best implemented with the assistance of an estate-planning attorney and the couple's financial planner, Roy said.
Also, review beneficiary designations to be certain they accurately reflect current intentions and properly coordinate with will and trust documents.
9. Call in an expert
Let's face it, some people cannot, do not, and will not try and educate themselves on matters of financial well-being, said McClatchy. The husband must realize this and start working with a financial professional in order to ensure that the surviving spouse will have some financial continuity.
That means the surviving spouse will be able to turn to someone to help guide her on important financial issues. A good adviser will work with clients in categorizing all important documents that spouses will need and additionally will walk the couple through an early death scenario to ensure all bases are covered.
10. Social network
Spouses should help each other create social networks. Ensure that the widow has a network of knowledgeable and trusted friends to rely upon, said McClatchy. That way, the widow has more than one person to lean on. This network ought to contain individuals familiar with financial concepts; unfortunately some bad financial advice has come from well-meaning but financially ignorant friends, he said.
Friday, November 9, 2007
Monday, November 5, 2007
Early dip into your 401(k)
As home prices fall and lenders continue to tighten credit standards, is it the right time to prematurely borrow from your own retirement accounts?
By Keisha Lamothe, CNNMoney.com staff writer
November 1 2007: 9:09 AM EDT
NEW YORK (CNNMoney.com) -- You're in a crunch and need money now. But with the housing market in a slump, you no longer qualify for a home equity loan. What about tapping your 401(k)?
"Keep your hands off your retirement money," says Phillip Cook, a financial planner in Torrance, Calif. "It's rarely a good idea."
"We like to tell people that your 401(k) plan should be your absolute last resort," says Clare Bergquist, director of strategic services, corporate and retirement services at Charles Schwab. "It's a risk to your wealth because you're borrowing against your future."
Most major companies that offer 401(k) plans allow you to borrow against your account. But you'll end up paying yourself back - with interest to boot.
A withdrawal from your account is different than a loan, but both carry some type of fee or penalty. If you're under 59 1/2 and make an early withdrawal, you'll pay income tax on the amount taken out, plus a 10 percent penalty.
"If you withdraw money from your account and were in the 28 percent tax bracket, that 10 percent penalty will bump you up to the 38 percent tax bracket, so you'll end up paying more," says said Neil McCarthy, a Certified Financial Planner in Roswell, Ga.
Generally, you have five years to pay back the loan and up to 15 years if it's for the purchase of a first home.
You'll repay the loan through automatic deductions from your paycheck, including an interest rate charge, which is usually the prime rate plus one percentage point.
For example, you have $100,000 in your account and decide to take a $20,000 loan that you plan to pay back over the course of five years. The prime rate is 8.25, so the interest would be 9.25 percent. If you get paid bi-weekly, $256.07 would be deducted from your paycheck for 120 months.
And if you decided to stop contributing to your plan while paying back the loan, you can potentially miss out on even more. If it's a good year for the stock market, and there's a 15 percent rate of return on the $80,000 left in your account, you'll only be getting 9.25 percent on the $20,000 loan you took out.
"They are missing out on match money," Bergquist said. "It is such a risk to long term savings."
Not only do you repay the loan with after-tax money, but you will also get taxed again when you withdraw money in retirement. And you lose the compounded interest you would have received if you left the money alone.
"What you're doing is taking care of short-term pain, but this is going to impact you in the long term because the money is not growing at the rate that it could be growing," Cook said.
To make matters worse, if you were to lose your job before paying back the early withdrawal, then the loan becomes immediately due, typically within 30 - 90 days.
On rare occasions, you could avoid a penalty by proving certain qualified hardships, such as medical expenses. But not all hardships can escape a punishment, including housing payments or paying for education.
"You still suffer penalties. It's really a tough path to go down and should be avoided at all costs," Bergquist said.
"You should look for something else you can borrow from or something you can sell, like a car," McCarthy said. "If you're really down, I think you should go to some kind of service agency, like the Consumer Credit Counseling Service (CCCS)."
The CCCS and other non-profit service agencies help people reach financial stability by offering counseling on a range of issues including debt management, budgeting, financing education.
So stay away from your 401(k) - it's meant to be used while you're actually in retirement, not before.
