Previous month:
October 2016
Next month:
December 2016

November 2016

Retirement and the Boomer Money Gap

MusingsOne of the looming financial crises in our country is what we might label the "Boomer money gap." A primary reason that Boomers want to continue to work well past the traditional retirement age is because they need the income. According to a recent study by the Transamerica Center for Retirement Studies, 66 percent of Boomers plan to or are already working past age 65 or do not plan to retire at all. Half plan to continue to work after they retire, mostly for income and health benefits.

Sadly, the study indicates that the estimated median current household savings of Boomers in all retirement accounts is just $147,000. Most Boomers are woefully under-funded when it comes to their retirement years. Even if Boomers can live on a modest annual income, life expectancies reaching into the 80s will mean stretching financial resources longer than anticipated.

Most Boomers, reports the study, expect Social Security income to be part of their retirement, but a third (34 percent) think it will be their primary source of income. About three quarters (78 percent) of Boomers expect retirement income to come from such retirement savings vehicles as IRAs and 401(k)s.

Retirement expert Mark Miller notes in an article for The New York Times that typically, social security income "replaces just 39 percent of pre-retirement income for the average worker retiring at 65..." He includes a number of strategies from financial planners for improving retirement income for those who haven't saved enough money. Among the ideas: "ramping up" contributions to retirement plans, waiting as long as possible to file for Social Security benefits, continuing to work past retirement age, downsizing a home or paying off a home mortgage, and understanding when to draw money out of retirement accounts. The article is well worth reading.

Probably the best thing my wife and I did to ensure a financially secure future was choose a competent, impartial financial planner. We have worked with this same professional for over twenty years, and never has that person been more important than in guiding us during our retirement years. Even though I was a successful small business owner, I could not have set and met life goals or managed investments without the help of a financial adviser. If you're facing a retirement money gap, get a professional to assist you. 

The Health Insurance Conundrum for Boomers

MusingsThe Medicare "open enrollment" period started on October 15 and runs through December 7. This annual rite of passage for individuals turning 65 marks a time of health insurance transition for Boomers, so it seems like a good time to consider health insurance in general.

Boomers likely remember the time when employer health insurance plans were a right, not a privilege. In my full-time employment years (both as employee and employer), I took employer-paid health insurance for granted. Not only that -- the employer-paid plans were excellent: The majority of the monthly premium was paid by the company, deductibles were low, and the coverage was comprehensive.

Nowadays, full-time employment is not a guarantee of similar health insurance coverage. Employers have become far more stingy and workers are expected to shoulder more of the burden. If an employee leaves a full-time position, retaining health insurance coverage becomes a problem. For example, I left a company with a fine health insurance plan and started my own small business. I was able to stay on my previous employer's plan for a short period of time via COBRA, but when that ended, I had to purchase health insurance on my own, since I was not yet Medicare-eligible. This was prior to the Affordable Care Act. My private health insurance plan became my largest monthly expense.

When I reached the age of 65, I signed up for Medicare. While I was relieved of some of the health care insurance costs, I learned that Medicare is not a free program. Part A is provided without cost, but Part B requires a premium payment. You must also pay additional amounts for Medicare supplemental insurance and prescription drug coverage, which I chose to do. The fact is, if you are on Medicare and you want health insurance coverage that is anywhere close to the insurance you enjoyed as an employee, you will be paying for it -- and you may be doing so at a time when you can least afford it. Keep in mind that there is no "family plan" in Medicare, so if your spouse also wants to be covered by Medicare, he or she will have to sign up and pay as well.

I am happy Medicare exists. It does relieve Boomers of the uncertainty of covering catastrophic medical costs, and for those Boomers who are willing to pay for it, more comprehensive coverage is possible. With all of its flaws, government-supported Medicare is surely better than fully private insurance or no health insurance at all.

Still, for Boomers who leave full-time employment, patching together health insurance coverage prior to age 65, and being adequately covered even with Medicare, are challenges to anyone with a reduced income. Those of us who want suitable coverage will continue to have to pay for it. That's a budget line item that will be increasingly difficult to swallow.