Clocking in for Late Retirement

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As longevity increases, will we face retirement with sufficient resources? Unfortunately, most signs point to no. If retiring full-time at 65 is still the goal, our finances are simply not in order. Economic instability, rising healthcare costs and the aftermath of the Great Recession haven’t helped. But whatever the cause, we have yet to adapt to this new fact of life.

A recent report from the Stanford Center on Longevity shows that thirty percent of Boomers have nothing saved for retirement, and that those who have saved will not be able to enjoy the same standard of living. How does this compare to previous generations? They were better off — with greater income, wealth, home equity and less debt than today’s Boomers, as shown below.

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This warning bell isn’t sounding the alarms for Boomers or for younger workers. Take a look at the suggested retirement contributions, sorted by the age at which you start saving, and the age at which you’d like to retire. As you can see, if you put off saving for retirement until, say, age 45, you’ll need to contribute a greater percentage of your income.

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Yet from ages 24–64, researchers estimate that families are only saving a median of 6–8% of their income. So even if people do have the opportunity to save, they’re not putting enough away.

One barrier to saving — at any age — is the cost of health insurance. As of 2016, just over half of Americans were covered by their employers, which leaves everyone else to sort it out on their own (or with support from the Affordable Care Act). But proposals for Medicare-for-All or Medicare-for-More could make an impact when Democrats have control of the Senate. Instead of expanding health coverage to everyone and doing away with employer-backed plans, the age eligibility for Medicare could simply be lowered. Although polls show that Democrats and Republicans alike are increasingly in favor of Medicare-for-all, the costs are unclear and the political will to pursue it is missing. All we do know is that our current system isn’t working.

Before we talk about expanding Medicare, let’s look at a recent snapshot. Currently, Medicare covers 49 million Americans, half of whom have three or more chronic conditions. Many live on modest incomes, and one fourth have less than $10,000 in savings. Unfortunately, poverty and old age go hand and hand for many in the U.S; though our elderly participate in the workforce at greater rates as compared to other developed nations, our poverty rate for those 65 and up is 21.5% — higher than every OECD nation except Switzerland and Australia.

While health insurance is just one part of the picture, it is a constant concern. A recent poll showed that nearly half of Americans aged 50 to 59 are not confident that they’ll be able to afford health insurance when they retire. That percentage dropped to 37% for people aged 60–64, 71% of whom had already retired. Part of the issue is that even though Social Security payments have been increased due to inflation, cost of living is increasing even faster — think of the cost of prescription medicine, which keeps skyrocketing.

Whatever route we take, value-based healthcare has been gaining momentum. In this system, hospitals and doctors are compensated based on health outcomes, not the number of procedures performed. There’s a focus on prevention and a coordinated approach — through sharing electronic medical records with everyone treating a particular patient. For instance, I know of an operator using value-based care who helped a patient apply for free or reduced cost transportation (for which he qualified) so he could make it to his appointments. The result? The patient’s health improved.

How prevalent is value-based care? The Affordable Care Act, passed in 2010, which promoted value-based care, as did the Medicare Reauthorization bill of 2015. Medicare’s focus on value-based care was further expanded in 2017 to include people with chronic conditions. Though hospitals across the nation are starting to take on value-based care, some barriers stand in the way; laws meant to eliminate fraud in fee-for-service are preventing accountable care organizations from coordinating efforts. Some in congress are trying to change these laws, but we all know that takes time.

Instead of finding these barriers disappointing, I think there’s reason for hope. When working under the auspices of value-based care, the healthcare system is highly motivated to help their patients stay healthy. After all, that’s how they get paid. And as a nation, we’ve begun to accept the importance of well-being. That personal wellness goals can align with the goals of the healthcare system could foster real change.

Assuming that’s possible, it could come as a great relief, and alter what retirement looks like for generations. In order to confront the increase in longevity, we have to find solutions that make it easier for Americans to prepare for the years ahead.

President of The McClennan Group, Serial Entrepreneur, Digital Businesses, Co-Author Innovators Anonymous, #IA

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