3 Questions I Bet You Can’t Answer…

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Dear Rich Lifer,

No one wants to move into a nursing home.

But the reality is almost 70 percent of today’s 65-year-olds will need long-term care at some point, according to the U.S. Department of Health and Human Services.

Whether you want to move into a nursing home or not, you might not have a say.

And because so many retirees are in denial of this fact, there’s a severe lack of long-term care planning happening in this country.

Ask any almost retiree the following three questions and I bet you’d be met with a blank stare…

  • How much does a nursing home cost?
  • How many years do most people stay in a nursing home?
  • How many days in a nursing home will Medicare cover?

If you’re one of the people putting off long-term care planning, that’s okay, but my hope is that after today the financial reality to these simple questions will move you to take action.

The True Cost of Nursing Homes

For starters, the national median cost of a semi-private room in a nursing home in 2017 for one year was $85,000, and it was $97,455 for a private room, according to a Genworth Financial survey.

The average stay in a nursing home was 835 days (almost 3 years), according to the latest National Nursing Home Survey, conducted by the Centers for Disease Control and Prevention (CDC.)

And, 62 percent of nursing home costs in the United States are paid for by Medicaid, according to the Kaiser Family Foundation.

Medicare, however, will only cover costs, in full, up to 20 days. Anything beyond the 20 days, up until 100 days, will be partially covered. After 100 days, it’s the resident’s responsibility.

The good news is that nursing homes in most states have to follow strict laws — including how they bill you for their services.

Of course, rates will differ depending on your health needs. But, most nursing homes will have a flat-rate fee covering the basics, like room and board, and medical and personal care.

Some nursing homes will charge an all-inclusive fee for all medical services, while others will charge more of an a la carte rate based on services.

The important thing to note here is you need to understand exactly what the terms of your nursing home cover. Get everything in writing and keep a close eye on any unusual fees that pop up on your bill.

I’m sharing this with you because it’s not uncommon for seniors to get hit with a nursing home bill they didn’t expect.

Here are five possible hidden fees to watch out for:

1) Health Assessment Fee

When you first move in to a nursing home, you’ll have to do some sort of health assessment. While most facilities include this service as part of basic care, some facilities will charge you a seperate, one-time fee, for the health assessment.

To budget for this variable, simply ask when you’re researching different facilities if a health assessment fee is included or not.

2) State Assessment Fee

If your state is footing part of the bill for your long-term care or you have long-term care insurance, then there’s usually a nursing home assessment fee added to your bill.

If you are paying the bill for the nursing home, this assessment fee is passed on to you. The good news is you can deduct this assessment as a tax credit. Just make sure you remember this and account for it when you’re budgeting.

3) Leave of Absence Fee

It’s not uncommon for nursing homes to charge you a leave of absence fee, also known as a bed-hold fee. Basically, this is a fee for residents who have to leave the nursing home for an extended period of time.

This could be due to having a surgery, getting treatment at different facility or any number of possible reasons. Nursing homes will charge you a fee to hold your room so you can return later.

If you don’t sign a bed-hold agreement, the home can technically discharge you and rent out your room to someone else.

To avoid losing your spot, talk to the nursing home staff administrator to understand whether leave of absence is covered in your plan. If it’s not, make sure you sign a bed-hold agreement to ensure you don’t lose your spot should you have to leave temporarily.

4) Additional Service Fees

Extra care, like social services, money management, and therapies beyond the basic care standards will likely be charged to you as an additional service fee.

This will ultimately depend on where you live and what kind of special care you require, however it’s important to know which services are included in your plan and which ones are not. Also, make a note of how much these extra services cost, in case you need to add these services later on.

If you can get your hands on a sample bill first, that’s a good way to see what potential charges you have in store.

5) Annual Cost Increases

If you do end up living in a nursing home, pay attention to the pre-bill they send you with the monthly statement, this should contain an estimated cost for the next month.

Several nursing homes increase the costs of their basic services annually. When you’re researching homes, ask how often they raise their rates. And, if rates start changing month to month, call the home and ask to speak to the billing staff to understand what’s changed.

