Retirement’s Revolving Door

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Tim and Chris Franson.jpg

In his view, Tim Franson utterly failed at retirement. After twenty years as a vice president at Eli Lilly, Franson and his wife, Chris, a real estate agent, thought they were quietly retiring nearly a decade ago. 

For the first month or so, Franson says, he mostly slept. He wasn’t depressed, just mentally and physically exhausted. Then, “I went crazy,” said Franson. “I’m not very good at sitting around.”

He quickly found himself back at work part time after a friend at a small pharmaceutical company asked him for strategic advice. “Things snowballed from there.”

Today, Franson, 66, consults and works about four days a week, while serving on two for-profit boards and two nonprofit boards.

Welcome to the land of the un-retired — people who thought they were leaving the work world only to return because they sorely missed something about it, besides the money. These people in their 50s through 80s retired on pensions or savings — or both — but ultimately woke up to the fact, there’s more to life than watching Florida sunsets.

This “un-retirement” trend continues to build, according to a 2017 Rand Corp. study showing that 39 percent of Americans 65 and older who are currently employed had previously retired. And more than half of those 50 and older who are not working and not searching for work said they would work if the “right opportunity came along,” the study found.

“We have a mistaken image of life, that we go to school, work for 40 years, then say goodbye to colleagues for the last time and embrace the leisure life,” says Chris Farrell, author of “Unretirement: How Baby Boomers Are Changing the Way We Think About Work, Community and the Good Life.” “It hasn’t turned out to be the arc of most people’s lives.”

This is not about older people returning to work because they need the money. This is about older people returning to work because they miss the challenges, the accomplishments and, most importantly, the collegiality.

When retirees are asked what they miss most about pre-retirement life, the number one answer is typically colleagues, says Farrell. “What’s constantly underestimated is that work is really a community. As it turns out, it’s much healthier and more satisfying to work for a bad boss than to sit on the couch and watch TV,” he says.

Franson understands all of this and not that it didn’t make perfect sense for him to retire when he did, at age 58. Lilly offered him a year’s pay and a full pension to take early retirement. Franson had prostate cancer while at Lilly — and though the surgery was successful, he says, “that experience made me sit back and revisit how I wanted to experience my remaining days.” At the time, his children were out of college, and he did not yet have any grandchildren.

Then, life derailed him when his wife, Chris, took ill and died within a few years. Four years ago, he accepted another consulting job in the Indianapolis area to be closer to his children and grandchildren. Franson has no plans to retire from his un-retirement anytime soon.

Laurie Caraway retired in 2013, at age 56, as director of clinical data management at Bristol-Myers Squibb. She picked that age because her father died at 56 before he had a chance to retire from private practice as a surgeon.

Her husband, Scott, a longtime American Airlines pilot, retired along with her. Scott adapted quickly and learned to be a potter. It was summer, and Laura spent the next three to four months biking, swimming and treating retirement like a vacation. Some days, she simply sat on her front porch swing.

Then, the weather changed. The cold autumn reminded Caraway that something had to change in her life. So, she started volunteering in Guilford, Connecticut, with a group that works to uplift academically gifted minority women from disadvantaged communities. That expanded into a part-time, paid position managing the group’s consignment shop.

Caraway was presented with an opportunity to go back — on a short-term contract — to Bristol-Myers Squibb. This encouraged her to send her résumé to Your Encore, a retiree return-to-work program co-created by Lilly, Procter & Gamble and Boeing that matches retirees with employers who need their skills. She landed more contracts to which she can always say “No, thanks” and still have time for yoga class.

“There is life after retirement,” she says. “It’s called work.”

Then, there’s Louise Klaber. She retired at age 65 from a 20-year career in organizational development — but is now working again at age 81.

In 2001, the former New Yorker thought she was living the dream when she arranged to retire in New York City with husband Ralph Walde, a college professor.

September 13 was moving day into their apartment on New York’s Upper West Side. But as the horrific events of 9/11 unfurled, they found they were living in a state of shock. Within weeks, they were both signed up to do volunteer work helping prepare meals for the 9/11 site workers. Their shift: 8 p.m. to 6 a.m., chopping squash, carrots and onions. “It made us feel like we were actually doing something to help,” Klaber says.

