Retirement Living News

September 2008

HEADLINES  (Click on headline to read story)

• New Tax Foundation Report on State/Local Tax Burdens Shows 
  New Jersey Residents Pay Highest Taxes
• AARP Forms Relationship with RetirementJobs.com to Offer Career Advice and Online Job Searching
• New Housing Bill Makes Substantial Changes to 
  Reverse Mortgage Program
• Actuaries Urge Policy Makers to Increase Retirement Age
• Fifteen Community Colleges Receive Grants to Develop Innovative Programs for Students Over 50
• Brookings Predicts Five Intermountain West States Will Become the New American Heartland

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NEWS STORIES

New Tax Foundation Report on State/Local Tax Burdens 
Shows New Jersey Residents Pay Highest Taxes 

If all other things are equal, a state with a lower burden is a more attractive place to retire than a state with a higher one. To get a true sense of which state is less expensive, you need to look at state and local tax burdens. Only then do the low tax states stand out. 

It is estimated by the Washington, D.C.-based Tax Foundation that the nation as a whole will pay on average 9.7 percent of its income in state and local taxes in 2008, down from 9.9 percent in 2007 primarily because income grew faster than tax collections between 2007 and 2008. 

New Jersey residents paid 11.8 percent topping the charts. New Yorkers were close behind, paying 11.7 percent, and Connecticut was third at 11.1 percent. The top 10 were rounded out by Maryland (10.8 percent), Hawaii (10.6 percent), California (10.5 percent), Ohio (10.4 percent), Vermont (10.3 percent), Wisconsin (10.2 percent) and Rhode Island (10.2 percent). 

Alaskans pay the least, 6.4 percent in 2008, but Nevada is close at 6.6 percent. In four states the residents pay between 7 and 8 percent of their income in state and local taxes: Wyoming (7.0 percent), Florida (7.4 percent), New Hampshire (7.6 percent) and South Dakota (7.9 percent). Four other states round out the bottom 10: Tennessee (8.3 percent), Texas (8.4 percent), Louisiana (8.4 percent) and Arizona (8.5 percent). 

The rankings calculated by the Tax Foundation are sometimes confused with the rankings based on Census Bureau data that use state and local tax collections. The difference is out-of-state tax payments. When state and local governments collect large amounts from non-residents, whether as tourists, commuters, businesses or property owners, the Census Bureau counts them in their collections of the taxing state. The Tax Foundation study counts them in the residential state of the taxpayer. 

For more information about the report and the tax burden in each state, click here.                                                                                               Top

AARP Forms Relationship with RetirementJobs.com to Offer Career Advice and Online Job Searching

In response to the aging of America's workforce and the need or desire of many baby boomers to keep working due to the recent downturn in the economy, AARP is collaborating with www.retirementjobs.com/ to help mature workers search for full-time, part-time and flexible jobs offered by age-friendly employers. As part of the effort, both organizations will identify employers that maintain policies, practices and programs consistent with employment of people age 50 and older based solely on the proficiency, qualifications and contribution. 

The online collaboration comes on the heels of an AARP economic survey (May, 2008) that found that 81 percent of all Americans ages 45 and over say the economy is in fairly bad or very bad condition. The survey showed that more than one in four older workers (27 percent) say they postponed plans to retire because of the recent downturn. 

Additional AARP research found that nearly eight in 10 Boomers said that they planned to work into their retirement years. Recent AARP surveys have found that those planning to work into their retirement years primarily are doing so to earn needed additional income, maintain health benefits or, in some cases, to remain active and gain personal enrichment. 

AARP's new relationship with RetirementJobs.com, part of the extensive expansion of its online career services, also comes at a time when 50 plus workers are playing an increasingly important role in the labor force. Fifty and over workers already represent 28 percent of the workforce, and projections show that by 2016 that figure will jump to 33.5 percent, more than one in three in the labor force. To read the economic survey report -- The Economic Slowdown's Impact on Middle-Aged and Older Americans -- go to http://assets.aarp.org/rgcenter/econ/economy_survey.pdf.
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New Housing Bill Makes Substantial Changes to 
Reverse Mortgage Program

The $300 billion housing bill signed into law on July 30 by President Bush helps stretched homeowners renegotiate their mortgages and provides tax credits to first-time buyers. It also addresses three major criticisms of reverse mortgage loans, which are increasingly popular among homeowners 62 and older who use the money for living expenses, health care, prescription drugs or to pay off an existing mortgage. 

