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BOSTON – While many things get better with age, new research shows the cost of health care isn't one of them. Fidelity's Retirement Health Care Cost Estimate reveals that a couple, both aged 65 and retiring this year, can now expect to spend an estimated $245,000 on health care throughout retirement, up from $220,000 last year.
The above has the following footnotes:
1. 2015 Fidelity analysis performed by its Benefits Consulting group. Estimate based on a hypothetical couple retiring in 2015, 65-years-old, with average life expectancies of 85 for a male and 87 for a female. Estimates are calculated for "average" retirees, but may be more or less depending on actual health status, area of residence, and longevity. The Fidelity Retiree Health Care Costs Estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government's insurance program, Original Medicare. The calculation takes into account cost-sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance). It also considers Medicare Part D (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by Original Medicare. The estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care. Life expectancies based on research and analysis by Fidelity Investments Benefits Consulting group and data from the Society of Actuaries, 2014.
2. For purposes of this hypothetical analysis, a 4% to 5% annual rise in health care costs is assumed.
I think benefits *will* be cut, but the action *will not be called* a benefits cut.
It will be called "means testing." The income thresholds will continue to be adjusted so the net effect for someone like me (high income/high assets) is a cut. Politicians can then claim they fought to protect entitlements for seniors.
there are many ways congress can pass bills to fill the gap for ss . ss is tiny compared to the medicare issues .
i believe ss benefits themselves will remain sacred
Other than some symbolic means testing for truly high income retirees, I certainly agree with this. I also think a 100% taxable tier is coming for Social Security income. Again, this will be largely symbolic.
The thing people seem to be forgetting is that old people vote. Millennials largely don't vote. No politician is going to risk facing recall elections where every Boomer would vote kick them out of office if they touched the political third rail.
Medicare, on the other hand, is not sustainable. I look at the United Kingdom for my cues on what health care public policy will likely be for the socialized medicine part of the health care system. Anything expensive is tightly rationed. Anyone with behavior-induced health problems goes to the end of the queue. They do everything possible to try to minimize the amount of money spent in the last 6 months of life. Unless you can pay cash, a lot of services offered to retirees now are going to vanish. Medicaid is going to be even more tightly rationed. The states pay up to 50% of the bill and it's crushing them. The states I've looked at now have Medicaid/CHIP as more than 1/3 of their budget.
I always find it funny that social security which is funded by people who work can run out of money while welfare which goes to those who don't work never runs out of money
No, 80 million others would not do the same. The Millennials already surpass the Boomers not only in population, but in the number of eligible voters as well. It's official: The Baby Boomer generation will continue to diminish in size and the ratio of Millennial voters to Boomer voters will continue to increase. You also cannot assume that Boomers like me will vote against their children's best interests. The top two issues for Millennials are climate change and student debt. I'm thinking we need to take care of their student debt problem before expecting Millennials to fully support our generation's retirement. Oh, I have no doubt that they will support Social Security but not to the extent the higher earners would like.
Just my 2 cents worth.
Well, they won't be cutting those of us already getting it (boomers), but be my guest if you want to cut your own.
Generally speaking SS is already adjusted this way in the formula for benefits v. contributions. Higher contributors get substantially less than lower earning contributors.
Again to make sizable inroads into the funding issues with SS you would have to take nearly all of the SS benefit from people earning middle class levels of income to get the millions and millions of recipients needed to "fix" SS. That in my opinion makes it a nonstarter. I suspect the biggest aspect of "means testing" will be in making the last 15% of SS taxable. The other problem with means testing is the cost to administer and how it changes the nature of the program.
For all those reasons I would bet that solution for SS is a combo of change retirement date, some form of adjusting COLA calculation, SS 100% taxable at certain income levels and increasing income ceiling on SS contributions.
I don't think taxing the last 15% will be the biggest - but it is probably the easiest.
Probably the second easiest is changing the maximum amount of income subject to SS tax (which has been done many times in the past) - or eliminating the cap altogether. Which we've already done with Medicare (and the world didn't come to an end).