By Keisha Lamothe, CNNMoney.com staff writer
November 1 2007: 9:09 AM EDT
NEW YORK (CNNMoney.com) -- You're in a crunch and need money now. But with the housing market in a slump, you no longer qualify for a home equity loan. What about tapping your 401(k)?
"Keep your hands off your retirement money," says Phillip Cook, a financial planner in Torrance, Calif. "It's rarely a good idea."
"We like to tell people that your 401(k) plan should be your absolute last resort," says Clare Bergquist, director of strategic services, corporate and retirement services at Charles Schwab. "It's a risk to your wealth because you're borrowing against your future."
Most major companies that offer 401(k) plans allow you to borrow against your account. But you'll end up paying yourself back - with interest to boot.
A withdrawal from your account is different than a loan, but both carry some type of fee or penalty. If you're under 59 1/2 and make an early withdrawal, you'll pay income tax on the amount taken out, plus a 10 percent penalty.
"If you withdraw money from your account and were in the 28 percent tax bracket, that 10 percent penalty will bump you up to the 38 percent tax bracket, so you'll end up paying more," says said Neil McCarthy, a Certified Financial Planner in Roswell, Ga.
Generally, you have five years to pay back the loan and up to 15 years if it's for the purchase of a first home.
You'll repay the loan through automatic deductions from your paycheck, including an interest rate charge, which is usually the prime rate plus one percentage point.
For example, you have $100,000 in your account and decide to take a $20,000 loan that you plan to pay back over the course of five years. The prime rate is 8.25, so the interest would be 9.25 percent. If you get paid bi-weekly, $256.07 would be deducted from your paycheck for 120 months.
And if you decided to stop contributing to your plan while paying back the loan, you can potentially miss out on even more. If it's a good year for the stock market, and there's a 15 percent rate of return on the $80,000 left in your account, you'll only be getting 9.25 percent on the $20,000 loan you took out.
"They are missing out on match money," Bergquist said. "It is such a risk to long term savings."
Not only do you repay the loan with after-tax money, but you will also get taxed again when you withdraw money in retirement. And you lose the compounded interest you would have received if you left the money alone.
"What you're doing is taking care of short-term pain, but this is going to impact you in the long term because the money is not growing at the rate that it could be growing," Cook said.
To make matters worse, if you were to lose your job before paying back the early withdrawal, then the loan becomes immediately due, typically within 30 - 90 days.
On rare occasions, you could avoid a penalty by proving certain qualified hardships, such as medical expenses. But not all hardships can escape a punishment, including housing payments or paying for education.
"You still suffer penalties. It's really a tough path to go down and should be avoided at all costs," Bergquist said.
"You should look for something else you can borrow from or something you can sell, like a car," McCarthy said. "If you're really down, I think you should go to some kind of service agency, like the Consumer Credit Counseling Service (CCCS)."
The CCCS and other non-profit service agencies help people reach financial stability by offering counseling on a range of issues including debt management, budgeting, financing education.
So stay away from your 401(k) - it's meant to be used while you're actually in retirement, not before.
Wednesday, October 24, 2007
Name IRA Beneficiaries
BOSTON (MarketWatch) -- After the recent death of his mother, James B. from Santa Barbara, Calif., had a sit-down talk with his father, covering family finances.
"My father doesn't need to change anything, he's set up for life," James said in an email, "but not changing anything means he wants to leave everything exactly as he had it with Mom. He says that his will sorts everything out, but I'm afraid we're missing something here."
What James' father is missing is a named beneficiary on his individual retirement account; his wife was the beneficiary, but her death and the absence of a contingent beneficiary means that the money will go the estate. While the will eventually will sort things out, the error could turn into a major headache.
The good news is that, unlike a poor investment, the situation is easily resolved and changed, with no potential negative consequences.
"It's not what you invest in, it's how much you keep after taxes," says Ed Slott of E. Slott & Co. in Rockville Centre, N.Y. "You spend a lifetime trying to build up an investment, and you know that one of the best ways to build wealth is to keep your money away from the government for as long as possible, so why do you then turn around and have the government get it as quickly as possible when you are gone."
Naming a beneficiary for an IRA is not the same as naming the heirs in your will. In fact, establishing the beneficiary designation is like having a special will to direct your IRA assets. That's much more important than most people recognize.