During the last federal fiscal year, ending September 30, 2007 more than 107,000 homeowners took out a reverse mortgage, compared to 76,351 the year prior and 7,781 in 2001. 

With a reverse mortgage, you can tap your home equity without having to make monthly payments. Instead the bank pays you. The loan comes due only when you die, sell or move away permanently. The amount you get depends on the home's value, location, interest rates and the age of the youngest borrower if there are co-owners. The new bill raises the amount you can get from the mortgage and lowers the cost of getting it. 

Most reverse mortgages today are Home Equity Conversion Mortgages (HECMs), which are backed by the Federal Housing Administration, so you'll still get your money even if the lender goes under. (The other two types are private loans and single-purpose reverse mortgages offered by some state and local government agencies and nonprofit organizations.) FHA limits the amount you can borrow with a HECM, which ranges from $200,160 to $362,790, depending on the county you live in. The new housing law, which will take approximately 60 to 90 days to implement, creates a single national loan limit of $417,000 that can increase to as much as $625,500 in high-cost areas. 

A second criticism has been that the transaction fees for reverse mortgages are too high. An AARP Public Policy Institute study in December 2007 found that high cost is the reason 63 percent of reverse-mortgage shoppers ultimately decided against applying for the loan. And 69 percent of actual borrowers agreed that costs were high. The origination fees lenders can charge are currently capped at 2 percent of your home's value or the county lending limit, whichever is lower. The housing bill recently reduced the maximum fee to 2 percent on the initial $200,000 of the home's value and 1 percent on the balance thereafter, with a cap of $6,000. But some lenders charge less, so it can pay to shop around and negotiate on the fees charged. Also, you should bargain on closing costs, service fees, mortgage insurance premiums, and interest rates. 

And finally, the new bill puts an end to one of the main problems related to reverse mortgages: lenders cross-selling other financial products. The new law forbids pushy marketing tactics requiring the purchase of an annuity, insurance product (such as long term care) or investment product as a condition of the loan. 

In order to qualify for a HECM, borrowers must discuss the loan with a loan counselor employed by a nonprofit or public agency approved by the U.S. Department of Housing and Urban Development. "You should take the counselor very seriously and be very forthcoming so that the counselor can help you do a thorough job of making sure that a reverse mortgage is really the answer for you," says Peter Bell, president of the National Reverse Mortgage Lenders Association, an organization that represents the reverse-mortgage industry. 

Barbara Stucki, director of home equity initiatives for the National Council on Aging, recommends spending an hour or longer discussing the loan. The counseling is free or has a minimal cost. You can find a local housing counseling agency by calling (800) 569-4287. The Financial Industry Regulatory Authority recommends verifying the independence of counselors recommended by your lender by asking whether they receive any funding from the lender or the mortgage industry.
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Actuaries Urge Policy Makers to Increase Retirement Age

The American Academy of Actuaries is urging policymakers to immediately address Social Security's long-term financial problems by raising the normal retirement age to reflect increased longevity. The Academy's position statement on the retirement age for Social Security was released during a news conference early last month. The position statement was developed by the Academy's Board of Directors and essentially makes future recipients wait longer for their first benefit check because they probably will live longer anyway. 

The next president and a new Congress will come under increasing pressure to fix the Social Security system. Democratic presidential candidate Barack Obama rejects any increase in the retirement age while his GOP rival John McCain opposes tax increases as a possible fix. 

Current benefits are supplied by payroll taxes from today's workers, all of whom pay a 6.2 percent Social Security payroll tax on income up to $102,000. Their employers match it, for a total tax of 12.4 percent. The tax applies only to earned income, not to passive income such as dividends and interest. 

Benefits are projected to exceed the Social Security system's tax revenues in about nine years. The program's trustees have said the Social Security trust fund will be depleted by 2041 without changes. A major problem, the actuaries say, is that people are living longer thereby drawing more money from the program. 