The prep kitchen shut down shortly after Thanksgiving, and she found part-time paid work assisting people most severely affected by 9/11 find financial aid, mental health assistance or employment. She then contacted ReServe, a national nonprofit that places retired professionals with public service agencies of all sizes, budgets and missions. ReServe linked Klaber with the New York City Law Department, where she has worked part time ever since as an organizational development counselor. What drives her is not the $10-an-hour pay but the professional camaraderie.

A former marathon runner, Klaber still runs almost daily. That, she says, is an important ingredient for staying healthy — but the work is just as important to her vitality.

When will she finally quit working? “Only God knows,” she says. “I’m having way too much fun.”

 

Medicare Rules and HSA’s

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Medical symbol with sunriseThe rise of high-deductible employer health plans has created one of the most unpleasant surprises for older employees. 

Anyone on Medicare is no longer allowed to make tax-free contributions to a health savings account (HSA).

In 2003, Congress authorized HSAs as part of the law that also brought Part D drug plans into existence. HSAs are only available to those with a high-deductible health plan.

The beauty of an HSA is that it is funded with pre-tax dollars and its holdings can be invested, like a 401(k). When spent, any earnings on these investments are exempt from income taxes, like a Roth IRA, so long as the expenditures are for qualifying medical expenses. Unlike flexible spending accounts, HSA contributions do not have to be spent by the end of each year but can be carried over indefinitely.

There are minimum deductions needed for a health plan to qualify as high-deductible, and they may change each year. For 2018, plans must have an annual deductible of at least $1,350 if they cover individuals, and $2,700 for families. Further, such plans may not generate out-of-pocket expenses that exceed $6,650 for individual plans and $13,300 for family coverage. These expenses, the IRS says, include plan “deductibles, co-payments, and other amounts, but not premiums.”

The annual maximum on these contributions in 2018 will be $3,450 for HSAs linked to individual insurance plans, and $6,900 for family plans. In addition, $1,000 age-related “catch up” contributions are permitted for those aged 55 or older. This raises the total limits of plan contributions to as much as $8,900. Employers often contribute the rest of these funds. And, contributions to a plan can come from family and friends as well as the insured individuals.

While most HSAs are linked with employer insurance plans, any qualifying high-deductible plan can permit the insured person or family to open an HSA. This includes private health plans through financial institutions. 

Medicare and Social Security enter the HSA picture because Medicare insurance is not a high-deductible health plan. Anyone with Medicare, or coverage from other health plans that do not offer qualifying high deductibles, may not contribute to an HSA. A person can continue to use any assets within an existing HSA account.

Most common questions:

Why does receiving Social Security prohibit a person from contributing to an HSA?

The law requires anyone aged 65 or older who is receiving any type of Social Security benefit to also be enrolled in premium-free Medicare Part A, which covers hospital expenses. This triggers the Medicare-related ban on HSA contributions. Historically, enrolling in Medicare Part A was a very good thing. It can be used as secondary insurance for people covered by employer health plans with no premiums. The rise of high-deductible health plans can make Medicare Part A a dubious benefit. Unfortunately, the only way to reject Medicare Part A is to withdraw from receiving Social Security benefits.

Why does Medicare Part A take effect six months before an individual’s requested effective date? And, how does a person know when to stop HSA contributions?

The earliest that a non-disabled person can enroll in Medicare is age 65. If enrolling in Medicare within six months prior to turning 65, Medicare Part A will start on the first of the month when turning 65. If enrolling in Medicare after turning 65, a person is entitled to as many as six months of retroactive benefits, but in no case can the effective date be earlier than when turning 65.

Historically, people were better off with these retroactive benefit dates. Clearly, that may not be the case when it conflicts with an HSA. 

People who claim Social Security benefits before they turn 65 are too young to qualify for Medicare Part A. Claiming Social Security does not always interfere with an HSA – only if a person is 65 or older.

If a person knows they are going to become ineligible for HSA contributions during a calendar year, can they “front load” that year’s allowable contributions before becoming ineligible?

No. It’s important to remember that contributions to an HSA are calculated monthly. For example, if someone with family coverage had $6,900 in allowable HSA contributions, the rules “credit” one-twelfth of that amount each month, or $575.

Normally, it would not matter if the person made all those contributions in January, for example, because the rules assume they would qualify for HSA contributions for the entire year. But if they became ineligible in July, they would only be able to contribute $3,450 (six $575 monthly contributions).

What happens to any excess contributions?