There are two key issues that come into play when an IRA passes to the estate rather than to a named beneficiary.
The first is that the IRA normally would go to the beneficiary without going through probate, the judicial process where a will is presented to the court for disposition. The probate process significantly slows the flow of the money. Even if the cash eventually gets where it is going -- assuming no creditor or other claimants to the estate successfully contest the will -- it won't get there for months, at a minimum.
The bigger issue involves what the recipients of the money can do with it.
Stretching benefits
The beneficiaries of an IRA -- so long as it is a named person or certain types of trusts -- can extend the tax benefits of the account, so that withdrawals are based on their own life expectancy. This creates what many in the industry call a "stretch IRA," where the benefits of IRA ownership can be extended by decades.
But if the money goes into an estate, even if it is destined to wind up with the same individual as a result of instructions in the will, the whole account must be distributed in short order. If the account owner died before turning 70 1/2, the whole account must be distributed by the end of the fifth year after death; if the owner died after that age, the IRA can be paid out through what would have been the owner's life expectancy, which could be more than five years but which will not be the same time frame as a member of the next generation.
"Paying it to your estate is kind of giving up, it's like saying 'The tax savings aren't worth it, so what the hell,'" says Stephen Ziobrowski, a partner in Day, Berry & Howard in Boston. "I haven't encountered a situation where paying an IRA to the estate is the right thing to do. I know it exists theoretically, but I haven't seen one case where it was the right thing to do."
Leaving an IRA to the estate is supposed to make sense in situations where account owners have no heirs and the money is earmarked for charity or where account owners have so many heirs -- or so little money -- that dividing the assets or tagging them for specific recipients creates a significant hassle.
For the average consumer, however, there's no question that naming a beneficiary is the right way to go.
Beyond setting it up, keeping it up to date is crucial. In the case of James' father, for example, having the mother as beneficiary was acceptable until her death; the lack of a secondary beneficiary became a problem upon her death.
Update forms
When investors open an IRA, they sign a custodial agreement with the firm they're investing with; in most cases, those agreements typically say that someone who dies without a beneficiary leaves the money to the estate. In some cases -- where the management firm has become proactive on the part of its customers -- the agreement says that in the absence of a named beneficiary, the money goes to a spouse, then to surviving children, before the estate could actually become beneficiary.
If you haven't read the custodial document to know the default case, check the beneficiary paperwork.
Phil Holthouse of Holthouse, Carlin & Van Trigt, an accounting firm in Long Beach, Calif., says that many people simply fail to pay attention to beneficiary forms.
"It's easy to fix, so long as you are alive and haven't lost competency," Holthouse says. "Call the company you have the IRA with and get new forms, and then fill them out. You can keep the beneficiary and contingent beneficiary up to date in about five minutes. ... If you don't, your heirs will face the cost of probate, they will lose flexibility on how to take money out of the IRA, and they suffer the practical damage of not being able to easily do what you actually wanted for that money."
"My father doesn't need to change anything, he's set up for life," James said in an email, "but not changing anything means he wants to leave everything exactly as he had it with Mom. He says that his will sorts everything out, but I'm afraid we're missing something here."
What James' father is missing is a named beneficiary on his individual retirement account; his wife was the beneficiary, but her death and the absence of a contingent beneficiary means that the money will go the estate. While the will eventually will sort things out, the error could turn into a major headache.
The good news is that, unlike a poor investment, the situation is easily resolved and changed, with no potential negative consequences.
"It's not what you invest in, it's how much you keep after taxes," says Ed Slott of E. Slott & Co. in Rockville Centre, N.Y. "You spend a lifetime trying to build up an investment, and you know that one of the best ways to build wealth is to keep your money away from the government for as long as possible, so why do you then turn around and have the government get it as quickly as possible when you are gone."
Naming a beneficiary for an IRA is not the same as naming the heirs in your will. In fact, establishing the beneficiary designation is like having a special will to direct your IRA assets. That's much more important than most people recognize.
There are two key issues that come into play when an IRA passes to the estate rather than to a named beneficiary.
