The fear of outliving one's retirement savings
weighs heavily on the minds of both retirees and those who
are about to retire. Few have taken the time to perform a
detailed analysis of projected expenses and create a strategy
to successfully address their financial needs in the future.
According to research, the person who retires at age 65 can
expect to live to be 85. Over that 20-year period the value
of one dollar will decrease to 46 cents at a modest 4% rate
According to a recent report, a 65-year-old couple retiring
today should have $190,000 in savings just to cover out of
pocket medical expenses until they die. And for those now
age 55 and planning to retire at 65, that number will nearly
double to $370,000. Those costs will be divided almost in
three—36% for insurance co-payments and deductibles,
routine eye care and glasses and other needs not covered by
Medicare. Prescription drugs will claim 33% of their savings
and Medicare premiums another 31%.
According to a survey of more than 1,300 people with $1 million
to invest, excluding their homes, accumulating substantial
assets is not enough to wipe away concerns about increasing
healthcare costs. Even more so, as employer-sponsored retiree
health insurance premiums see double digit escalation since
2001, many employers are eliminating benefits for future retirees
or asking employees pay more out of pocket to cover the tab.
Most people don't plan to fail; they
fail to plan. The majority of those surveyed said they
had yet to craft a retirement plan and were relying largely
on 401K plans, Social Security, Individual Retirement Accounts
and investments to pay for retirement including medical costs.
“The average annual cost of health care for a retired
person in this country is about $12,000,” notes Terry
Marr, president of NIA Securities. “That doesn’t
include people with exceptional health issues. Those nest
eggs could be quickly depleted if a retiree should face a
catastrophic illness over a significant period of time.”
To cover the ongoing escalating cost of medical expenses,
Marr recommends instituting a Medicare supplement plan and
a portfolio structure to provide the needed funds. This may
include fixed income securities to provide cash flow with
modest returns and growth stocks to offset inflation and rising
costs. In some cases, an annuity provides the needed funds
for both the present and the future.
“Baby boomers approaching retirement must take action
to structure a financial program to plan for health care needs
and provide needed capital in the future,” notes Marr.
“The first step in achieving peace of mind is to meet
with one of our financial planners at NIA Securities,”
he suggests. “We’ll help an individual or couple
identify their health care needs and have a frank discussion
examining assets, liabilities and life-style goals to give
them an effective road map toward financial security.”
For more information about post-retirement healthcare coverage
and financial planning, contact NIA
Securities at 201-845-6600.