Free Wealth Management Guide Retirement Planning: What You Need To Know | Page 2

Funding Future Healthcare

According to the U.S. Congressional Budget Office
(CBO), in calendar year 2010, for the first time since the
According to a 2010 study conducted at the Center for
enactment of the Social Security Amendments of 1983,
Retirement Research at Boston College (1), a couple reannual outlays for the program exceeded annual tax
tiring today at age 65 will need an estimated $197,000 in
revenues (that is, outlays exceeded total revenues excludsavings to pay for the present value of health insurance
ing interest credited to the trust funds). In 2011, outlays
premiums, co-payments, and uninsured prescription
exceeded tax revenues by 4 percent. In fiscal year 2012,
drug costs. If you add nursing home costs, the figure
outlays 65
LONGEVITY RISK: MARRIED COUPLES, AGEfor Social Security totaled a little under $800 bilincreases to $260,000!
lion, equal to about 5 percent of gross domestic product
One spouselong-termage...insurance,Probability one-fifth of federal spending.
lives to care
and
Assuming you don’t have
how

many of you have at least $260,000 earmarked for unin70
99.5% CBO projects that the gap between tax revenues
The
sured healthcare costs in retirement?
75
97.2 and program spending will average about 10 percent of
80
90.6 tax revenues over the next decade. As more members of
the baby-boom generation enter retirement, outlays will
The Uncertainty of Social Security
85
75.9
increase relative to For size of thecouples, age 65, tax
the married economy, whereas
there is a 50% chance of at the
90
50.3 revenues will remain at an almost constant share ofleast
Social Security is the federal government’s largest single
one spouse living to age the
economy. As a result, the gap will grow larger in 90. 2020s
95
program. When social security started in 1935, there 22.1
and will exceed 20 percent of revenues by 2030.
were many more people paying into the social security
Source: Applied Risk Management During Retirement, Milevsky and Abaimova,
system than those receiving benefits. Today, that is just
June 2005, Society of Actuaries RP-2000 table.
CBO projects that under current law, the DI trust fund
the opposite. By the year 2036, there will be almost twice
will be exhausted in fiscal year 2016 and the OASI trust
as many older Americans as today - from 41.9 million
fund will be exhausted in 2038. (2)
today to 78.1 million. There are currently 2.9 workers for
each Social Security beneficiary. By 2036, there will be 2.1
workers for each beneficiary.

Health care costs as a percent
of annual spending

RISING HEALTH CARE COSTS IN A TYPICAL RETIREMENT
As we age, health care becomes a much
larger portion of total annual spending.
15.1%
11.9%
7.6%
5.6%

45-54

55-64

65-74

75+

Age
Source: U.S. Bureau of Labor Statistics, Consumer Expenditure Survey, 2010

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