We have already changed the retirement dates once. But back in the early 80's when life expectancies were different than they are today. So I wouldn't be surprised to see changes there too. It also makes sense to adjust the early retirement age from 62 to 63 or 64 - so we get back to the original scheme. Where "early retirement age" was 3 years earlier than full retirement age (today it's 4 years - and - when the FRA goes to 67 - it will be 5 years). OTOH - doing this is problematic for people in various occupations. It's relatively easy to work until you're 66 or 67 or 70 if you're an accountant. Not so easy if you're in a job that involves manual labor. I think one of the issues we're seeing today with Social Security disability is it's being used increasingly as a kind of "very early" Social Security - especially for people who do manual labor.
Note that I have a lot of empathy for people in this position. At age 68 - I can't even work in my garden for more than 2 hours at a time these days without my back killing me. Can't imagine what it would be like to work in a job that required 6-7 hours of manual labor a day.
And then there is the issue of means testing. Which started for Medicare in 2007. And - again - the world didn't end. Social Security is already means tested/income adjusted to the extent that lower income beneficiaries get back more than they put in - and people at the higher income levels these days don't even get back what they put in. It is probably easier to rejigger the formulas for people who aren't already on SS than current beneficiaries. Robyn
It's kind of inevitable Social Security will phase out at higher income levels when they revamp payroll taxes and retirement ages to cover the 30% shortfall but I'm not sure I believe it would be as low as $85K. I can certainly see 100% of Social Security being subject to Federal income taxes at an income level like that but going from 85% to 100% isn't much of a hit. There are so few retirees with a 6-figure AGI that it doesn't particularly impact the 30% shortfall in Social Security funding. I think a symbolic phase-out would start at well north of $100K and you wouldn't get anything at all with $200K+.
Medicare premiums, on the other hand, are the thing that really worry me. If you want the level of coverage available now with Medicare plus supplemental, it's likely to get very costly. Basic Medicare is going to have to fairly tightly ration the more expensive things.
This is all driven by some pretty basic demographic math. Right now, there are about 4 1/2 workers per retiree. In 2050, it will be more like 2 3/4 workers per retiree. Either taxes are going up in a massive way or benefits are going to get slashed. I think Social Security benefits will be largely grandfathered. I don't see how Medicare can be.
I agree 100% that Medicare will see the largest changes. Because there's no way around it. And - if we get another year or two like last year - I wonder how long the "grandfather" clause when it comes to Medicare premiums will be around - especially for higher income people (and higher income when it comes to Medicare today is a joke - $170k for a married couple). Does it make more sense for a lower income senior going on Medicare in 2016 to pay more than I do?
I'll take my gravy train as long as it lasts. But won't be surprised or infuriated if it ends. I would be pleasantly surprised to see any politician telling it like it is to the American people/voters. Robyn
Congress will have to make some changes though I think the first one is to look at their own spending habits on pet projects. Start with funding that strike fighter jet. The air force don't need it. Instead put more people in boots. Those things get an economy working. Put more people working infrastructure like roads and bridges. How about working on better dams and maybe even making more power electric dams. That at least would create jobs and provide a useful service.
Well hell I am making too much sense. Might as well put me in a box to shut me up.
Sorry - but we're not going back to the WPA or similar. Sending 10-20,000 guys to the middle of the desert to work on something like the Hoover Dam:
No, 80 million others would not do the same. The Millennials already surpass the Boomers not only in population, but in the number of eligible voters as well. It's official: The Baby Boomer generation will continue to diminish in size and the ratio of Millennial voters to Boomer voters will continue to increase. You also cannot assume that Boomers like me will vote against their children's best interests. The top two issues for Millennials are climate change and student debt. I'm thinking we need to take care of their student debt problem before expecting Millennials to fully support our generation's retirement. Oh, I have no doubt that they will support Social Security but not to the extent the higher earners would like.
Just my 2 cents worth.
Even though I don't have children - I very much agree with you. Too much money going from poorer Millennials to richer Boomers these days. Should be the other way around. And if it means I lose a few bucks in the process - well I can afford it. Robyn
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