How do your ER costs compare to these?

[mickeyd]

I found this article interesting because of all of the different statistics that were quoted. Not sure if they are all accurate, but it sure makes you think.

Quote:

Consider, for instance, health-care costs. Fidelity Investments estimated earlier this year that a 65-year-old couple retiring today would need $215,000 set aside just to pay for medical expenses over a 20-year span. And if that wasn't depressing enough, other estimates are even higher. Paul Fronstin of the Employee Benefit Research Institute, for instance, said a 65-year-old couple retiring today would need, assuming average life expectancy of 82 for men and 85 for women, more than $300,000 set aside to pay for health-care costs (premiums and out-of-pocket expenses) in retirement, and more than $550,000 if the couple lives to age 92.

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Consider, for instance, the results of the 2002 Consumer Expenditure Survey. On average, retirees spent 32.6% on housing, 14% on food, and 13% on health care. But that's the average. What's interesting is the degree to which money spent on health care in retirement changes over time. For instance, those 55 to 64 spend 6.8% on health care, those 65 to 74 spend 11.2% and those 75 and older spend 15.1%. That percentage rises in part because the cost of health care is rising twice as fast as the core rate of inflation (less energy and food), 5% vs. 2.3%, according to the U.S. Bureau of Labor Statistics. But it also rises because older retirees tend to spend more on health care than younger retirees.

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So where do retirees get their income once in retirement? Again, the numbers are depressing (and deceiving). On average, retirees get 39.8% from Social Security, 23.7% from earnings, 19.4% from pensions and annuities, 15.4% from assets (IRAs and the like) and 1.9% from other sources, according to EBRI Notes.

http://finance.yahoo.com/focus-retir...nt-preparation

[walkinwood]

I wonder what "set aside" means. Is that money you invest with the rest of your portfolio, money invested in a CD?

It would be nice if journalists cared about these nuances.

[Michael]

I can't imagine a CD keeping up with medical inflation. Maybe Vanguard's health care mutual fund, or some such (no guarantees with such funds). The Fidelity estimates of money needed for medicine are quite a bit higher than a few years ago. The amount estimated a few years ago, put in a CD, would be hopelessly insufficient today.

[megacorp-firee]

Quote:

Originally Posted by mickeyd I found this article interesting because of all of the different statistics that were quoted. Not sure if they are all accurate, but it sure makes you think.

I am fairly sure that I am not representative of the population, but here are my numbers for reference.

Quote:

Consider, for instance, health-care costs. Fidelity Investments estimated earlier this year that a 65-year-old couple retiring today would need $215,000 set aside just to pay for medical expenses over a 20-year span. And if that wasn't depressing enough, other estimates are even higher. Paul Fronstin of the Employee Benefit Research Institute, for instance, said a 65-year-old couple retiring today would need, assuming average life expectancy of 82 for men and 85 for women, more than $300,000 set aside to pay for health-care costs (premiums and out-of-pocket expenses) in retirement, and more than $550,000 if the couple lives to age 92.

I can't comment on any set asides, as I can't figure out (and don't think anyone else can) how much I would need for something that may or may not happen in the future. I insure against catastrophes and allow for it in the 'fluff' part of my budgeting.

Quote:

Consider, for instance, the results of the 2002 Consumer Expenditure Survey. On average, retirees spent 32.6% on housing, 14% on food, and 13% on health care. But that's the average. What's interesting is the degree to which money spent on health care in retirement changes over time. For instance, those 55 to 64 spend 6.8% on health care, those 65 to 74 spend 11.2% and those 75 and older spend 15.1%. That percentage rises in part because the cost of health care is rising twice as fast as the core rate of inflation (less energy and food), 5% vs. 2.3%, according to the U.S. Bureau of Labor Statistics. But it also rises because older retirees tend to spend more on health care than younger retirees.

I have a limited sample, since I have been FIREd for only 6 months (at 56), but: health care is about 10%, housing (mortgage & taxes) about 37%, food/groceries about 10%

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So where do retirees get their income once in retirement? Again, the numbers are depressing (and deceiving). On average, retirees get 39.8% from Social Security, 23.7% from earnings, 19.4% from pensions and annuities, 15.4% from assets (IRAs and the like) and 1.9% from other sources, according to EBRI Notes.

My income sources are roughly about 50% pension, 30% earnings and 20% assets. I am not old enough to apply for SS. I am fortunate enough not to have to rely upon SS and did not include the numbers in my FIRE decision. This is another 'fluff' buffer I will have to deal with the unknowns.

[audreyh1]

Quote:

Originally Posted by walkinwood I wonder what "set aside" means. Is that money you invest with the rest of your portfolio, money invested in a CD? It would be nice if journalists cared about these nuances.

I assume they suggest you "pad" your retirement fund with an extra $215,000 to cover medical costs? That's the only interpretation that makes sense to me.

Audrey

[Alan]

Quote:

Originally Posted by megacorp-firee My income sources are roughly about 50% pension, 30% earnings and 20% assets. I am not old enough to apply for SS. I am fortunate enough not to have to rely upon SS and did not include the numbers in my FIRE decision. This is another 'fluff' buffer I will have to deal with the unknowns.

30% earnings? Does this mean you are semi-ER'ed or by earnings do you mean dividends, interest etc.

[dex]

Quote:

Originally Posted by audreyh1 I assume they suggest you "pad" your retirement fund with an extra $215,000 to cover medical costs? That's the only interpretation that makes sense to me. Audrey

Would it mean allocate $215K of their cost over the next 20 years or an average of 10,700/year?

If so we would need to know the total budget over the 20 years in question to really get a full picture.

[UncleHoney]

But in retirement, income falls dramatically.The average total income for those 65 and older in America is $25,610, and the median was a meager $16,770, according to EBRI Notes. That means retirees are living on roughly one-third of their preretirement income. And that's a far cry from the 70% to 80% income replacement experts suggest Americans need to maintain their preretirement standard of living.


Maybe the experts don't really know what they are talking about. Seems like everyone has the answer to how much retirees need to get along in old age but to me their numbers are just WAG's. Everything is based on statistics and not much actual data of how a retiree can make ends meet. Why don't these experts work with some real input, talk to some real retirees and get the real facts instead of just blabbering on about statistics? People retire everyday with limited means and live to a ripe old age.



As far as healthcare costs, to me the limiting factor will end up being how much money is available for healthcare, not how much you will need. Just my thought on the subject but I think there is going to be a major setback for the healthcare industry in general when the day gets here that people are tapped out for money. The healthcare industry is running the show right now but I think the day will come that the person in need will be controlling it. If the money isn't available it won't be paid and that will limit the out of control costs increases. If people quit buying, sales always drop off.

[audreyh1]

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Originally Posted by dex Would it mean allocate $215K of their cost over the next 20 years or an average of 10,700/year?

Well, that's what is so vague!

If they mean that a retiring at 65 years couple on average spends $215,000 (in today's dollars) on medical expenses (not covered by medicare), then investing that money is a way that keeps up in inflation might should be OK.

But of course, the key word is "average". None of us really knows how much $$ we will spend over our lifetime on medical expenses, or what the future holds and how expenses will change.

I mean really - the article is almost useless in that respect.

Audrey

[megacorp-firee]

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Originally Posted by Alan 30% earnings? Does this mean you are semi-ER'ed or by earnings do you mean dividends, interest etc.

sorry, I interpreted earnings to mean dividends and interest. So I probably should have included those in assets.