They need to be removed from the HSA and treated as taxable income on the annual tax return. These rules are explained, albeit not always clearly, in IRS Publication 969

What happens to the employer’s contributions?

The employer has made a commitment to contribute, for example, $1,500 for the year to the employee’s HSA. It is legal for the employer to contribute a full annual contribution. In this example, for a period of six months, the employee’s allowed contributions would be $1,950 in addition to the employer’s $1,500 contribution.

It is the responsibility of the employee to make sure there are no excess contributions. If there are, it’s the responsibility of the employee to correct it before filing that year’s tax return. If the employer does not have knowledge of the employee becoming ineligible for additional HSA contributions, there is no reason why the employer’s contribution should terminate.

What if a person has family coverage and one family member becomes ineligible?

If one spouse becomes ineligible, the full amount of that year’s family HSA contributions normally can be made by the eligible spouse. The $6,900 can be contributed in any way the couple prefers. If the ineligible spouse was making a $1,000 catch-up contribution, this would no longer be allowed.

One important requirement is that if the employee is the person who begins Medicare and becomes ineligible, the spouse must have established their own HSA in order to complete the couple’s allowable contributions.

Is there was a family HSA for people with family health coverage?

There are no joint HSAs. Each spouse must have their own HSA if they wish to make tax-free contributions. This most often happens where the non-employee spouse wishes to make an age-related catch-up contribution of $1,000. That contribution can only be placed in their HSA account. Employers usually do not create such accounts, so the non-employer spouse needs to work with a financial firm to establish the account. There are ongoing efforts to revise HSA laws and eliminate the need for non-employee spouses to create separate HSAs for their catch-up contributions.

If an employer offers only the high-deductible plan, what can a person do if they are ineligible for an HSA?

If a person wants employer health insurance, they will need to accept the likelihood that out-of-pocket expenses could be substantial without HSA funds.

People with Medicare Part A should take a close look at whether it makes sense for them to reject their employer’s health plan and, instead, purchase Medicare Part B and other Medicare coverage, including a Medicare Part D drug plan with an optional Medigap supplement plan or a Medicare Advantage plan. 

If ineligible, how does this affect income taxes?

If a person has made excess contributions and can withdraw them by the time income taxes are due, there will not be a penalty due to the IRS. Otherwise, the penalty is 6 percent.

What tax forms should be used?

Form 8889 is used for reporting your annual HSA activity. Form 5329 is used to report excess contributions. If using a tax preparer, work with them on how to file these forms.

 

 

Former Hospitals Get A New Life

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Hollenbeck TerraceWhen Juana Monroy moved into Hollenbeck Terrace in 2015, she learned that the senior apartment building was once a hospital that had appeared in dozens of movies and television shows. Then she began hearing rumors that the old Linda Vista Community Hospital building was haunted. “I was a little scared,” says Monroy, 60.

But she hasn’t seen a ghost yet, and now she loves living in a building with such history. “It’s gorgeous,” she says.

Across the country, hospitals that have closed their doors are coming back to life in various ways: affordable senior housing in Los Angeles, luxurious multimillion-dollar condominiums in New York’s Greenwich Village, a historical hotel in Santa Fe, New Mexico. In the Capitol Hill neighborhood of Washington, D.C., a hospital that opened in 1905 to care for the poor was remodeled and reopened in 2017 with 139 apartment units, a rooftop deck and an indoor dog wash.

Such conversions can pull at the heartstrings of communities in which residents often have an emotional attachment to hospitals where family members were born, cured or died. Nevertheless, the changeovers can also be welcome, particularly when hospitals have been closed leaving their buildings empty and dilapidated.

Closing a hospital and converting it to another use is not exactly like renovating just any old building, says Jeff Goldsmith, a health industry consultant in Charlottesville, Virginia. “A hospital in a lot of places defines a community — that’s why it’s so difficult to close them,” Goldsmith says.

The trend of converting hospitals to condos and apartments comes as real estate values have soared in many U.S. cities, and demand for inpatient hospital care is on the decline. Surgery and other health services are being moved increasingly to freestanding outpatient centers, and the average number of days patients stay in hospitals has dropped significantly.

Against this backdrop, the hospital industry is consolidating, and many institutions are shutting their doors. The number of hospitals in the U.S. has declined by 21 percent over the past four decades, from 7,156 in 1975 to 5,627 in 2014, according to the latest federal data.

In addition, many older hospitals are too outmoded to be renovated for today’s medical needs, which include large operating room suites and private rooms.