The first is that the IRA normally would go to the beneficiary without going through probate, the judicial process where a will is presented to the court for disposition. The probate process significantly slows the flow of the money. Even if the cash eventually gets where it is going -- assuming no creditor or other claimants to the estate successfully contest the will -- it won't get there for months, at a minimum.
The bigger issue involves what the recipients of the money can do with it.
Stretching benefits
The beneficiaries of an IRA -- so long as it is a named person or certain types of trusts -- can extend the tax benefits of the account, so that withdrawals are based on their own life expectancy. This creates what many in the industry call a "stretch IRA," where the benefits of IRA ownership can be extended by decades.
But if the money goes into an estate, even if it is destined to wind up with the same individual as a result of instructions in the will, the whole account must be distributed in short order. If the account owner died before turning 70 1/2, the whole account must be distributed by the end of the fifth year after death; if the owner died after that age, the IRA can be paid out through what would have been the owner's life expectancy, which could be more than five years but which will not be the same time frame as a member of the next generation.
"Paying it to your estate is kind of giving up, it's like saying 'The tax savings aren't worth it, so what the hell,'" says Stephen Ziobrowski, a partner in Day, Berry & Howard in Boston. "I haven't encountered a situation where paying an IRA to the estate is the right thing to do. I know it exists theoretically, but I haven't seen one case where it was the right thing to do."
Leaving an IRA to the estate is supposed to make sense in situations where account owners have no heirs and the money is earmarked for charity or where account owners have so many heirs -- or so little money -- that dividing the assets or tagging them for specific recipients creates a significant hassle.
For the average consumer, however, there's no question that naming a beneficiary is the right way to go.
Beyond setting it up, keeping it up to date is crucial. In the case of James' father, for example, having the mother as beneficiary was acceptable until her death; the lack of a secondary beneficiary became a problem upon her death.
Update forms
When investors open an IRA, they sign a custodial agreement with the firm they're investing with; in most cases, those agreements typically say that someone who dies without a beneficiary leaves the money to the estate. In some cases -- where the management firm has become proactive on the part of its customers -- the agreement says that in the absence of a named beneficiary, the money goes to a spouse, then to surviving children, before the estate could actually become beneficiary.
If you haven't read the custodial document to know the default case, check the beneficiary paperwork.
Phil Holthouse of Holthouse, Carlin & Van Trigt, an accounting firm in Long Beach, Calif., says that many people simply fail to pay attention to beneficiary forms.
"It's easy to fix, so long as you are alive and haven't lost competency," Holthouse says. "Call the company you have the IRA with and get new forms, and then fill them out. You can keep the beneficiary and contingent beneficiary up to date in about five minutes. ... If you don't, your heirs will face the cost of probate, they will lose flexibility on how to take money out of the IRA, and they suffer the practical damage of not being able to easily do what you actually wanted for that money."
Health Care Costs
SAN FRANCISCO (MarketWatch) -- Concerned about affordability and feeling the financial sting of higher cost-sharing in their health plans, more Americans are changing their personal health behavior in ways that are likely both good and bad, according to a new study.
More than six in 10 Americans with health insurance, or 63%, said they saw an increase in their health plans' out-of-pocket costs in the past year, according to a survey of 1,000 people 21 and older from the Employee Benefit Research Institute, a nonprofit, nonpartisan research group in Washington, and research firm Mathew Greenwald & Associates.
Among these people, 81% said their greater financial responsibility motivated them to try to take better care of themselves, up from 71% who said that in 2005. Two-thirds said they tried to talk to the doctor more carefully about treatment options and costs compared with 57% who did so two years ago.
The number of people being more discriminating about doctor visits also grew -- 64% reported they only went for more serious conditions or symptoms, up from 54% in 2005. Half delayed going to the doctor this year, compared with 40% who used that tactic two years ago. Twenty-eight percent skipped or passed on filling doses of their prescribed medications, up from 21% two years ago.
It's impossible to discern from the study what the outcomes of those behaviors were, but the overall trend suggests people are being more mindful of their care and its costs, said Paul Fronstin, director of EBRI's health research program.
"They're becoming engaged on some level, more so than they've been in the past," he said. "That's really the goal of what employers and insurers are trying to do -- to get them to think more about their decisions and be more active in their health care."
