Golden Opportunities

At last, the clock on your working years is running out, and you are actually within field goal distance of your dream - retirement-preferably in a warm, sunny locale. But if you've failed to include one important cost, your retirement goals could be sidelined. Here to help you avoid being penalized for this offensive penalty is our financial quarterback, Jim Lineweaver, of the Lineweaver Financial Group.

Question: What is one major mistake people make when determining how much money they will need for a comfortable retirement?

Answer: Many people who plan for retirement forget to factor in the cost of health care, and hat can be a big mistake. The dollars that you thought were going to get you out of Cleveland in the winter might be needed to cover your health care costs. So instead of sitting on a beach somewhere, you are going to be wondering how you are going to afford your health care bills.

Question: Why do people forget to adjust for healthcare?

Answer: Many people in this country have had the luxury of having someone else pay for their health care during their working years-their employers. However, that is changing. Many employees are paying for an increasing share of their health care.
For those who haven't contributed to their health care, the costs are shocking. Even if you are old enough for Medicare, a supplement to cover what Medicare doesn't cover will run you around $250/month.
Are you planning on retiring at age 55 or 60? Who is going to pay for your health care before you are eligible for Medicare? You really cannot take the chance and have no health care coverage. One major illness could have a profound impact on your retirement savings if you don't have at least catastrophic coverage.
Another change is the portion of health care costs that employers are covering. With health care costs that are significantly outpacing inflation, corporations are cutting the portion of health care that they will cover for future retirees. This is a trend that will not reverse, so if you aren't retired, and your employer pays for a portion of your retirement health care premiums, you can expect a greater share to come out of your pocket.

Question: Can you give us an example?

Answer: Sure. For those covered under the School Employees Retirement System, the portion you will pay is increasing dramatically. If you retire in 2007 with 20 years of service, you will pay for 25% of your health care. But if you wait until 2008 to retire, your portion of your health care costs for the rest of your life are now 50%! Your out-of-pocket expenses have doubled for the rest of your life, assuming there are no changes in deductibles and co-pays.
These numbers are not unique. We see lots of employers making the same kinds of changes. Retirees are going to pay a greater portion, if not all, of their retirement health care costs. The increases that retirees can expect to pay are not limited to increased premiums, but will include higher deductibles and higher co-pays.

Question: Are there any solutions?

Answer: First of all, you need to plan for these costs so they don't surprise you.
Secondly, are they any ways you can lower your cost of insurance? Do you belong to any groups, like professional or alumni organizations, where you can get lower cost coverage due to group rates?
Do you have any activities that you could turn into a part-time business? If so, and if you were to incorporate your business, you could be able to deduct the cost of your health insurance through the business. And if you do start that business, many organizations, like COSE, will help you with cost of health coverage by getting you savings through their negotiated rates.

Don't let rapidly rising health care costs put a chill on your warm weather retirement plans. To learn more, give Jim's office a call. We'll be back.