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ToddF

Good article in NYT re senior finances

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The article has some good statistics on senior finances. 21% of households headed up by someone 65+ still have a mortgage.

There is a bunch of other stuff I found interesting.

1/3 of senior households rely on SS for 90% of their income.

If you're gearing up for retirement or just wondering how your finances stack up against theirs, this article is instructive.

 

‘Too Little Too Late’: Bankruptcy Booms Among Older Americans https://nyti.ms/2nbIpXM

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The transfer has come in the form of, among other things, longer waits for full Social Security benefits, the replacement of employer-provided pensions with 401(k) savings plans and more out-of-pocket spending on health care. 

I have long believed that the change in pension plans, brought about mostly by the demands for portable plans that you can take with you when changing jobs, has played a major part in this. I feel fortunate to have fallen into the overlapping period when we had both a fixed monthly pension and the 401k plan. Far too many people have used the 401k money for other things than retirement security.  What isn't mentioned at all is the part played by inflation. Even though that has been small for recent years, for those who have been retired for more than 10 years it plays a significant role and as we are nearly 20 years retired it is a major factor in our financial future.

Thank you for posting the link to that story!

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Agree with Kirk.  If you have been retired for any number of years the inflation on things that affect retirees, for example medication costs, really hits your income.   Just ask anyone who takes insulin!:(

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3 hours ago, Barbaraok said:

Agree with Kirk.  If you have been retired for any number of years the inflation on things that affect retirees, for example medication costs, really hits your income.   Just ask anyone who takes insulin!:(

Neither of us take insulin. Our medication costs have actually decreased over the past few years with prescriptions that use to cost $100 for a 3 month supply now costing less than $30.00. Prescriptions that were about $10.00 are now zero. I doubt that the reductions make up for the substantial increases in medical insurance cost (mine have about doubled in the past 5 years), but my suspicion is that the insurance costs are more a result of the changes in law/regulations than inflation.

As a traveling RVer, changes in fuel cost are an issue and they seem to have little to do with inflation directly, effecting inflation more than being caused by it.

In my opinion, one of the major reasons for the movement away from pension plans was that most were unsustainable. Employee contributions if any were too low and many employers underfunded the plans to begin with. For example, I paid into the retirement plan and my employer matched the amount. I have been retired 14 years and have already received 3.6 times the amount that I and my employer  combined paid in. Attempts to rebalance the systems were often stymied by strikes, law suits or regulations. The increase in longevity of retirees made the financial problems even worse.

In my opinion, low mortgage and home equity interest rates and the tax deductibility provide a strong incentive to carry those debts into retirement or even take on new debt.

Edited by trailertraveler

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34 minutes ago, Barbaraok said:

It isn’t regulation that has caused insulin to rise 240%.  Big Pharma because they can.

Sounds more like a cause of inflation than the result of it. Chicken and egg type thing.

I didn't  say that the rise in insulin cost was due to regulation, I was speculating about the changes in cost of insurance.

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1 hour ago, trailertraveler said:

Our medication costs have actually decreased over the past few years

For my wife and I take enough brand name drugs that we easily reach the "catastrophic" level on our Part D plans.  But a little recognized side benefit of ACA was that the cost of the Coverage Gap medications has been stepwise reduced each year.  I think in 2018 we're currently paying only ~35% of the "true cost" of our brand name drugs while in the Coverage Gap.  It's not zero, but it's a lot less than it used to be.

One thing I've noticed is that many people don't realize that the Coverage Gap is "bounded", in that there's a specific amount of money that you have to pay until you "emerge"" into Catastrophic Coverage.  What's often overlooked is that you don't really have to pay anywhere near as much out of pocket as you might think to get to Catastrophic.

This year you have to have $5k in "out of pocket" expenses to get to Catastrophic,  but what isn't so clear is that every time you buy a brand name drug you are credited with a "discount" that is more than the price you paid and this discount is considered part of your out of pocket expenses!  So  if three months of Lantus, for example, costs you ~$450, there wil be a discount of ~$500 showing on your EOB and this discount counts toward achieving Catastrophic Coverage.

The spreadsheet calculations I've done for my wife and myself show that our out of pocket expenses for medications will this year run about $2400 each which averages out to $200/mo.  That's in addition to the premiums for our Part D plans themselves. Those totals are inclusive of all of the costs of both of use going completely through the Coverage Gap.

One  thing that lots of Medicare recipients seem to overlook is that once you enter the Coverage Gap the total amount of money you will spend is roughly the same no matter how many Rx you have and how expensive they are.  Once you get to the Catastrophic region the costs per Rx are pretty low so if you  expect to go all the way through the Coverage Gap it doesn't matter if you have 2 Rx or 20.    And it doesn't really matter if they are generic or not.  In fact, generic drugs don't get the discounts that the name brand ones get so, depending on your plan, you may have to pay 100% of those while in the Coverage Gap while only paying ~35% of the name brand ones.

I'm not trying to say that $200/person/mo in drug costs is nothing, but it's a lot less than you might imagine when you see the statement that you will stay in the coverage gap until you reach $5k/person in Rx expenditures.

 

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28 minutes ago, trailertraveler said:

Sounds more like a cause of inflation than the result of it. Chicken and egg type thing.

I didn't  say that the rise in insulin cost was due to regulation, I was speculating about the changes in cost of insurance.

Which is what Kirk was talking about in mentioning that seniors often do not get adequate adjustments in COLAs, like for SS, because the basis of the COLA calculations are what working people spend money on, not what retirees need.  

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3 hours ago, Barbaraok said:

Which is what Kirk was talking about in mentioning that seniors often do not get adequate adjustments in COLAs, like for SS, because the basis of the COLA calculations are what working people spend money on, not what retirees need.  

👍

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