Employers typically have been cautious by transferring more of the costs at the point of service -- doctors' offices, hospitals and the like -- rather than charging workers a higher share of the premium that comes out of their paychecks, which could drive more people to skip coverage altogether, said Alwyn Cassil, director of public affairs for the Center for Studying Health System Change in Washington.
"You have a real mixed bag here," said Cassil, who wasn't involved in the EBRI study. "Increased cost-sharing that most people face is a very blunt instrument and applies to both care we might want to be encouraging [and] care we want to be discouraging."
Higher copays and coinsurance may result in people with more discretionary health-care usage patterns changing their habits and saving the system money, but lower-wage workers and the chronically ill are especially vulnerable to forgoing care they truly need, she said. "They're the ones that this increased cost-sharing is likely to deter most strongly from getting things you'd want them to get."
Another troubling finding was the growth in the number of people experiencing rising health costs who said those costs made it difficult to afford basic necessities of food, heat and housing. That figure jumped to 30% this year from 18% in 2004, according to the study. Another 30% said the burden of health costs caused them to reduce their contributions to a retirement plan, up from 25% three years ago.
Satisfied with quality, wellness programs
Americans generally are satisfied with the quality of their health care but are worried about its costs and want to see broad-based change, the study found. Half were extremely or very satisfied with health-care quality, but less than two in 10, or 18%, were satisfied with the cost of medical insurance. Only 16% were satisfied with costs not covered by insurance.
"Half the population's healthy, so you're always going to have a significant percentage of the population happy with what they've got because they don't need anything," Fronstin said. "But there's concern. They feel vulnerable, feel like may lose health-care coverage. They're concerned costs are going up and concerned about the future."
Consumers may be less aware of quality problems, Cassil said. "I'm not sure we've done a very good job of helping consumers really understand how to assess the value in health care."
"Everything we know about the quality of care provided in this country is that it's uneven at best," she said, pointing to a recent study of staph infections as an example.
Last week, the Centers for Disease Control and Prevention reported that one form, methicillin-resistant staph aureus, was more common than previously thought. MRSA caused more than 94,000 life-threatening infections and nearly 19,000 U.S. deaths in 2005, with the majority occurring in health-care settings, the CDC said.
"If you could get health-care workers to wash their hands you'd get a huge leap in quality in this country," Cassil said.
One bright spot in the survey was wellness programs, which a growing number of employers use to help workers identify their risk factors for disease and make lifestyle changes to lower their risk.
Eight in 10 said they were strongly or somewhat positive about such initiatives, though their comfort level dips when the programs become more managed and intrusive. For example, only half support a program that sends reminders when annual checkups, health screenings or prescriptions are due. Still, many said they'd participate in exchange for a break on premiums.
More than eight in 10 said wellness programs are beneficial for workers and three in four saw them as a reflection of employers' concern for their well-being. But some have reservations, with 45% concerned that such programs, which can include health risk assessments and coaching, impinge on worker privacy.
Employers need to assure workers that they comply with mandatory privacy protections, said Jerry Ripperger, national practice leader for consumer health at Principal Financial Group, a financial services and insurance company in Des Moines, Iowa. The firm, one of the study's underwriters, has 333 employer contracts for wellness programs this year.
"If you're a large employer, we aggregate that data together on a deidentified basis to say you have a greater preponderance of smokers or a greater preponderance of [people with high blood pressure] than the general population," Ripperger said. "But we never identify that back to an individual. We never want an employer to even inadvertently identify a participant."
For the most part, people were confident that their employers would continue to provide health insurance, and they recognized its value. Three in four of those with job-based coverage said they would prefer $7,500 in employer health benefits to an additional $7,500 in taxable income, the survey found. More than half, or 54%, were not too confident or not at all confident they could afford coverage on their own if their employer stopped offering it.
Almost half of Americans -- 47% -- believe the health-care system needs major changes despite having some good aspects, according to EBRI. Nearly one in four say drastic problems require a complete overhaul, while an equal portion maintains the system needs only minor changes because it works pretty well.
The survey's margin of error is plus or minus four percentage points. Funding was provided by AARP, American Express, BlueCross BlueShield Association, Buck Consultants, Deere & Company, General Dynamics, IBM, NRECA, Principal Financial Group, Procter and Gamble, Sanofi-Aventis, Schering-Plough Corp., Shell Oil Co., Society for Human Resources Management and the Commonwealth Fund.