Real estate investors say the location of many older hospitals — often in city centers near rail and bus lines — makes them attractive for redevelopment. The buildings, with their wide hallways and high ceilings, are often easy to remake as apartments.

Some of the changes have elicited controversy, however — particularly in New York, where many hospitals have been converted to residential housing in recent years.

St. Vincent’s Transformation

St. Vincent’s hospital in New York, which traditionally cared for the poor and treated survivors of the Titanic’s sinking in 1912, the first AIDS patients in the 1980s and victims of the 9/11 terrorist attacks in 2001, went bankrupt and closed seven years ago. Developer Rudin Management bought it for $260 million and transformed it into a high-end condo complex, which opened in 2014. In early 2017, former Starbucks CEO Howard Schultz reportedly bought one of the condos for $40 million. The shift from a place that cared for the poor to a home for the wealthy, upset many residents in Greenwich Village.

Jen van Meer, an assistant professor at the Parsons School for Design in New York, who lives four blocks from the former St. Vincent’s, says people in her neighborhood were sorry to see the hospital close for more than just sentimental reasons. Because today, if a person is having a cardiac arrest, the nearest hospital is almost an hour drive by car or 20 minutes in an ambulance across the city.

St. Vincent’s is one of at least 10 former hospitals in New York City that have been turned into residential housing over the past 20 years.

Spurring Development

In some circumstances, a conversion provides a much needed lift for the community. New York Cancer Hospital, which opened on Central Park West in 1887 and closed in 1976, was an abandoned and partially burned-out hulk by the time it was restored as a condo complex in 2005. Developer MCL Companies paid $24 million for the property, branded 455 Central Park West.

“The building itself is fantastic and a landmark in every sense of the word,” says Alex Herrera, director of technical services at the New York Landmarks Conservancy. He notes that it has retained some of its original 19th-century architecture.

Repurposing hospitals does not come without friction, however.

Nicky Cymrot, president of the Capitol Hill Community Foundation in Washington, D.C., a neighborhood group, says that when Specialty Hospital Capitol Hill sold off a little-used 100,000-square-foot wing of its facility to developers who planned to build apartments, neighbors weighed in with concerns about aesthetics and traffic. But the builders of 700 Constitution — the hospital-turned-apartment house a few blocks from the U.S. Capitol — preserved the old architecture, which pleased residents.

The renovation cost $40 million and took nearly nearly five years to complete in part because of delays in building an underground parking garage. At 700 Constitution, one-bedroom apartments rent for nearly $2,600 per month.

It’s not the first hospital in the district to make such a conversion. Columbia Hospital for Women which had delivered more than 250,000 babies since it opened shortly after the Civil War, closed in 2002 and reopened in 2006 as condos with a rooftop swimming pool in the city’s fashionable West End. 

Some former hospitals are used for purposes other than housing. In San Diego, Point Loma’s Cabrillo Hospital closed in 2007 and was transformed into a language school nine years later, providing economic stimulus for nearby businesses.

In Santa Fe, New Mexico, St. Vincent Hospital moved into a new facility in 1977 and the old structure downtown was reborn as a state office building. Later, it was abandoned and locals listed it as one of the spookiest places in town. In 2014, the building reopened yet again as the 141-room Drury Plaza Hotel.

‘A Building With Tremendous History’

Linda Vista Community Hospital, which overlooks a park in L.A.’s Boyle Heights neighborhood, opened in 1905 to serve railroad employees. Budget problems and declining patient rolls led to its closure 86 years later, and the abandoned six-story building fell into disrepair.

But the empty patient rooms, discarded medical equipment and aging corridors soon attracted film crews, who shot scenes for movies such as “Pearl Harbor” and “Outbreak.” The hospital also attracted trespassers looking for ghosts and groups such as the Boyle Heights Paranormal Project. The property was purchased and redeveloped by Amcal Multi-Housing Inc. in 2011.

The company turned patient rooms into affordable senior apartments and renovated everything from the intensive care unit to the medical library. Amcal retained many of the building’s original features, including mailboxes, dumbwaiters, windows and stainless-steel doors.

“They really rescued a building with tremendous history … while providing really needed low-income senior housing,” says Linda Dishman, CEO of the Los Angeles Conservancy, a group dedicated to preserving and revitalizing historic structures. “It is such an iconic building in the neighborhood.”