Recently, there was more doom and gloom out of the research community about the financial state of people close to or living in retirement. One study focused on the financial readiness of the boomers to retire and the other on the mounting debt carried by the elderly. Both are worth thinking about — from a personal and societal view — as we begin the New Year.
The Center for Retirement Research at Boston College surveyed 400 employers to get their views on how ready their workers aged 50 and older are to retire. The news was not good. They project one in four of the nation’s baby boomers will probably be working at least an extra two years because they won’t have the financial resources to retire at normal retirement age.
While two additional years may not seem like a lot, it’s not a sure thing that those workers will be able to keep working. Will they be able to stay employed at the same company or at the same level of pay to generate the additional income needed for retirement income? It remains unclear whether employers are going to want to keep aging boomers on their payrolls or hire other, often less expensive workers.
Another consideration is the physical ability to keep working. Plans and options can change rapidly due to a change in health or need to provide caregiving, for example. Art Koff’s article in this issue can be a first step for anyone looking at the need for additional income whether planning for or living in retirement. In addition, Longevity Alliance is launching an investment program designed to help individuals figure out the best way to finance a longer life.
Another reason people will keep working is the amount of debt they are carrying. Among households headed by people 75 and older, 40% carried debt in 2004 compared to 32% in 1992. On average, that debt was just over $20,000. For those 55 and over, debt loads — including mortgages, car loans and credit cards — increased 76% to $51,791 from 1992 to 2004, according to the study by the Employee Benefits Research Institute (EBRI).
Why the increase? The National Consumer Law Center says its elderly clients are often facing higher property taxes, housing costs, energy prices and out-of-pocket medical expenses. And for many, a medical issue creates the double whammy of reducing income and increasing expenses. It is one of the reasons we highly recommend that those who are entering Medicare eligibility or are already Medicare beneficiaries take a serious look at their health care coverage. A Medicare Advantage or Medicare supplement plan can be a cost-effective way of protecting against catastrophic healthcare costs in retirement.
The new year is a great time to review your financial situation and insurance coverage. Longevity Alliance helps older adults find the right health insurance, long-term care coverage and investments. Give us a call at 1-800-713-6610 and let us help you get a great start to 2007.
Steve Zaleznick
CEO, Longevity Alliance