Cruises, Golden Years sailing into the sunset?
How will you spend your Golden Years? Where do you invest your hard-earned and essential retirement funds? Planning It is vital and important, make sure you think about it in depth.
Make sure you don’t forget to focus on a much more and impending need, healthcare. Not healthcare like you might assume, but a different type of healthcare. Healthcare costs you will need to PAY after your Medicare insurance pays.
The biggest concern our clients and prospects should be facing is not living too long, but what percentage of our retiree’s income will be needed to pay for leftover expenses after Medicare and supplemental plans have been paid.
In 2013, the average percentage of overall income needed to cover out of pocket expenses was 14% (Kaiser Family Foundation). That percentage is expected to rise to 17% by 2030.
Let me make that clear, I am speaking of a percentage of TOTAL gross income. 17% of all before taxable income will be needed just to cover what Medicare doesn’t pay. And there is no end in sight. The percentage of gross income that must be allocated to cover this “uncovered” cost will affect retirees at the worst time of their lives. Plus, as the population ages, the percentage will increase.
The relationship of expenses also is dependent on the level of income earned. Poorer people will pay a higher amount; higher-income retirees will pay less. Estimates are as high as 34% based on the lower income earner, a completely reversed pyramid, those who earn more will pay a lesser percentage.
If a retiree receives a retirement amount of $25,000, out of pocket expenses would have been paid $3,500 in 2013. The same income would have grown to $4,250 in 2030.
Once a retiree retires, many have no other option for additional income. Prescription drugs are also increasing and putting more pressure on a limited income budget. What options are available? Sadly, there is only one, an increase in benefits available through Medicare and at present, Congress does not seem in the mood to provide more benefits. In fact, the current federal budget calls for a reduction in the Medicare budget, a reduction that will bring further pressure on retirees.
More information? Here is a link to the entire Kaiser Family Foundation report: Report Medicare Beneficiaries Out of Pocket Health Care Spending as a Share of Income Now and Projections for the Future? PDF
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