Tag Archives: Retirement Age

Re-Evaluate Retirement Goals Based on Longer Life Expectancy

Re-Evaluate Retirement Goals Based on Longer Life Expectancy

There are many unknowns when planning for your retirement, especially regarding how long you can expect to live.  Most financial planners base calculations on a life expectancy of 90 to 95 years, but what is your real life expectancy?  What impact will a longer life have on your retirement?

Federal government statistics reveal that the life expectancy of a male born today is 73 years and a female is 79 years.  However, these numbers are somewhat misleading, because if you make it to retirement age, then you can expect to live longer than the average.  If you are a man who turned 65 in 1995, you could expect to live an additional 15.6 years – to age 81.  A woman who turned 65 at the same time could expect to live an additional 18.9 years, to almost 84 years.  Every time we reach a new milestone, our overall life expectancy increases.  The increases in longevity prevailed throughout the 20th century, and there is every indication that the upward trend in average lifespan will continue.

Another twist in the life expectancy calculation is that half of those who reach a milestone age will live beyond that age.  As the government continues to collect and analyze data, we see that the 65-year-old man in 1995 has an even greater chance of living beyond age 81.  In fact, living into your 90’s is no longer rare.  When looking carefully at the numbers, we see that almost one-third of men and almost one-half of women who reach age 65 will reach age 85!

How do these calculations fit in with your retirement planning?  They assist you in avoiding a worst-case retirement scenario – outliving your savings.  During your golden years, you will be living from money in your 401(k) and IRAs, and maybe from a pension.  If you are one of the lucky 65 year-olds that live to be 85, but you only planned to live to age 73, you may be struggling to make ends meet.   Using this reasoning, it is vital that your retirement planning extend beyond your expectations, and then some.

Since people are living longer, retirements are lasting longer, which may require some adjustments.   For instance, you should be cautious with spending in your early years of retirement so that your resources last longer.  Another idea is to be more aggressive with investing, or even head back into the workforce with a part-time job.  You may also wish to consider purchasing long-term care insurance to cover the high cost of late-life health problems.  No matter what decisions you make, be sure to do so in such a way that you can enjoy every minute of your retirement.

How Will You Pay for Long-Term Care?

How Will You Pay for Long-Term Care?

With costs for long-term care expected to quadruple by the time America’s 77 million baby boomers reach retirement age[1], there’s no time like right now to learn how you can help protect your assets.

Long-term care can be very expensive. As a national average, a year in a nursing home is estimated to cost as much as $65,985[2], with that cost doubling in some areas of the country. Home care can be less expensive, but it still adds up. Bringing a certified aide in to your home five times a week (two to three hours per visit) to help with dressing, bathing, preparing meals and similar household chores, can easily cost upwards of $2,000[3] per month. So who pays for long-term care? The chart shown here gives you a good idea of where the money comes from:

Who pays for long-term care?[4]

As you can see, 25 percent of all long-term care costs are paid out-of-pocket by individuals and their families. Only about 14 percent is paid by Medicare, with Medicaid picking up most of the balance of the country’s long-term care bill- either immediately for those meeting the federal poverty guidelines, or later on for those who “spend down” their assets and become eligible.

Let’s explore these options in greater detail:

Medicaid, Medicare and Medicare Supplement Insurance
Many people begin paying for long-term care on their own, but find that their savings are not enough to cover more than a few years of care. If they become impoverished, they turn to Medicaid to pay the bills. Because nursing home care is the primary type of care funded by Medicaid, this situation usually means entering or relocating to a Medicaid approved nursing home. Turning to Medicaid once meant impoverishing the spouse who remained at home as well, but changes in the law permit the at-home spouse to retain certain levels of assets and income.

If you are eligible for Medicare, some costs are picked up by Medicare – but only for short-term, skilled nursing home care following hospitalization and for some skilled at-home care when needed for short-term unstable conditions.

Medicare supplement insurance (often called Medigap or MedSupp) is private insurance that helps cover some of the gaps in Medicare coverage. Those gaps include hospital deductibles, doctors’ deductibles, and coinsurance payments – or what Medicare considers excess physician charges – but they do not include long-term care.