More than six in 10 Americans with health insurance, or 63%, said they saw an increase in their health plans' out-of-pocket costs in the past year, according to a survey of 1,000 people 21 and older from the Employee Benefit Research Institute, a nonprofit, nonpartisan research group in Washington, and research firm Mathew Greenwald & Associates.
Among these people, 81% said their greater financial responsibility motivated them to try to take better care of themselves, up from 71% who said that in 2005. Two-thirds said they tried to talk to the doctor more carefully about treatment options and costs compared with 57% who did so two years ago.
The number of people being more discriminating about doctor visits also grew -- 64% reported they only went for more serious conditions or symptoms, up from 54% in 2005. Half delayed going to the doctor this year, compared with 40% who used that tactic two years ago. Twenty-eight percent skipped or passed on filling doses of their prescribed medications, up from 21% two years ago.
It's impossible to discern from the study what the outcomes of those behaviors were, but the overall trend suggests people are being more mindful of their care and its costs, said Paul Fronstin, director of EBRI's health research program.
"They're becoming engaged on some level, more so than they've been in the past," he said. "That's really the goal of what employers and insurers are trying to do -- to get them to think more about their decisions and be more active in their health care."
Employers typically have been cautious by transferring more of the costs at the point of service -- doctors' offices, hospitals and the like -- rather than charging workers a higher share of the premium that comes out of their paychecks, which could drive more people to skip coverage altogether, said Alwyn Cassil, director of public affairs for the Center for Studying Health System Change in Washington.
"You have a real mixed bag here," said Cassil, who wasn't involved in the EBRI study. "Increased cost-sharing that most people face is a very blunt instrument and applies to both care we might want to be encouraging [and] care we want to be discouraging."
Higher copays and coinsurance may result in people with more discretionary health-care usage patterns changing their habits and saving the system money, but lower-wage workers and the chronically ill are especially vulnerable to forgoing care they truly need, she said. "They're the ones that this increased cost-sharing is likely to deter most strongly from getting things you'd want them to get."
Another troubling finding was the growth in the number of people experiencing rising health costs who said those costs made it difficult to afford basic necessities of food, heat and housing. That figure jumped to 30% this year from 18% in 2004, according to the study. Another 30% said the burden of health costs caused them to reduce their contributions to a retirement plan, up from 25% three years ago.
Satisfied with quality, wellness programs
Americans generally are satisfied with the quality of their health care but are worried about its costs and want to see broad-based change, the study found. Half were extremely or very satisfied with health-care quality, but less than two in 10, or 18%, were satisfied with the cost of medical insurance. Only 16% were satisfied with costs not covered by insurance.
"Half the population's healthy, so you're always going to have a significant percentage of the population happy with what they've got because they don't need anything," Fronstin said. "But there's concern. They feel vulnerable, feel like may lose health-care coverage. They're concerned costs are going up and concerned about the future."
Consumers may be less aware of quality problems, Cassil said. "I'm not sure we've done a very good job of helping consumers really understand how to assess the value in health care."
"Everything we know about the quality of care provided in this country is that it's uneven at best," she said, pointing to a recent study of staph infections as an example.
Last week, the Centers for Disease Control and Prevention reported that one form, methicillin-resistant staph aureus, was more common than previously thought. MRSA caused more than 94,000 life-threatening infections and nearly 19,000 U.S. deaths in 2005, with the majority occurring in health-care settings, the CDC said.
"If you could get health-care workers to wash their hands you'd get a huge leap in quality in this country," Cassil said.
One bright spot in the survey was wellness programs, which a growing number of employers use to help workers identify their risk factors for disease and make lifestyle changes to lower their risk.
Eight in 10 said they were strongly or somewhat positive about such initiatives, though their comfort level dips when the programs become more managed and intrusive. For example, only half support a program that sends reminders when annual checkups, health screenings or prescriptions are due. Still, many said they'd participate in exchange for a break on premiums.
More than eight in 10 said wellness programs are beneficial for workers and three in four saw them as a reflection of employers' concern for their well-being. But some have reservations, with 45% concerned that such programs, which can include health risk assessments and coaching, impinge on worker privacy.
