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8 Big Things Older Workers Should Worry About

Many older Americans have taken advantage of the pandemic to quit their jobs and retire early. And why not? Stocks were up, real estate was up, and this so-called “wealth effect” gave them a sense of confidence.

Enough of commuting, office politics and everything else. Many others weren’t so lucky and were forced out as employers raced to cut costs. Whatever the reason, the share of retirees as a percentage of the US population has increased by 1.5 percentage points in just a year and a half, to nearly 20%, according to the Kansas City Federal Reserve. That’s a big leap in such a short time.

That was then. Since then, we have seen a sharp drop in stocks, cracks in the housing market and inflation of 9.1%. This is more than enough to erode the confidence young retirees might have had. Some are now choosing to return to work. A lot has changed in the past couple of years, and for those wondering what’s next, check out this list of things to watch. They all come down to money, of course, and I’ll offer a bit of context with each data point, which hopefully will be helpful.

1. Inflation. The current cost of living index, says the government, is 9.1%. For every $1,000 you have saved for retirement, that money will earn you $909 in purchasing power. Inflation, it has been said, is a “hidden” thief. No it is not. It’s clearly visible at the grocery store, gas station and more. Whatever you’ve saved won’t last that long.

2. Social Security. Fears that Social Security will disappear are not true. What is true, however, is that his vaunted trust fund is expected to be depleted by 2034. When that happens, retirees will get whatever can be generated by payroll taxes, and currently that should be around 77 cents on the dollar. .

3. Health expenditure. A couple retiring this year at age 65 will spend $315,000 out of pocket on health care alone for the rest of their lives. The key phrase here: in the pocket. That’s beyond what Medicare will pay. People in their 60s or 60s often scoff at this, saying they don’t spend as much now and so it’s not true. But it is wrong to extrapolate this to his later years, when the bulk of health care costs are generally borne.

4. Drug prices. Think energy and food are up? The Medical Association Journal indicates that the prices of new branded prescription drugs have increased by 20% per year between 2008 and 2021. That’s far beyond even the current rate of inflation, of course. Generics and assorted discounts help reduce the real price people pay, but the result is that drug prices have skyrocketed over the long term and are reflected in the Fidelity figure above.

5. Diabetes. Here is a huge cost bomb that is just starting to explode. According to the American Diabetes Association, in 2019 more than 37 million Americans had diabetes. But get this: 96 million more people over the age of 18 are prediabetic. The Centers for Disease Control and Prevention estimate that, even now, about 25% of all healthcare costs in the United States are spent on caring for people with diabetes. Medicare and insurance pays for a lot of it, but who pays the taxes and insurance premiums for Medicare? You do. In addition, diabetes costs the US economy an additional $90 billion a year in lost productivity. ​​

6. Exercise. Putting more emphasis on staying fit would undoubtedly lead to better outcomes, including cost savings, in the previous three elements: health expenditures, drug prices and diabetes. recommends people age 65 and older get at least 2.5 hours of moderate aerobic exercise each week. It’s about 20 minutes a day. He points out that there are four things to focus on: endurance, strength, balance and flexibility.

7. Savings. So how much will we need? According to Baltimore-based investment giant T. Rowe Price, if you’re, say, 50 years old, you should have saved 3 to 5.5 times your annual salary. At 60? Six to 11.5 times your salary. And at age 65, 7 to 13.5 times your salary.

8. Savings gap. Compare T. Rowe’s benchmark to actual savings, and it would seem that millions of Americans are running out, perhaps alarmingly, of what they should have. Synchrony Bank, for example, reports that the median savings for Americans in their 50s is $117,000 and $172,000 for those in their 60s. Meanwhile, Bankrate pegs the median household income for adults ages 45 to 54 at $90,359. Going back to T. Rowe’s multiple, this implies that workers in their 50s should have, at the low end, about $300,000 saved.

Most financial advisors say the best thing you can do to strengthen your finances – and that’s not what some want to hear – is to keep working. Better yet, keep working somewhere that can help cover health costs. These are difficult times. No one can say how high inflation might rise, or when it will fall. As long as this persists, everything I mentioned above will be impacted and not for the better.

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