Freeman's Blog


February 19th, 2013 by

How much does heath care cost in retirement?

Medicare covers only 59% of the cost of health care for seniors–and retirees can expect to pay an even larger share in the future.

In fact, a couple age 65 might need $387,000 saved in order to be confident of covering their health care costs in retirement, not including outlays for long-term care.  Those are findings from a new report from the Employee Benefit Research Institute (EBRI). Based on the latest data available, from 2009, Medicare paid 59% of health care services for beneficiaries 65 and older. Individuals enrolled in Medicare paid 13% out-of-pocket, private insurance covered 14%, and the balance came from other sources such as Medicaid and VA benefits.

Going forward, EBRI predicted that “individuals can expect to pay a greater share of their costs out of pocket because of the combination of the underfunded financial condition of the Medicare program and cutbacks to employment-based retiree health programs.” EBRI found that estimated health care costs for seniors depends on two factors. First, how much are people likely to spend on prescription drugs? Second, how confident do they want to be that they’ll cover their health care costs?

For example, take a married couple in which both spouses are now 65. They are in good health, so they expect to use the median amount of prescription drugs in retirement, and they are satisfied with a 50% chance of meeting their lifelong health care costs. Such a couple should have $163,000 in nest egg dollars, EBRI concluded. On the other hand, suppose that same couple expected to be in the 90th percentile of prescription drug usage and also wanted a 90% chance of having enough money. Such a couple would need a nest egg of $387,000, according to EBRI. Even those numbers might be inadequate, if long-term care is needed, but seniors may trim the amounts needed for life_guide_retirement_medicare health care if they work past age 65 and continue to receive health care benefits as employees.

Source:, Nov 13, 2012, Health Care May Cost Nearly $400K for a Retired Couple

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February 18th, 2013 by

74 percent of Americans are not likely to borrow money even with low interest rates

Source: – “Borrow money? ‘No thanks,’ say consumers” Oct. 22, 2012
This result comes from a survey in 2012 after the Federal Reserve’s recent declaration to keep interest rates shockingly low until 2015. By keeping interest rates low, the Federal Reserve aims to stimulate economic activity through consumer spending and borrowing. But despite the low rates, Americans are focused on spending less.

The Federal Reserve announced that interest rates would remain at these all-time low rates for an additional one year beyond their expectations. That gives Americans who do want to borrow an additional year of low interest rates.  But this notice of extension for low interest rates tells Americans that there isn’t any major rush to take advantage of the low interest rates. They will be around for years to come still.

While more consumer spending would boost economic activity, consumers are still recovering from previous spending binges. In fact, the most recent numbers from the Federal Reserve showed that total household debt is at 103% of disposable income. Granted, total household debt is down from 123% when the economic depression began, but it is no where near the expect norms of 10-15 years ago. About two decades ago, Americans had a total household debt around 80%.

Americans are facing continued fear of unemployment. The Federal Reserve might be trying to nudge consumers to increase their spending and borrowing, but without job security, Americans are concerned about how they will pay back their loans.

life_guide_retirementMaybe it’s a sign that Americans are returning to an era of “spend less than you earn”.

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February 7th, 2013 by

Many workers are adjusting some of their expectations about retirement, perhaps in response to their reduced level of confidence about their retirement finances.

Twenty-five percent of workers surveyed in the 2012 Retirement Confidence Survey say the age at which they expect to retire has changed in the past year. Of those, the vast majority (88%) report that their expected retirement age has increased. This means that in 2012, 22% of all workers planned to postpone their retirement.1

Many workers who are planning for retirement are feeling the effects of the poor economy. As the economy struggles to gain positive momentum, many people who planned to retire earlier are rethinking their retirement strategy and staying in the work force for some years longer. Some are no longer confident in social security or the government, some are concerned with the increase in cost of living during their retirement years and many are afraid to retire because they won’t have enough finances to retire comfortably.2

Regardless of what is weighing on your mind for your retirement years, the only way to create a positive solution is to plan early. For many people who do not know where to turn to get started, your best option is to find someone who specializes in helping people with their retirement planning. When looking at your financial position, retirement planners can determine how to enlarge your nest egg with your current resources and make actionable steps to keep adding to your nest egg.  Once the plan is prepared, take action and keep your retirement planning a priority in your financial house.

1+2) Employee Benefit Research Institute 2012- March 2012

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February 5th, 2013 by

retirement planning for age

The number of Americans aged 90 and older almost tripled between 1980 and 2010 and is expected to quadruple by 2050.1

Without a source of guaranteed income, it might be difficult to estimate how much to withdraw each month from your retirement nest egg. Withdraw too much and you risk running out of money in your lifetime. Withdraw too little and you may live on a more limited budget than necessary, missing out on some of the experiences you have looked forward to enjoying in retirement.

Annuity payouts can be retirement income solution. In fact, annuity payouts can be structured to continue throughout the lifetime of a second individual, thereby providing income for a surviving spouse (as long as the contract remains in force). Knowing today’s census data, this may be especially important for women, who often are younger than their spouses and typically live longer than men.3–4 According to US Census Bureau, more than 84% of women who live to age 90 and older are widows.5

Premiums for a fixed annuity can be paid in a lump sum or a series of payments. If the insured dies before annuity payouts begin, the insurer will generally keep the premiums that were paid. You should be aware that money put into a fixed annuity does not have the opportunity to pursue potentially higher growth rates in the financial markets. And inflation could reduce the future purchasing power of the annuity payouts.

A fixed annuity is an insurance-based contract. Any guarantees are contingent on the claims-paying ability of the issuing insurance company. Generally, annuities have contract limitations, fees, and expenses. Most annuities have surrender charges that are assessed during the early years of the contract if the annuity is surrendered. Withdrawals of annuity earnings are taxed as ordinary income. Early withdrawals prior to age 59½ may be subject to a 10% federal income tax penalty.

(1, 3, 5) U.S. Census Bureau, 2011
2), May 25, 2011
4) National Vital Statistics Reports, Vol. 59, No. 9, September 28, 2011

Call The Host of Radio Show- CBS Sports Radio 1580AM, Freeman Owen JrI specialize in retirement planning strategies. Let me help you determine the best way to plan for retirement and keep your money safe so you can enjoy the retirement lifestyle you always dreamed about. My consultation is free so call 833-313-7233.