Medicare, Social Security, and Retirement Hellby Denise Early on Mar. 19, 2012, under Health
Many Americans are headed for retirement hell because they have saved too little for their “golden years”. This is the conclusion of LIMRA, which used to be called the Life Insurance Marketing and Research Association. I read this in an article in the Hartford Courant that paints a bleak picture for 70% of Americans who have not saved enough for their retirement.
Having the discipline to save for retirement is more and more crucial because younger workers are less likely to have pensions than previous generations. The problem is that people are likely to live longer and they won’t have enough money.
Compounding the problem is that people who are saving for retirement aren’t likely to get big returns in the stock market over the next ten years. With the Federal Reserve keeping interest rates low to help the economy, bonds and annuities will offer low returns for the foreseeable future. And putting money into a savings account or certificate of deposit is kind of like putting it under the mattress.
70 percent of Americans have less than $100,000 saved for retirement.
The Hartford Courant article says: A LIMRA analysis of how much U.S. households saved in investable assets — including 401(k) accounts and IRAs, but not including home values or pensions — shows that:
- 35 % of households have less than $10,000 in retirement savings.
- 24% have from $10,000 to $49,999.
- 11% have from $50,000 to $99,999.
That means, not including their pension [if they have a pension], Social Security payments and the value of their home, the percentage of working Americans who said they have less than $25,000 in savings and investments has increased from 48 percent to 56 percent between 2007 and 2011.
This is why Social Security is so important.
I estimate that about half my clients are dependent on their Social Security check for their living expenses. Most of these folks have very little in savings that would allow them to pay large co-pays for medical bills. Most of these folks are enrolled in Medicare Advantage plans that require them to pay between $3,400 and $6,300 each year in co-pays if they have serious medical problems – cancer being the big one. This is a MOOP (maximum-out-of-pocket) for the year, which is a actually protection against never ending medical bills.
A MOOP in a Medicare Advantage plan is a protection, or a cap, but many of my clients cannot write a check for $3,400, or $6,300 if they get sick. One lady told me she used her credit card to pay for her radiation therapy co-pays, which were around $5,000. It took her three years to pay off her credit card – and her interest rate is probably 20% or more.
The health care reform law will require everyone to buy health insurance in 2014, and opponents cry, “You can’t make me buy health insurance!” Perhaps we need a law that requires everyone to save for their retirement. Oh, wait, that’s what Social Security does. But setting aside 6% of a person’s salary for Social Security adds up to far too little for a comfortable retirement. Everyone needs to put another 6% to 12% of their earnings into retirement savings if they want to avoid retirement hell.