My generation.
No, despite sharing the video above, I am not really reliving one of my favorite tunes from The Who.
It seems that my generation is at grave risk. They lack sufficient funds to survive the next decade or so. (If they live longer, the problem is even more acute!)
Drs. Jan Mutchler, Yang Li, and Nidya Velasco Roldan (all from UMass Boston) published a study describing the economic insecurity of older Americans. This was determined via what’s called the Elder Index. It’s a measure of the incomes that folks need to meet their monthly expenses without any assistance, a measure of how these folks can age in their own homes.
Over the past three years, the economic situation has gotten worse. Both single folks and couples now need 4% more than they did in 2016- if they own their homes free and clear. Renters now need about 8% more.
Given that single folks need $ 21,012 and married couples need $ 31, 800 (these are USA averages; there are vast differences among the regions of the US- after all, one needs $33,060 to live in my neck of the woods), it’s pretty clear that those folks who lack IRA and/or 401(k) plans will be short of cash. The average social security stipend for singles is $ 17,532, while couples can expect $ 29,376 over the course of a year.
But, if one resides in the Northeast, the situation is far worse, since these are among the states with the highest Elder Indices. And, since the US average leaves folks at risk, it’s obvious that higher Elder Indices create much larger problems for folks hoping to not run out of money before the end of the month. On average, more than half of the folks who are at risk are relying on Social Security to cover their needs. Even the state with the fewest number of seniors at risk, Nevada, is nothing to write home about- more than 40% of the single residents are underwater. (Almost 62% of those living in Massachusetts are.) Married folks fare significantly better than singles- ranging from 14.7% (Alaska) below water to a high of 34.8% (Vermont).
Couple this problem with the fact that older Americans have greater health problems- and their attendant costs, the picture gets even more bleak. (Yeah. Who the heck believes that it’s only $395 a YEAR to cover health care costs???) About 20% of folks 65 and older suffer health maladies (according to the CDC), with 4 in 10 having difficulty with vision, mobility, communications, cognition, and/or self-care.
Which is why so many of us financial advisors keep harping to our clients to make sure that they fund their IRA and/or 401(k) plans when they are young. Especially since the divorce rate seems to be attenuating- and couples with just a little bit of retirement funds help are not at risk.
(Not to mention the fact that most folks who divorce end up digging into their 401(k) and IRA- long before they reach retirement age.)
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Even $790 a year for the elder couple for health care – are they SERIOUS? I’m trying very hard to impress the need to save for retirement on my son (who is in his late 20’s) but it can be hard, when you live paycheck to paycheck, and have a high deductible health care plan. I fear for his generation even more than mine – my son doesn’t have college debt but so many do. If it is hard for us – what will it be for them?
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My first question is who gets Medicare for that price, Alana!
It’s scary when I think what’s going to happen in the next 10 – 20 years. The older we get, the higher the insurance premiums go up. Hubby just got his Plan F increase for 2020 and I now it will only keep increasing.
I will make the same recommendation here that I do for those signing up for Obamacare. Don’t rely on your old insurance being the best choice- seek our new ones. (In my case, I am signing up with my same vendor- as if it were a new plan- and will be saving $ 46 a month!)
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