Moving into a nursing home is not all bad. In fact, for most people it’s a good move, since it provides a safe and comfortable environment to live out your remaining years. And nursing homes have come a long way since your grandparents’ days.

It’s not unusual for nursing homes to plan outings, have regular lectures, and game and movie nights organized for the residents.

But before you move into a retirement home, make sure you do your research.

To a richer life,

Nilus Mattive

Nilus Mattive

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Are You Ready for Open Enrollment?

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Dear Rich Lifer,

Every year at this time, millions of Americans age 65 and older have to make a choice:

Do I sign up for a new Medicare Advantage plan, shop around for another provider, or return to Original Medicare (Part A and Part B)?

Medicare Open Enrollment Period for 2020 coverage runs from October 15 – December 7. This year the government also added a second open enrollment period for Medicare Advantage plan owners.

Between January 1 and March 31, you can leave your Medicare Advantage plan and return to Original Medicare, or you have the option to switch to a different Medicare Advantage plan altogether during this time.

But like all insurance policies, Medicare has its fair share of restrictions, so knowing what costs are covered and which ones are not is critical when choosing a new plan..

That’s why today I’m giving you a cheat sheet on what Original Medicare does NOT cover so there are no surprises in the new year. Here’s what you need to know:

  1. Eye Exams and Glasses

Unless you have diabetes or cataracts, Original Medicare does not cover routine eye care, including exams, eyeglasses or contact lenses.

Some Medicare Advantage plans offer vision coverage, but it can be pricey. A cheaper option is buying stand-alone vision insurance.

If you don’t need glasses or your vision seems to be stable, paying out of pocket for an annual eye exam might cost less than premiums. Whatever you do, don’t skip going to the eye doctor to save a few bucks. A lot of serious eye conditions can be treated with early detection.

  1. Dental Checkups and Dentures

The American College of Prosthodontists reports that 30 percent of seniors over 65 have no natural teeth. This is due to a number of causes, like gum disease and trauma.

You would think such a large population of people should receive some dental coverage from our government — but they don’t. A soap box for another day perhaps.

Medicare does not cover routine dental care like cleanings, fillings, root canals, tooth extractions, or dentures.

Other dental procedures like crowns, bridges, and plates are also excluded. So, at the end of the day you’re left paying a hefty out of pocket bill to maintain good dental hygiene.

So what are your options?

Some Medicare Advantage plans offer dental coverage, you can also buy private secondary insurance. But another good strategy is to use money from a tax-advantaged health savings account. The only catch is you can’t contribute to an HSA once you’re on Medicare, so plan ahead!

  1. Hearing Aids

According to the National Institute of Health, one-third of people between 65 and 74 years old and half the people over 75 years old have hearing loss.

Despite the high number of seniors with hearing loss, Medicare does not cover routine hearing exams. Medicare will only pay for a test if you specifically complain of symptoms to your doctor and they deem the tests necessary.

This is unfortunate because a lot of seniors gradually lose their hearing and won’t speak up about symptoms until it’s too late. Although basic Medicare won’t cover hearing aids, some Medicare Advantage plans will cover them. HSAs are also an option to fund hearing aids.

  1. Long-Term Care

Long-term care is typically one of the largest expenses in retirement. On average, the cost of a private nursing home is $97,000 a year, and assisted living will set you back $45,000 a year.

Basic Medicare does not cover long-term non-medical (custodial) care. However, you may be covered under Medicaid.

But if your income is too high, you’ll end up paying for long-term care out of pocket until your income reaches Medicaid eligibility. This is called a spend-down.

  1. Prescription Drugs

Another thing original Medicare (Parts A and B) does not really cover is prescription drugs. Only part B covers some prescription medicines. If you need prescription drug coverage, you’ll need to enroll in either a Medicare Part D drug plan or a Medicare Advantage plan.

Either way, you’re going to be paying premiums. Medicare Part D has annual premiums averaging around $34 a month. But overall costs vary depending on your provider and individual needs.

