Time for one last look back at last year. CBS Moneywatch.com posted a story last week that caught my eye. It was a list of the top 5 news stories from 2010 that had to do with retirement. I thought you would find their selection interesting. I have added some comments and thoughts of my own. You may disagree with some of what I have to say. In that case, I certainly hope you will comment at the end of this article to add your voice to a debate that is crucial to us all.
The Passage of Health Care Reform topped their list of the stories that could have the biggest impact on retirees going forward. The potential positives and negatives have been debated to death so I'm not going there. The change to a Republican-controlled house could very well make a lot of what happened last year moot. If money for various parts of the law isn't provided, not much will happen. If various state efforts to not participate are allowed to proceed the law will not be able to function. If some court rulings stand the central part of the law will be eliminated making the rest of it not affordable. The fate of 30 million uninsured citizens, the size of our federal deficit, and the affordability of insurance through private insurers are all directly affected.
So, what do we do while we wait? Take more responsibility for your own health maintenance. Eat better, exercise more, understand the cost-savings of preventive care, buy generic drugs when possible, and question the need for tests and procedures that seem designed to simply protect doctors or rack up extra charges. In the highly unlikely event that the Health Care Bill ends up exactly as passed costs and personal responsibility will shift. Get used to it.
The Release of the Deficit Commission Report. Not surprisingly, the suggestions included in this report brought forth howls of protest from those supporting programs suggested for cutbacks. While everyone demands deficits be cut, absolutely no one wants anything that affects them to be part of the cuts. Obviously, such a selfish stance cannot work. It is impossible to spend more than we make as a country, yet continue to ask government to pay for things we think are our right.
There will be cuts in Social Security and the retirement age will go up (not in our lifetime), Medicare's waste will be attacked (a bit), and the Pentagon will no longer have access to unlimited funds. Why? Because we will have no choice, unless it is the loss the the country's entire middle class, hyper-inflation, and the purchase of most of our assets by foreigners. But, it is going to make the yelling and partisanship of the last few years seem mild in comparison. The real losers will be the poorest, sickest, and most vulnerable of our citizens. They are most likely to suffer the most severe cutbacks.
Higher Retirement ages in France and Greece trigger protests . This was an interesting choice for the third most important retirement story of the year, but the author is probably correct. The riots in France over the increase in retirement age from 60 to 62 and protests in Greece over a similar change from 61 to 63 were hardly unnoticed by the rest of the world. Most Americans, with the choice to retire as early as 62 or receive full benefits at 65 or 66 probably have a hard time sympathizing. Meanwhile Bolivia, decided to turn common sense upside down and reduced the full retirement age to 58.
These events are the outcome of debt-ridden governments trying to rein in entitlement spending, and keep pension systems from going broke (I have no idea what Bolivia was thinking !). The debt commission's suggestion that U.S. full retirement increase over the next 50 years or so seems extremely cautious by comparison, but does reflect the reality of people living longer and the system being broke.
As an interesting aside CBS reports on the results of a study that correlated early retirement with mental dysfunction. According to the study, countries with the lowest retirement ages, like France, Italy, and Spain scored lowest in cognition tests among their older citizens. What's the connection? I'd suggest this may show that keeping active and engaged in your later years is one of the best ways to reduce the odds of getting dementia or Alzheimer’s.
Generating Adequate Income from Retirement Savings. With CD rates hovering around 1%, Money Market Accounts paying much less, and Social Security having no monthly increase for the second year in a row, it is easy to see why this has become one of the top stories for retirees this past year. Trying to make ends meet when energy, food, and health costs are rapidly rising just as rates on fixed investments plummet is increasingly difficult. Stocks remain volatile. Experts warn against municipal bonds as cities and states face huge deficits.
There is no simple answer. The quick return of higher interest rates doesn't seem to be in the cards. Cutting expenses can only help so much. At some point the only things left to cut are essentials. For those on a fixed income that was adequate before, the next few years do not look very encouraging. The hard truth is you’re on your own when it comes to figuring out the best approach for you.
MetLife Halts Sale of New Long-Term Care Insurance. This is a story I read but its importance didn't register. CBS Marketwatch.com is correct in drawing attention to an important issue. Even with adequate health insurance through Medicare and a supplemental policy, the average 55 year old will still spend almost $200,000 on out of pocket medical expenses during the rest of his life. Nursing care expenses average close to $5,000 a month, and Medicare doesn't pay for long term care.
For years we have been advised to consider buying longterm care insurance to help with these overwhelming costs. Now, the 4th largest provider of these policies has stopped selling them. It is a safe bet that other companies will follow. For those still willing to insure someone the premiums and exclusions will certainly increase.
There isn't really a a positive story among these five. Even the potential benefits of health care reform come with added costs and large does of uncertainty. So, what is the underlying lesson? The age of individual responsibility is on us. The time when we could count on the government or social institutions to solve all the problems that come with aging is rapidly drawing to a close.
Another answer? Maybe we will see a resurgence of family taking care of family. Maybe the multi-generational household will become the norm. Maybe that is not such a bad thing.
Your thoughts? Would these stories been in your top 5? Do you have a different thought on any of them? Let me know and we'll talk about it.
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