Health Insurance
Generally, neither the health insurance you may have on your own or through an employer will pay for long-term care.

Personal Savings
Considering what you’ve learned about the cost of long-term care, how long would your savings last in the face of an ongoing long-term care need? If you’re like many of us, your personal savings could not withstand several years of long-term care costs. Caregivers and/or those in need of long-term care often sacrifice savings earmarked for college tuition, retirement, or an inheritance for the next generation. Once these savings are depleted, Medicaid becomes the only option.

Long-Term Care Insurance
One option that many people are choosing is long-term care insurance. Like other types of insurance, long-term care insurance allows you to pay a pre-set premium that fits your budget and helps offset the risk of much larger out-of-pocket expenses. It’s important to know that in return for your premium, long-term care insurance policies pay for expenses associated with long-term care up to the policy limits that you choose.

No one can predict what type of care they’ll need in the future, or what the costs will be. But since the risk of having long-term care expenses is very real, and long-term care can be very expensive, you need to consider the best way to manage this risk and preserve your assets.

Will long-term care be a part of your future?
Thanks to advances in medicine and a greater understanding of how we stay healthy, we’re all living longer. The baby boomers are nearing retirement in record numbers, and those over age 65 makeup the fastest-growing segment of our society.[5] But while the number of older people is increasing rapidly, changes in families (more childless, one-child and step-families) and the increasing participation of women in the workforce mean that the numbers of those available to provide informal care for aging baby boomers is decreasing.

What does all this mean for your long-term care needs in the future? It means that you need to plan now for the care you may need independently of relatives who could once be relied upon for help. A long-term care policy would provide the funds to help pay for the care you might need.

1 The American Council of Life Insurance, “Can Aging Boomers Avoid the Nursing Home?,” 2000. – 2,3 Genworth Financial 2007 Cost of Care Survey. 4 Health Care Financing Administration, Office of the Actuary, National Health Statistics Group. 1999 – 5 The American Council of Life Insurance, Insurance Facts, 1998

Tips to Maximize Your Social Security Benefits

Tips to Maximize Your Social Security Benefits

A married couple, or an unmarried couple who were previously married for at least 10 years, combine their working records, for the purposes of Social Security benefits, while they are both living. With careful planning, a couple can maximize their benefits in ways that are not available for single people.

Claim Deceased Spouse’s Benefits

If your spouse is deceased, you are eligible to receive his/her full retirement benefit when you reach the age of 60. If you are disabled, you only need to be 50 years old to collect. If you claim benefits before the full retirement age of the deceased, they can be decreased up to 28 ½ percent. However, you could choose to ask for the lower benefit on your deceased spouse’s working record when you reach 60, and change to your own full benefit when you reach your full retirement age.

Claim Ex-Spouse’s Benefits

If you are at least 62 years old and were previously married for at least 10 years to the same person, and unmarried now, you could be entitled to collect benefits from your ex-spouse’s earnings. The amount that you collect will not decrease the amount that your ex-spouse receives.

Claim % of Your Spouse’s Benefits

A spouse can collect 50% of the amount of his/her spouse’s benefit if that would be more than his/her own benefit amount. You must have reached your full retirement age to collect that amount. If you apply at the earliest age you can, which is currently 62, you will only receive 35% of your spouse’s benefit amount. Note that the higher earning spouse must apply for Social Security benefits before his/her spouse can receive spouse’s benefits.

If the higher earning spouse has reached full retirement age, he/she may apply for the benefits and then ask to have them postponed. In this way, the spouse who earns less can apply for the spousal benefit while his/her spouse keeps working until age 70 to earn more credits. Each year that you postpone claiming benefits after reaching your full retirement age adds approximately 7 and 8 percent to your retirement checks when you apply at age 70. Note that there is no advantage in delaying benefits past the age of 70.

If you and your spouse are both past your full retirement age, you can draw based on your spouse’s benefits and keep working and accumulating credits on your Social Security record. You can then claim benefits on your own work record when you reach the age of 70 and get a larger monthly check because you deferred your credits.

If you can increase your benefits by any of these methods, it is worth a phone call or a trip to your nearest Social Security office.