  1. Foreign Travel

There’s no better time to see the world then when you’re retired. (If you haven’t already, check out this post about how you can fly free, or how you can get a 2 week trip to Europe covered by Volvo) But the last thing you want to run into while you’re abroad is a medical emergency. Unfortunately, original Medicare does not cover health care outside the United States unless very specific criteria are met.

Medicare will pay for emergency services when you travel to/from Alaska through Canada, when you are on a cruise ship within six hours of a United States port, or when the nearest hospital is over the border to the United States.

Other than that, you’re stuck footing the bill if anything were to happen outside the US. Some Medicare Advantage plans offer decent coverage. But your best bet would be to find a Medicare Supplement Insurance (aka Medigap plan) that offers foreign travel benefits.

  1. Acupuncture

Original Medicare does not cover acupuncture period. It views it as an alternative medicine that’s not medically necessary.

The good news is you can find some private Medicare Advantage plans that will pay for acupuncture and other alternative therapies. It’s also worth talking to your acupuncturist to see if they’re willing to give you a lower rate or offer payment plans for seniors on fixed incomes.

Choose Carefully

Choosing a new Medicare plans can be overwhelming, but at least you have options. My advice would be to take your time and research different plans carefully so you know exactly what you’re getting and how much it’s going to cost you.

To a richer life,

Nilus Mattive

Nilus Mattive

The post Are You Ready for Open Enrollment? appeared first on Daily Reckoning.

The Big 4 Retirement Worries and How to Beat Them

This post The Big 4 Retirement Worries and How to Beat Them appeared first on Daily Reckoning.

The #1 concern most Americans have when it comes to retirement is paying for health care.

According to a recent survey from Merrill Lynch and Age Wave, those age 65 and over ranked health as their greatest source of worry.

With rising health care costs and longer life expectancies, it’s no wonder covering medical expenses tops most retirees list of retirement worries.

Add to that an unpredictable future for our Social Security system, market corrections, and uncertain taxes, it’s reasonable to feel a bit on edge these days.

However, Americans do retire successfully. Studies tend to show current retirees being less concerned about these issues than those approaching retirement. They have the benefit of experience, I guess.

Although I can’t predict your future, a bit of insight and planning can still go a long way to help ease some of your retirement worries.

So today, I’m going to debunk four of the biggest worries nearly all retirees have on their mind.

Retirement Worry #1: Health Care

You see healthcare top many retirement lists and studies as a major concern because many health issues are age related.

While you can’t control your genetic makeup, you can make good choices when it comes to eating healthy and exercising regularly. In addition, I find simply giving people their options when it comes to healthcare coverage can ease a lot of the uncertainty.

Here are the basics…

Most people become eligible for Medicare when they turn 65. Medicare is made up of several parts.

Medicare Part A is hospital coverage. It’s generally free, with some exceptions.

Medicare Part B is medical insurance, and you pay a premium for coverage.

Medicare Part C, aka Medicare Advantage, is an optional replacement for traditional Medicare. You might pay more for an optional Part C plan.

Medicare Part D is your prescription drug coverage. Pard D costs will vary.

So unless your prior employer has your health insurance covered for life, you’ll most likely go onto Medicare.

Choosing the right plan depends on your health status, family history, and budget. It’s also not a bad idea to consider a Medicare Supplement plan, or a Medigap policy.

A major reason to consider a Medigap policy is if you plan on traveling.

Traditional Medicare doesn’t cover you when you travel outside the U.S. But, most Medigap policies do.

The last thing you should consider is long-term care insurance. The data isn’t pretty. Coverage is expensive and your alternative of no coverage can be worse.

The main things to consider here are whether or not your assets are needed for someone else to maintain a certain standard of living. And, whether or not you’re looking to leave a legacy.

Those are two major questions you need to ask before you consider long-term care insurance.

Retirement Worry #2: Outliving Your Money

The second biggest worry is fear of running out of money. With longer life expectancies and rising costs, the amount of money it takes to maintain a comfortable standard of living in retirement is significant.

Step one is to figure out how much you’ll need saved to retire comfortably. You can do this a number of ways but my suggestion would be to find a few different retirement calculators and run the numbers.