For many years, 65 has been the retirement age to receive full benefits. But under changes in 1983, only people born before Jan. 2, 1938, can collect full benefits at 65. Those born after that date face a gradually rising retirement age for full benefits until they reach 67. Current estimates show that by 2040, 65-year-old men and women could live at least 18 more years after becoming eligible for full Social Security benefits. 

The Academy said that increasing the retirement age may be only part of the solution. But by acting now, policymakers would have a fuller range of policy options to choose from and be able to apply those options to more of the population.
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Fifteen Community Colleges Receive Grants to Develop Innovative Programs for Students Over 50

As 78 million baby boomers approach retirement, their attention is turning to staying active and re-focusing their careers--and they're about to get some help from America's community colleges, thanks to a recently-launched "Plus 50 Initiative." 

Ten community colleges will launch new "demonstration" programs for students over the age of 50, with the help of seed grants from the American Association of Community Colleges (AACC) and The Atlantic Philanthropies. They'll be aided with mentoring support from five "mentor" colleges that already have established programs for baby boomers. 

Organizers say the project is designed to help with one of the largest generational shifts affecting our nation, as baby boomers approach retirement and consider how to keep their lives active, healthy and engaged in careers and projects that matter to them. 

"The baby boomer generation wants to stay active in retirement and holds a wealth of knowledge and experience that society cannot afford to see leave the talent pool," said George R. Boggs, AACC President and CEO. "By retooling educational programs and adjusting for the needs of plus 50 students, community colleges can empower baby boomers to continue to give back by leading the vibrant and fulfilling lives they desire." 

The three-year program is sponsored by the AACC and is funded by a $3.2 million dollar grant from The Atlantic Philanthropies. The 10 demonstration colleges receiving grants are: 

• Chaffey Community College, located in Cucamonga, Calif., will start a new program for baby boomer volunteers to mentor and tutor under-prepared students and help them be successful in college. 
• Clover Park Technical College, located in Lakewood, Wash., will offer an environmental science program alongside a volunteer on-site project for baby boomers exploring sustainability. The program will apply classroom lessons while restoring wetlands, forests and an oak savannah. 
• Joliet Junior College, located in Joliet, Ill., will offer workforce skills certificate programs to students over the age of 50 for new careers in high-growth jobs in healthcare and education. 
• Luzerne County Community College, located in Nanticoke, Pa., will provide courses and services that encourage new job skills development, as well as entrepreneurship for plus 50 students wanting to start a new business venture. 
• Northern Virginia Community College, located near Washington, D.C., will expand educational offerings targeting baby boomers and reach out to senior facilities with programs on retirement, personal finance, entrepreneurship, technology literacy and good health. 
• Richland College, which is part of the Dallas County Community College District, and is located in Dallas, Texas, will assess learning needs for baby boomers, develop life-enhancing curricula for plus 50 students seeking to re-define their lives and offer opportunities to retrain experienced workers. 
• Santa Fe Community College, located in Gainesville, Fla., will address the critical nursing educator shortage by training baby boomer nurses to become instructors for nursing education programs, enabling them to pass their knowledge onto to others and serve a valuable mentoring role for younger nurses. 
• St. Louis Community College, located in St. Louis, Mo., will establish and pilot workshops on four campuses that will help plus 50 students who see retirement looming ahead of them, but are unsure about how to make this next phase of their lives all they hope it can be. Travel study tours, art classes and many other topics, offered in a format for non-degree seeking students, will enable baby boomers to re-connect with interests they may have set aside decades before while raising children and working. 
• Wake Technical Community College, located in Raleigh, N.C., will centralize coursework and activities offered by three separate divisions under one organizational umbrella and offer afternoon college classes at convenient times that cater to plus 50 students.
•  Western Dakota Technical Institute, located in Rapid City, S. D., will develop and pilot a national training model for baby boomers who want to become seasonal rangers and interpretive guides at national parks. 

