Here we discuss 7 issues that have the potential to directly impact your retirement health and wealth.
Repeal and Replace the Affordable Care Act (ACA)
Government subsidized healthcare sure has a lot of different names.
The plan passed by Obama is officially called the Affordable Care Act (ACA), but it is more commonly known as Obamacare. It is defined by making insurance compulsory for all Americans with the intention of reducing costs by having everyone enrolled.
The newly introduced plan is officially called the American Healthcare Act. However, many people are referring to it as Ryancare or Trumpcare. This plan is defined by offering tax rebates to help cover the costs of insurance and guaranteeing universal access to care.
Here are a few pros and cons of the dueling plans with regards to people nearing retirement:
- The American Healthcare Act is designed to bring down premiums by an average of 10%.
- The new plan also hopes to increase options and choices for people seeking insurance.
- Some experts believe that younger and healthier people may see cost reductions for insurance but older people — especially those 50-64 will see increases in costs. (If you are 65, you can participate in Medicare which is different from these other plans.)
- If you need to buy your own healthcare before age 65, there may be cause for concern. The Congressional Budget Office estimates that the price an average 64-year-old earning $26,500 would need to pay after using a subsidy would increase from $1,700 under Obamacare to $14,600 under the Republican plan. Other estimates say that costs for older Americans could go up 5 times.
- Interest groups who are against the new plan include the AARP, American Hospital Association, Federation of American Hospitals, the American Medical Association, American College of Physicians and others.
- Some conservative groups are also opposed to the new bill because it does not cut government involvement enough. These groups include Heritage Action, Cato Institute, Tea Party Patriots and others.
- Unlike the ACA, you are not required to buy insurance under the American Healthcare Act, but you would pay higher premiums when you do sign up if you weren’t enrolled in a program at the outset.
If you are not yet 65, use the NewRetirement retirement planning calculator to help estimate the impact to your finances should you see premiums rise.
Social Security makes up 24% of federal government spending — currently 9% more than defense.
According to several government estimates, Social Security may not have enough money starting sometime between 2033 and 2037 — if no changes are made to the program.
If you are already receiving benefits, it is unlikely that you would see cuts, unless no changes to the program have been made, in which case your checks could shrink. Federal law prohibits Social Security from deficit-spending. Legislative reform would be required before 2033 (or whenever the system starts to run in the red) in order to avoid an immediate 21% cut in benefits.
More likely is that the government will make other changes that will impact future beneficiaries — delaying the eligibility date or reducing benefits to new enrollees.
Like Social Security, Medicare makes up a huge part of the federal budget — 25%.
According to the 2015 Medicare/Social Security Trustees’ Report Analysis Medicare faces a $27.9 Trillion unfunded liability over the next 75 years. Currently Medicare “Part A trust fund is officially bankrupt in 2030, at which time the Medicare program will no longer be able to pay full benefits for seniors.”
- Healthcare is expensive and seniors are the biggest consumers of the services.
- We are living longer than ever before and due to these longer lifespans and the baby boomers retiring, there are also record numbers of older adults.
- Our economy has not been booming, meaning that we have less revenue to help fund Medicare and other entitlements.
Did you know that Medicare costs went up in 2017?
You might not think of immigration as a retirement issue, but did you know that almost 30% of doctors and 16% of all healthcare professionals are immigrants?
With healthcare being such a critical issue for seniors, it is worth considering these facts — especially when you know that we already have a projected a projected shortfall of 46,000 to 91,000 doctors by 2025.
Have you tried finding a new doctor lately? Some areas of the country have severe shortages already.
Until recently, many financial professionals (many of whom sold products) only needed to adhere to a “Suitability standard” which means that they could sell you a product if it was a good or reasonable fit or maybe the closest fit they had in stock.
This is different than a “Fiduciary standard” which means that the advisor needs to act in your best interest.
A rule was introduced last year by the Department of Labor that stated that any retirement plan advisor should adhere to the fiduciary standard. This year that rule was cancelled.
If you work with an advisor or if you are buying a financial product, ask the person with whom you are working if they are a fiduciary. If they are not offering you fiduciary advice, ask a lot of questions about how they are compensated and make sure that you are not paying too much in fees.
Learn more about the fiducary rule and how to protect your money.
If you expect to collect a pension in the future, you have reason to be concerned about your promised benefits.
If you are a tax payer, you may need to worry about the massive financial burden of the benefits that have been promised to pension recipients.
The problem is that pension administrators have promised to pay out FAR MORE money than they have access to. And, in the case of public pensions, the burden of making up the difference is on tax payers.
Exactly how much of a burden this will end up being depends on how the financial markets perform and the rate of return the administrators will get on the money:
- With conservative investment returns, the total US Public Employee Pension Debt (or unfunded liability) is $5.6 Trillion or about $47,000 per household.
- If you assume a 7.5% rate of return on average, the unfunded total US Public Employee Pension Debt (or unfunded liability) is just $1.3 Trillion or about $11,000 per household.
New Federal Budget
President Trump introduced his 2018 budget on March 16, 2017.
His plan calls for a 9% increase in defense spending and a 7% increase for homeland security.
Beyond that there are cutbacks on almost everything else. Of particular interest to retirees might be the 20% cut to the National Institutes of Health (a major organization fighting disease) and reductions to home energy assistance, Meals on Wheels and other low income programs.
It is worth noting that the President did not propose any changes to Social Security and Medicare. However, he only makes budget recommendations, ultimately Congress will finalize the plans and it will be interesting to watch what happens.
What Changes Should You Make to Your Retirement Plans Based on This Information?
Think carefully about your expenses for healthcare and taxes. Consider the possible impact that changes to Social Security and pensions could have on your future income. And, also think about the overall health of the economy and the types of services you want to use in retirement.
You can try different what if scenarios with a retirement planning calculator.