Once you have a few different sets of numbers, choose the worst case scenario and build your savings plan around that number.

The sooner you know how much you should have saved the better. Sometimes it can seem like a pension, Social Security and some modest savings will be enough. But that isn’t always the case.

Inflation and other uncontrollable factors can quickly eat away at your savings. It’s important to keep your spending to a minimum early in retirement, this way you give your money time to grow and you’ll have extra saved should you run into trouble later on.

Retirement Worry #3: Not Enough Cash Flow

This worry might seem similar to the second, but it comes from a different place. A lot retirees worry that their income won’t be enough to cover basic living expenses.

The fate of Social Security is up in the air. It likely won’t disappear but it could be significantly reduced, leaving a lot of retirees struggling to pay their bills.

The fix here is putting in place a solid drawdown strategy. The most common strategy is the 4% rule, where you withdraw 4% of your savings in the first year of retirement, and each year after that you take out the same dollar amount, plus an inflation adjustment.

For example, if you have $1,000,000 in retirement savings, the first year you would withdraw $40,000. Then, over the course of that year, inflation runs 3%. The next year, you’d withdraw $41,200.

There are a number of different drawdown strategies, the point being that having a sufficient cash flow is critical in retirement.

Retirement Worry #4: Debt

The last big worry is paying down debt. This worry probably wouldn’t have topped the list 20 years ago. But today retirees carry a lot more debt.

Bigger mortgages, multiple credit cards — it’s a major issue that retirees face. It’s not that you can’t ever have debt in retirement, but you need to be able to manage it.

If you can, pay off your credit cards before you retire. You don’t want your retirement savings getting eaten up by high-interest payments.

In some cases, you’ll want to go into debt. Maybe you need to replace your vehicle and the interest payments are low enough that it makes sense to take out a car loan.

You might also downsize or buy a second vacation property with a mortgage. So long as you’re not relying on debt to fund your retirement and you have a plan in place to manage the debt you owe, you can overcome this worry.

The bottom line is that it’s natural to feel some anxiety about retirement. With the right plan is place and a grasp on what’s to come, you can mitigate most of your fears fairly easily.

To a richer life,

Nilus Mattive

Nilus Mattive

The post The Big 4 Retirement Worries and How to Beat Them appeared first on Daily Reckoning.

The Big 4 Retirement Worries and How to Beat Them

This post The Big 4 Retirement Worries and How to Beat Them appeared first on Daily Reckoning.

The #1 concern most Americans have when it comes to retirement is paying for health care.

According to a recent survey from Merrill Lynch and Age Wave, those age 65 and over ranked health as their greatest source of worry.

With rising health care costs and longer life expectancies, it’s no wonder covering medical expenses tops most retirees list of retirement worries.

Add to that an unpredictable future for our Social Security system, market corrections, and uncertain taxes, it’s reasonable to feel a bit on edge these days.

However, Americans do retire successfully. Studies tend to show current retirees being less concerned about these issues than those approaching retirement. They have the benefit of experience, I guess.

Although I can’t predict your future, a bit of insight and planning can still go a long way to help ease some of your retirement worries.

So today, I’m going to debunk four of the biggest worries nearly all retirees have on their mind.

Retirement Worry #1: Health Care

You see healthcare top many retirement lists and studies as a major concern because many health issues are age related.

While you can’t control your genetic makeup, you can make good choices when it comes to eating healthy and exercising regularly. In addition, I find simply giving people their options when it comes to healthcare coverage can ease a lot of the uncertainty.

Here are the basics…

Most people become eligible for Medicare when they turn 65. Medicare is made up of several parts.

Medicare Part A is hospital coverage. It’s generally free, with some exceptions.

Medicare Part B is medical insurance, and you pay a premium for coverage.

Medicare Part C, aka Medicare Advantage, is an optional replacement for traditional Medicare. You might pay more for an optional Part C plan.

Medicare Part D is your prescription drug coverage. Pard D costs will vary.

So unless your prior employer has your health insurance covered for life, you’ll most likely go onto Medicare.

