You are using an older browser version. Please use a supported version for the best MSN experience.

8 big things older workers should be worrying about

MarketWatch logo MarketWatch 7/25/2022 Paul Brandus
© Getty Images/iStockphoto
RETIRE BETTER

Lots of older Americans used the pandemic as a good time to leave their jobs and retire early. And why not? Stocks were up, real estate was up, and this so-called “wealth effect” gave them a feeling of confidence. Enough of the commute, office politics and all the rest. 


Gallery: 6 Ways To Avoid Having To Delay Retirement Due to Inflation (GOBankingRates)

But many others weren’t as lucky, and were forced out as employers raced to shed costs. Whatever the reason, the share of retirees as a percentage of the U.S. population grew by 1.5 percentage points in just a year and a half, to nearly 20%, according to the Kansas City Federal Reserve. That’s a big jump for such a short period of time. 

​That was then. Since then, we’ve seen a sharp drop in stocks, cracks in the housing market and 9.1% inflation. This is more than enough to erode whatever prior confidence early retirees might have had. Some are now choosing to come back to work. Much has changed in the last two years, and for anyone wondering what’s next, ​check out this list of things to keep an eye on. They all come back to money, of course, and I’ll offer a bit of context with each data point, which hopefully will be useful.

1. Inflation. The current cost of living index, says the government, is 9.1%. For every $1,000 you have saved up for retirement, that money will get you $909 worth of purchasing power. Inflation, it has been said, is a “hidden” thief. No it’s not. It’s plainly visible at the grocery store, gas station and more. Whatever you have saved​, ​ it’s not going to last as long.

2. Social Security. Fears that Social Security will vanish aren’t true. What is true, however, is that its vaunted Trust Fund is projected to be exhausted by 2034. When that happens, retirees will get whatever can​ b​e generated by payroll taxes, and currently that’s projected to be about 77 cents on the dollar.   

3. Healthcare spending. A couple retiring this year at age 65 will spend $315,000 out of pocket on healthcare alone over the rest of their lives. The key phrase here: out of pocket. That’s beyond what Medicare will pay for. Folks in their 60s or 70s often scoff at this, saying they don’t spend anywhere near that much now and therefore it’s incorrect. But it’s wrong to extrapolate that into one’s final years, when the bulk of healthcare spending is typically borne.

4. Drug ​p​rices. Think energy and food’s up? The Journal of the Medical Association says prices for new brand-name prescription drugs increased 20% per year between 2008 and 2021. That’s far beyond even the current inflation rate, of course. Generics and assorted discounts help lower the actual price that folks pay, but the bottom line is drug prices have shot up over the long term—and are reflected in the Fidelity figure above. 

5. Diabetes. Here’s a huge cost bomb that’s just now beginning to explode. According to the American Diabetes Association, as of 2019, more than 37 million Americans had diabetes. But get this: a staggering 96 million more, over the age of 18, are prediabetic. The Centers for Disease Control and Prevention estimates that even now, about 25% of all U.S. healthcare ​costs​ is spent caring for people with diabetes​. Medicare and insurance pay big chunks of this, but who pays Medicare taxes and insurance premiums? You do. In addition, diabetes costs the U.S. economy another $90 billion annually in lost productivity. ​​

6. Exercise. A greater emphasis on staying fit would undoubtedly drive better outcomes, including cost savings, in the prior three items—healthcare spending, drug prices and diabetes. FamilyDoctor.org recommends that seniors 65 and older get at least 2.5 hours of moderate aerobic exercise each week. That’s about 20 minutes a day. It emphasizes that there are four things to focus on: ​e​ndurance, ​s​trength, ​b​alance and ​f​lexibility. 

7. Savings. So how much will we need? According to Baltimore-based investment giant T. Rowe Price, if you are, say, 50, you should have 3 to 5.5 times your annual salary saved. By age 60? Six to 11.5 times your salary. And by age 65, 7 to 13.5 times your salary. 

8. Savings ​g​ap. Compare T. Rowe’s benchmark to actual savings, and it would appear that millions of Americans are short, perhaps alarmingly short, of what they should have. Synchrony Bank, for instance, says the median savings for Americans in their 50s is $117,000 and $172,000 for those in their 60s. Meanwhile, Bankrate pegs median household income for adults ages 45 to 54 at $90,359. Coming back to the T.Rowe multiple, this implies that workers in their 50s should have, on the low end, some $300,000 saved. 

Most financial advisers say the best thing anyone can do to bolster their finances—and this isn’t what some want to hear—is to keep on working. Even better, keep on working somewhere that can help with healthcare costs. These are challenging times. No one can say how much higher inflation could go, or when it will come down. As long as it persists, everything I’ve mentioned above will be impacted and not for the better. 

What are your thoughts? Let me know at RetireBetterMarketWatch@gmail.com.

AdChoices
AdChoices
AdChoices

More from Marketwatch

image beaconimage beaconimage beacon