Employers need to assure workers that they comply with mandatory privacy protections, said Jerry Ripperger, national practice leader for consumer health at Principal Financial Group, a financial services and insurance company in Des Moines, Iowa. The firm, one of the study's underwriters, has 333 employer contracts for wellness programs this year.
"If you're a large employer, we aggregate that data together on a deidentified basis to say you have a greater preponderance of smokers or a greater preponderance of [people with high blood pressure] than the general population," Ripperger said. "But we never identify that back to an individual. We never want an employer to even inadvertently identify a participant."
For the most part, people were confident that their employers would continue to provide health insurance, and they recognized its value. Three in four of those with job-based coverage said they would prefer $7,500 in employer health benefits to an additional $7,500 in taxable income, the survey found. More than half, or 54%, were not too confident or not at all confident they could afford coverage on their own if their employer stopped offering it.
Almost half of Americans -- 47% -- believe the health-care system needs major changes despite having some good aspects, according to EBRI. Nearly one in four say drastic problems require a complete overhaul, while an equal portion maintains the system needs only minor changes because it works pretty well.
The survey's margin of error is plus or minus four percentage points. Funding was provided by AARP, American Express, BlueCross BlueShield Association, Buck Consultants, Deere & Company, General Dynamics, IBM, NRECA, Principal Financial Group, Procter and Gamble, Sanofi-Aventis, Schering-Plough Corp., Shell Oil Co., Society for Human Resources Management and the Commonwealth Fund.
Dividing possessions
NEW YORK (MarketWatch) -- Dividing up a beloved parent's possessions can bring up strong feelings even in the most-well-adjusted families. To avoid unnecessary friction, Jane Bennett Clark, associate editor of Kiplinger's Personal Finance, suggests the following five steps when deciding who gets what:
Agree on a strategy. Before anyone starts cherry-picking, family members should decide on a mutually agreeable strategy for divvying everything up. One method: group items according to their financial or sentimental value and then have everyone take turns choosing what they want.
Articulate your reasons. If more than one person has their heart set on a particular heirloom, ask them to write down why they feel they should get the item. Then, sit down and compare reasons. The keepsake should go to the person who offers up the most compelling or logical explanation.
Limit the number of people. Try to limit decision makers to people in the immediate family and don't include spouses or grandchildren unless absolutely necessary. The more family members involved in the process of choosing, the more complications are likely to arise.
Find out what it's worth. To ensure that no one gets short shrift, enlist the help of an appraiser to figure out exactly what things are worth, counsels Clark. After everything has been dispersed, tally up the value of the items chosen by each family member. If one person's take is worth significantly more than the rest, you may want to consider letting other family members take matching funds out of the estate. (To find an appraiser in your area, visit the American Society of Appraisers at www.appraisers.org.)
Commit to a peaceful resolution. If tensions bubble up during the decision-making process, try not to let your feelings run away with you. Remember: in the long run, getting what you want is less important the supporting one another during this difficult time.
Agree on a strategy. Before anyone starts cherry-picking, family members should decide on a mutually agreeable strategy for divvying everything up. One method: group items according to their financial or sentimental value and then have everyone take turns choosing what they want.
Articulate your reasons. If more than one person has their heart set on a particular heirloom, ask them to write down why they feel they should get the item. Then, sit down and compare reasons. The keepsake should go to the person who offers up the most compelling or logical explanation.
Limit the number of people. Try to limit decision makers to people in the immediate family and don't include spouses or grandchildren unless absolutely necessary. The more family members involved in the process of choosing, the more complications are likely to arise.
Find out what it's worth. To ensure that no one gets short shrift, enlist the help of an appraiser to figure out exactly what things are worth, counsels Clark. After everything has been dispersed, tally up the value of the items chosen by each family member. If one person's take is worth significantly more than the rest, you may want to consider letting other family members take matching funds out of the estate. (To find an appraiser in your area, visit the American Society of Appraisers at www.appraisers.org.)
Commit to a peaceful resolution. If tensions bubble up during the decision-making process, try not to let your feelings run away with you. Remember: in the long run, getting what you want is less important the supporting one another during this difficult time.
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