Choosing the right plan depends on your health status, family history, and budget. It’s also not a bad idea to consider a Medicare Supplement plan, or a Medigap policy.

A major reason to consider a Medigap policy is if you plan on traveling.

Traditional Medicare doesn’t cover you when you travel outside the U.S. But, most Medigap policies do.

The last thing you should consider is long-term care insurance. The data isn’t pretty. Coverage is expensive and your alternative of no coverage can be worse.

The main things to consider here are whether or not your assets are needed for someone else to maintain a certain standard of living. And, whether or not you’re looking to leave a legacy.

Those are two major questions you need to ask before you consider long-term care insurance.

Retirement Worry #2: Outliving Your Money

The second biggest worry is fear of running out of money. With longer life expectancies and rising costs, the amount of money it takes to maintain a comfortable standard of living in retirement is significant.

Step one is to figure out how much you’ll need saved to retire comfortably. You can do this a number of ways but my suggestion would be to find a few different retirement calculators and run the numbers.

Once you have a few different sets of numbers, choose the worst case scenario and build your savings plan around that number.

The sooner you know how much you should have saved the better. Sometimes it can seem like a pension, Social Security and some modest savings will be enough. But that isn’t always the case.

Inflation and other uncontrollable factors can quickly eat away at your savings. It’s important to keep your spending to a minimum early in retirement, this way you give your money time to grow and you’ll have extra saved should you run into trouble later on.

Retirement Worry #3: Not Enough Cash Flow

This worry might seem similar to the second, but it comes from a different place. A lot retirees worry that their income won’t be enough to cover basic living expenses.

The fate of Social Security is up in the air. It likely won’t disappear but it could be significantly reduced, leaving a lot of retirees struggling to pay their bills.

The fix here is putting in place a solid drawdown strategy. The most common strategy is the 4% rule, where you withdraw 4% of your savings in the first year of retirement, and each year after that you take out the same dollar amount, plus an inflation adjustment.

For example, if you have $1,000,000 in retirement savings, the first year you would withdraw $40,000. Then, over the course of that year, inflation runs 3%. The next year, you’d withdraw $41,200.

There are a number of different drawdown strategies, the point being that having a sufficient cash flow is critical in retirement.

Retirement Worry #4: Debt

The last big worry is paying down debt. This worry probably wouldn’t have topped the list 20 years ago. But today retirees carry a lot more debt.

Bigger mortgages, multiple credit cards — it’s a major issue that retirees face. It’s not that you can’t ever have debt in retirement, but you need to be able to manage it.

If you can, pay off your credit cards before you retire. You don’t want your retirement savings getting eaten up by high-interest payments.

In some cases, you’ll want to go into debt. Maybe you need to replace your vehicle and the interest payments are low enough that it makes sense to take out a car loan.

You might also downsize or buy a second vacation property with a mortgage. So long as you’re not relying on debt to fund your retirement and you have a plan in place to manage the debt you owe, you can overcome this worry.

The bottom line is that it’s natural to feel some anxiety about retirement. With the right plan is place and a grasp on what’s to come, you can mitigate most of your fears fairly easily.

To a richer life,

Nilus Mattive

Nilus Mattive

The post The Big 4 Retirement Worries and How to Beat Them appeared first on Daily Reckoning.

Could Retiring Later Make You Live Longer?

This post Could Retiring Later Make You Live Longer? appeared first on Daily Reckoning.

If you ask most people when they’d like to retire, they’ll tell you ‘yesterday.’

However, there’s an interesting argument to be made for delaying retirement just one more year.

According to the Employee Benefit Research Institute, the number of workers reporting that they expect to work past age 65 rose from 16 percent in 1991 to 48 percent last year.

It seems like more workers are getting the message that in order to boost their retirement security they need to work longer.

But boosting your retirement nest egg is not the only benefit to delaying retirement. In fact, I’ve got six reasons why putting off retirement just one more year is not such a bad idea.

Reason 1: You’ll Live Longer

It’s counterintuitive to think that working a stressful 9-5 job will increase your chances of living longer but that’s the truth.