Colleges receiving grants to serve as mentors for the program are: 

• Cape Cod Community College, located in West Barnstable, Mass., has conducted focus groups and extensive surveys with baby boomers to identify courses and volunteer opportunities. They plan to expand their current programs and develop a talent bank that matches plus 50 students with civic and service opportunities. 
• Central Florida Community College, located in Ocala, Fla., plans to develop course offerings that will lead to new employment opportunities for plus 50 students, including online business classes, individual and corporate tax preparation courses, training in less physically demanding medical fields such as medical transcription, and intergenerational computer courses. 
• Century College, located in White Bear Lake, Minn., will help baby boomers retiring from professional and supervisory positions apply their leadership skills as community volunteers. They will also help plus 50 professionals, who've been downsized out of their current jobs, with skill development courses in healthcare and technology that enable them to re-enter the workforce. 
• Clark College, located in Vancouver, Wash., will redesign its small business development curriculum to offer second careers through business ownership at a wine and cooking school for wine hobbyists and food enthusiasts. In addition, a joint program with the Area Agency on Aging will train in-home caregivers. 
• The Community College of Spokane, located in Spokane Wash., will help plus 50 workers upgrade or gain new skills and receive re-training to fill regional job vacancies. The college will also expand course delivery to rural areas using distance learning, so that plus 50 students located farther from campus can participate. 

For 88 years, the AACC has been the leading advocate for the nation's community colleges, which currently number more than 1,125 and serve more than 12 million students annually. Its membership comprises 95 percent of all public two-year colleges -- the largest, most accessible, most diverse sector of U.S. higher education. As institutions committed to providing access, community service and lifelong learning, community colleges have long-focused on the needs of adults who are already in the workforce, many of whom are seeking new skills and knowledge for changes in their lives and careers.
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Brookings Predicts Five Intermountain West States Will Become the New American Heartland

The southern Intermountain West region of the nation is experiencing rapid changes that many soon make it the "New American Heartland," according to an 80-page report published by the Brookings Metropolitan Policy Program. Five states - Arizona, Colorado, Nevada, New Mexico, and Utah - currently hold some of the fastest growing places anywhere in the country. 

It is now apparent that an extraordinary new settlement pattern has emerged to characterize growth in the nation's fastest growing regions. In the 1960s, Dallas and Fort Worth were clearly colliding, as were Washington and Baltimore in the 1980s. 

These mountain states have grown surprisingly urban, with more than 80 percent of their population, employment, and economic activity taking place in five emerging "megapolitan" areas: Arizona's Sun Corridor surrounding Phoenix and Tucson, Colorado's Front Range surrounding Denver, Utah's Wasatch Front taking in the areas surrounding Salt Lake City, the greater Las Vegas area extending from central Nevada into neighboring Arizona, and Northern New Mexico encompassing Santa Fe and Albuquerque. During the current decade these areas have captured 13 percent of the nation's growth. 

"We knew going in and the research confirms that this region is growing up, flexing its muscles, and distancing itself from California which historically has had an outsized impact on the West's development," said Bruce Katz, Vice President at the Brookings Institution and founding director of its Metropolitan Policy Program. "We believe that the economy of this region, its people, and its politics are becoming more central to the nation." 

Brookings projects that by 2040 these "Mountain Megas" may double in size. A number of trends are developing. The megapolitan areas need to harness their economic potential by developing policies that will lead to prosperity. 

• Infrastructure: Given the region's extraordinary coming growth, the Mountain West needs federal investment and policy reform to build out its passenger and freight rail networks, and to address its enormous research needs, especially concerning water and energy. 
• Innovation: While the region is home to world-class research institutions and a number of strong industry clusters in export markets, it must enhance these resources to increase overall competitiveness and local standard of living. 
• Human capital: Plentiful and increasingly skilled workers are the regions greatest resource and key to its economic growth. However, unsettled immigration policies have generated uncertainty and controversy among employers and communities alike. 
• Quality places: While the region's alluring scenery helps to constrain sprawl and keep urban spaces relatively compact, the real challenge to creating spaces is the enduring legacy of auto-oriented development that fails to link residential or commercial building to public transportation, and fails to inspire much in the way of neighborhood cohesion.

In a broad conclusion, the report says the region should stop to revaluate its planning and development practices or risk compounding past mistakes. There is a growing sense that the legacy of a boomtown past may be finally catching up with the West's big cities. To read the report, click here. 
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