The Looming Retirement Crisis for baby Boomers

A study conducted by The Blackstone Group, an independent research firm, on behalf of Bankers Life Center for a Secure Retirement outlines some very unsettling data regarding middle-income baby boomer retirement care preparedness. According to the survey above, the bleak financial reality of this demographic is that 79 percent of middle-income baby boomers have NO savings put aside to cover their retirement care. Couple this disaster savings scenario with the US government’s admission that for the first time since 1982 Social Security trust funds are being used to pay current benefits to recipients and Medicare’s reserves are being used to cover the costs of that program as well. It is the perfect storm of a looming retirement insolvency crisis.

Middle-income baby boomers for this study are defined as aged 53 to 72 with an annual income of $30,000 to $100,000 and less than one million dollars in investable assets. For those baby boomers in this demographic, a mere 4 percent of them have more than $100,000 saved for health care retirement planning, long term care, and general retirement preparedness. While 65 percent of these survey respondents prefer to receive retirement care in their current homes only 55 percent of them expected to be able to do so, and there is a disconnect at what age these care services will be required. A full 45 percent thought that assisted living circumstances would be needed between the ages of 71 and 80 while 37 percent said it would be between the ages of 81 and 90. The problem with these hopes is the ever-increasing presence of Alzheimer’s and other forms of dementia which can push retirees younger than ever into the need for assisted living and retirement care.

According to the survey, 40 percent of those surveyed consider retirement care planning to be a low priority or not one at all, 42 percent thought it to be a medium priority and only 18 percent identified retirement care planning as a high or very high priority. Incredibly 56 percent expected that Medicare would pay for retirement care as needed, including long-term care needs which Medicare does not cover. The costs of long-term care policies are cited as the biggest reason for not making the prudent insurance purchase.

Dangerous misconceptions about how much retirement care costs and how to pay for it exist. It may seem incredible, but the truth is that baby boomers are better prepared to die than to live. Among middle-income baby boomers, 81 percent have formally made at least one preparation for when they pass away, usually in the form of a will or trust, while only 32 percent have a plan as to how they will receive retirement health care should it become necessary.

The message is unmistakable; middle-income baby boomers need to address their underfunded retirement plans pronto. There is an overconfidence in this demographic that allows them to think they will be able to manage their and their spouse’s healthcare costs as they continue to age. The reality is that many of them are one bear stock market or health care crisis away from disaster. The federal government and its programs are just as unlikely to be able to stave off the financial crisis brought about by this willful ignorance of the costs of aging successfully.

If you are in these incomes and age brackets, it is time to take a realistic look at what you can do to better prepare yourself for the coming years ahead. Being financially unprepared to age brings stress and family discord at a time when you should be living your best life. Be proactive, contact our office today and schedule an appointment to discuss how we can help you with your planning.

States Brace for Baby Boomer Retirement Age Challenges

There are demographic and cultural shifts occurring in the United States. The baby boomer generation continues to “gray” the country and is changing the way individual states set budgets and health care policies.  More attention will be paid to the needs of the post age 50 generation(s) . Changing attitudes towards working past the age of 65 has taken root in this country and “retirement age” does not necessarily mean a senior is leaving the workforce.

A Gallup poll recently found that 74% of US adults plan to work in some form or another past the age of 65. Some will work out of necessity to earn more money because of increased longevity, health care costs, and reduced Social Security payouts, while others will leave their career and strike out in a different direction often pursuing a lifelong dream or spending time and energy in volunteer work and/or philanthropy causes. Whatever the senior individual’s pursuit, it is clear that new patterns have emerged in the past 10 years and it has a profound budgetary effect on individual US states.

Baby boomers want to age in place and are committed to staying vital, fit, and independent for as long as possible. They want to die in their own homes, not in a hospital or facility. A record high 64 million Americans are now living in multigenerational homes which makes aging in place more possible. These Americans are primarily the younger generations moving into established parent or grandparent home environments. Over 32% of the 64 million are comprised of two generation families and over 28% have three generations (www.pewresearch.org/fact-tank/2018/04/05/a-record-64-million-americans-live-in-multigenerational-households). In 2016 these blended generation homes accounted for 45% of Americans ages 55 and older and the trend is likely to continue.

So why does this demographic and economic shift put a strain on so many state budgets? The answer is twofold; there is an increase in health care burdens while at the same time remittances from tax revenues decline since Americans tend to pay fewer taxes as they get older. According to the Bureau of Labor Statistics this is due partially to senior retirement but also because seniors tend to spend less money than their younger counterparts. This means more health services are needed and fewer tax dollars are available to fund the programs. The revenue collected in 33 states was lower than forecasted for fiscal year 2017 and the aging population is one of the reasons why.

Even the states that are best rated for aging, ranked by overall health, senior unemployment, life expectancy and nursing home quality, are challenged because of health care costs. Rising health care costs have been taking a large portion of each state’s government budget and will most likely continue to do so.

Health care costs are also hitting baby boomers hard. There is a trend in people aged 50 to 65 having more incidence of disability, obesity, and diabetes thus increasing their need for medical care and services. In August of 2017 Fidelity Investments estimated that the average 65 year old couple retiring in 2018 will need $275,000 to cover health care costs alone over the remainder of their lives. That is a 6% increase from the previous year and with no substantive health care pricing reform on the policy horizon that amount will continue to increase.

Now is the time to work with a legal and financial professional to work on a retirement plan that is personal to you and takes your future care needs into consideration. We would be honored to work with you on this important planning step.

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