The Center for Retirement Research found that delaying retirement reduced the five-year mortality rate for men in their early 60s by 32%.

Another study of half a million retired self-employed workers in France found that dementia was significantly less common among those who retired later than those who retired earlier.

Researchers hypothesize that the reason why early retirement has such negative effects on the brain is due to a decrease in mentally challenging tasks.

Reason 2: You’ll Save More

The longer you work, the more time you have to save for retirement. And, as you get older, the opportunity to set aside even more money increases.

Here’s how: If you’re under 50, your contribution limit to a 401(k) is $19,000 and $6,000 for an IRA this year. But, once you’re older than 50, you can add an extra $6,000 and $1,000 to your 401(k) and IRA contribution limits, respectively.

On top of that, the money you have saved and invested gets a chance to grow one more year without you touching it.

For example, if you have $500,000 in a retirement account today by delaying just one year, that $500,000 could grow to $535,000, assuming a 7% annual rate of return. And that’s not including any additional contributions you make to your retirement accounts during that time.

What can you do with an extra $35,000? That leads us to my next reason…

Reason 3: You’ll Have a Better Quality of Life

The reason why your quality of life will improve if you work just one more year is due to the fact that your retirement will be one year shorter.

If you estimate your yearly expenses in retirement to be $35,000, then delaying just one year lowers your required savings by that same amount. Couple that with an extra $35,000 from compound growth and you now have an extra $70,000 to spend how you please.

Reason 4: You’ll Have Bigger Social Security Checks

If you delay retirement, you boost your Social Security benefits in two ways.

First, it’s likely that you’re at the peak of your earning potential so because your Social Security check is based on the average monthly income during your 35 highest-earning years, delaying retirement could make up for the early years in your career where you earned less.

Second, depending on your age, you might be able to delay your Social Security benefits, which further increases your checks. Everyone can begin claiming as early as age 62, but you give up a significant amount versus if you waited until your full retirement age. How much exactly?

You’ll earn 124% more with a full retirement age of 67 and 132% for a full retirement age of 66. Plus, the longer you wait to claim benefits, the less of a burden you place on your personal savings later on.

Reason 5: You’ll Have Better Health Care

One more reason to delay retirement is company benefits, especially health insurance. Depending on the size of your company, your employer’s health insurance plan could be cheaper than Medicare and provide better coverage.

Here’s what you need to know: At 65, you qualify for Medicare Part A, which covers inpatient hospital services. Because Part A is free, there’s no reason why you shouldn’t enroll. At that point, you can also enroll in Medicare Part B (for doctor visits), Medicare supplemental coverage and Part D (for prescription drugs).

If your company has less than 20 employees, you need to sign up for Medicare as your primary insurance, even if your employer offers its own coverage. Failing to do so could mean you’re not covered at all. Talk to your Human Resources department to find out what’s best for you.

Reason 6: You’ll Make a Difference

A commonly cited reason for staying in the workforce is meaningful work. If there’s a project you’re working on that you enjoy, it might be fulfilling to stick around and see it through to the end. Capping off your career with a big project could be the perfect way to cruise into retirement.

Lastly, working one more year is not always going to be your call. Sometimes your boss has a different timeline for when he sees you retiring. Take what I said today with a grain of salt and decide what’s best for you and your family when the time comes to make the call .

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

The post Could Retiring Later Make You Live Longer? appeared first on Daily Reckoning.

7 Ways THIS Is Not What It Used to Be

This post 7 Ways THIS Is Not What It Used to Be appeared first on Daily Reckoning.

The days of the 40-year career with the same company are gone. The gold watch is gone. And in most cases, the company pension is gone too, or it’s been replaced by a self-managed IRA or 401(k) plan.

The first thing you need to know about retirement today is it’s entirely your responsibility.

Here are seven ways retirement has changed in the last 25 years and what you can do about it.

1. Inheritance

If you were banking on an inheritance from mom and dad to fund your retirement, think again.

According to an HSBC Bank survey of 16,000 people in 15 countries (1,000 from the U.S.), 23% of pre-retirees would like to spend their last dollar with their last breath, and let the kids figure it out on their own. Only 9% of the pre-retirees found it important to leave a legacy for their kids.

In the U.S., about one in 10 retirees support a child over the age of 16 and almost 60% of working-age Americans expect to leave something to heirs.

The days of a hefty inheritance will soon be forgotten, so instead I suggest you start saving more now.

2. Mortgage Payoff

Should you pay off the mortgage? For most people, it generally makes sense after taxes to keep the mortgage, but 25 years ago most people would rather not have to make that payment every month.

Given how low interest rates are today, many retirees are choosing to keep the mortgage, or obtain one if they are buying a retirement home. A recent study by Merrill Lynch and Age Wave, a research firm, found that 64% of retirees expect to move at least once and 37% have already done so.

What’s more, 27% are seriously thinking about it. And not all of this is downsizing, 30% of those who have already moved upsized to a larger home primarily to make room for visitors and family.

3. Retirement Age

It used to be that 65 was the age you retired. This was the norm for a long time. Then a handful of baby boomers made retiring at 55 cool but this was still considered early retirement.

A recent survey by the Employee Benefit Research Institute, found that 50% of retirees quit working earlier than they expected. Health issues were the culprit in 60% of those situations, while 27% cited changes at the company, and surprisingly, 22% stopped to care for a family member.

In addition, a New York Life survey found that 51% of retirees wished they had stopped working sooner so they could have enjoyed retirement while they were younger and healthier. On average, they wanted to retire four years earlier than they did.

There’s no set or recommended retirement age anymore. Retirement comes to each person at different times in life. For some people, retirement is when your work becomes optional. While others are forced into it due to unforeseen circumstances.

The point is you need to be prepared when your time comes to retire. Build a plan anticipating the most likely outcome and stick to that plan until you retire or your circumstances change.

4. Reliance on Social Security

In the mid ‘80s through to the early ‘90s, retirees relied on Social Security for around 65% of their income. Today, Social Security accounts for just 27% of a person’s retirement income.

It used to be that a lot people had pensions that could fill the gap left by Social Security. In the early ‘90s, 43% of all private-sector workers were covered by a pension plan. Today, only 19% of companies offer pension plans. Again, you’re going to have to rely heavily on savings to bridge the gap between Social Security and your cost of living, so keep saving and earning.

5. Living Longer

The average life expectancy for a 65-year-old is 19 years, but a lot of people will live another 25 even 30 years. This presents several challenges with respect to planning how much you’ll need saved up.

The longer you live, the more likely you are to encounter health problems which can quickly eat away at your nest egg. The good news is with living longer you have more opportunities and time to pursue items on your bucket list. Just make sure you budget for all the things you want to do.

6. Medicare: Part D

Speaking of health. The Part D prescription-drug plan is probably one of the biggest changes to Medicare in the last 25 years. 

When Part D launched, there was a huge gap in coverage. The tradeoff was drug prices were lower. Since 2006, drug prices have rapidly climbed. Now the gap is a lot smaller, but drug prices are higher.

Add in Medicare Advantage plans, where you have new benefits and they don’t have to be uniform across plans, and your head starts to spin. Most people only focus on premiums, rather than looking at the out-of-pocket costs coming from actual expenses. Moving forward, it’s going to be even more difficult for the average American to choose the right plan.

7. Retirement Solutions

Around the mid nineties, we were dealing with a bull market. Everyone loved 401(k) plans. You could invest in just about anything and be doing well. Then, at the beginning of the 2000s, Enron crashed.

All these massive companies had 401(k) plans filled with company stock, and when the company failed, so did your 401(k). This was a big red flag and it became even worse when the economy crashed in 2008.

Today, we’ve moved away from defined benefit plans into 401(k) plans.

But I see more changes to come, possibly even an entire system overhaul.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

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7 Ways Retirement Has Changed

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The days of the 40-year career with the same company are gone. The gold watch is gone. And in most cases, the company pension is gone too, or it’s been replaced by a self-managed IRA or 401(k) plan.

The first thing you need to know about retirement today is it’s entirely your responsibility.

Here are seven ways retirement has changed in the last 25 years and what you can do about it.

1. Inheritance

If you were banking on an inheritance from mom and dad to fund your retirement, think again.

According to an HSBC Bank survey of 16,000 people in 15 countries (1,000 from the U.S.), 23% of pre-retirees would like to spend their last dollar with their last breath, and let the kids figure it out on their own. Only 9% of the pre-retirees found it important to leave a legacy for their kids.

In the U.S., about one in 10 retirees support a child over the age of 16 and almost 60% of working-age Americans expect to leave something to heirs. The days of a hefty inheritance will soon be forgotten, so instead I suggest you start saving more now.

2. Mortgage Payoff

Should you pay off the mortgage? For most people, it generally makes sense after taxes to keep the mortgage, but 25 years ago most people would rather not have to make that payment every month.

Given how low interest rates are today, many retirees are choosing to keep the mortgage, or obtain one if they are buying a retirement home. A recent study by Merrill Lynch and Age Wave, a research firm, found that 64% of retirees expect to move at least once and 37% have already done so.

What’s more, 27% are seriously thinking about it. And not all of this is downsizing, 30% of those who have already moved upsized to a larger home primarily to make room for visitors and family.

3. Retirement Age

It used to be that 65 was the age you retired. This was the norm for a long time. Then a handful of baby boomers made retiring at 55 cool but this was still considered early retirement.

A recent survey by the Employee Benefit Research Institute, found that 50% of retirees quit working earlier than they expected. Health issues were the culprit in 60% of those situations, while 27% cited changes at the company, and surprisingly, 22% stopped to care for a family member.

In addition, a New York Life survey found that 51% of retirees wished they had stopped working sooner so they could have enjoyed retirement while they were younger and healthier. On average, they wanted to retire four years earlier than they did.

There’s no set or recommended retirement age anymore. Retirement comes to each person at different times in life. For some people, retirement is when your work becomes optional. While others are forced into it due to unforeseen circumstances.

The point is you need to be prepared when your time comes to retire. Build a plan anticipating the most likely outcome and stick to that plan until you retire or your circumstances change.

4. Reliance on Social Security

In the mid ‘80s through to the early ‘90s, retirees relied on Social Security for around 65% of their income. Today, Social Security accounts for just 27% of a person’s retirement income.

It used to be that a lot people had pensions that could fill the gap left by Social Security. In the early ‘90s, 43% of all private-sector workers were covered by a pension plan. Today, only 19% of companies offer pension plans. Again, you’re going to have to rely heavily on savings to bridge the gap between Social Security and your cost of living, so keep saving and earning.

5. Living Longer

The average life expectancy for a 65-year-old is 19 years, but a lot of people will live another 25 even 30 years. This presents several challenges with respect to planning how much you’ll need saved up.

The longer you live, the more likely you are to encounter health problems which can quickly eat away at your nest egg. The good news is with living longer you have more opportunities and time to pursue items on your bucket list. Just make sure you budget for all the things you want to do.

6. Medicare: Part D

Speaking of health. The Part D prescription-drug plan is probably one of the biggest changes to Medicare in the last 25 years. 

When Part D launched, there was a huge gap in coverage. The tradeoff was drug prices were lower. Since 2006, drug prices have rapidly climbed. Now the gap is a lot smaller, but drug prices are higher.

Add in Medicare Advantage plans, where you have new benefits and they don’t have to be uniform across plans, and your head starts to spin. Most people only focus on premiums, rather than looking at the out-of-pocket costs coming from actual expenses. Moving forward, it’s going to be even more difficult for the average American to choose the right plan.

7. Retirement Solutions

Around the mid nineties, we were dealing with a bull market. Everyone loved 401(k) plans. You could invest in just about anything and be doing well. Then, at the beginning of the 2000s, Enron crashed.

All these massive companies had 401(k) plans filled with company stock, and when the company failed, so did your 401(k). This was a big red flag and it became even worse when the economy crashed in 2008.

Today, we’ve moved away from defined benefit plans into 401(k) plans.

But I see more changes to come, possibly even an entire system overhaul.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

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