Do you know your life expectancy? What does life expectancy really mean, and why should we care?
These are the questions I answer in my video this newsletter.
Therefore, you should watch my video.
Hi there, Mike Brady with Generosity Wealth Management, a comprehensive, full service, wealth management firm headquartered here in Boulder, Colorado. Today I want to talk about life expectancy and withdrawals and Medicare and Social Security, etc. To be honest with you I only have three or four minutes so I’m only going to give you a little teaser and then I’m going to follow up in the next video.
The first one is life expectancy. If you are 65; I’m going to put up on the chart there, on the video, a chart. What you’ll see if you are 65 years old and you are a woman you have an 85% probability of living up to age 75. That’s a high probability of course. If a couple that are 65 years old the probability of one of you living past 75 is almost assured at 97%. We go out to 80, 85, 90. Let’s just look at 90 years old; if you’re 60 years old, from 75, 85, that’s 25 years to age 90. If you are a woman you have a 1 in 3 chance of living to 90. Periodically I’ll meet with someone who will say; well you know my mother and father they died in their early 80s and there’s no way I’m going to live to 90. Well, you know what, there’s a 1 in 3 chance that you will. Do you want to be that one and spend all your money in the next 25 years? Probably not; plus, many times our parents, that’s just kind of the way it worked. That generation they were smoking and drinking and all kinds of stuff and now we’re always eating kale and gluten free stuff so chances are we’re probably going to live a little bit longer. That’s what statistics have shown us.
One of the values that a financial advisor brings and I always bring to the relationship with clients is life expectancy, that’s usually; if my life expectancy is 85 or so I’ve got to make sure that I plan for much longer than that because that’s using the average. I think that chart there starts to show it. The reason why I bring that up is in retirement; I’m now going to throw one more chart up there for today and what you’re going to see is extending my age and category. From left to right it adds up to about 100%, some rounding and stuff like that, but the gray is the 10 years leading up to retirement at age 65. Then you hit 65 and then above. What you’re going to see is some housing and other increases as a percentage. Transportation goes down. Medical care of course goes up, etc. What we’re going to see on the bottom there is the average inflation from 1982 to 2013 of those particular categories. You’re going to see the medical care which is a higher percentage has a tendency to increase. You know this; you’ve been paying attention the last five years and I’m stating the obvious. Other things; housing is still almost 3%. The percentage of; the items that seem to go up as a percentage of your income also has some high inflation to it as well. That’s something that we have to keep in consideration. We live longer than what we think we’re going to do and many times things are more expensive than what we think as well.
Gosh, do I have time for one more really cool thing here? Here is the variation in healthcare cost. See that little graph there, the little United States there? What you’re going to see is the annual Medicare cost and in Colorado we’re right in the middle. We’re not on the cheap side like many of the world in blue, we’re between $3750 and $4500 and then $4500 after that entry has to do with those with traditional Medicare and comprehensive Medicare depending on where you live in retirement. We’re going to talk a little bit more at another video of some long-term planning, withdrawal strategies. One of the things that a financial advisor brings to the relationship are all the strategies about the de-accumulation of the portfolio; you’ve got the accumulation stage where you’re trying to save money and 401(k) all this type of stuff and then you hit a point and then it’s the de-accumulation. What’s your strategy? What’s your mix? How can you set things up to limit, to make the probability that you’ll outlive your money as low as possible because that’s of course a bad thing. These are some of the things I’m going to talk about in upcoming videos. Nice to talk to you today, sorry it’s so short but I did want to be short and pippy.
With all the discussion around Obamacare, I thought I’d include a whitepaper on planning for future healthcare.
It’s pretty tricky–I’m not going to lie.
I have a great program that extrapolates out into the future estimates for specific healths, age, lifestyle, tax brackets, etc. I have to admit it’s pretty cool.
If you’d like me to do one for you (complimentary of course), let me know.
It’s my belief the volatility we’ve seen in the past few weeks, months, and year will continue going forward. I also believe that more active management may make sense to take advantage of this market condition.
I talk about this in my video.
I also discuss the rising healthcare costs in your future and that I have software that will estimate what lump sum you may need upon retirement to fund your healthcare under certain assumptions.
Fun stuff! Click on video to hear more!
TRANSCRIPT:
Hi there, Mike Brady with Generosity Wealth Management, here in Boulder, Colorado. And I am really pleased to be talking with you today and there are a couple of things I want to talk about today.
And the first one is volatility. On Wednesday, we had a DOW that was over 400 points up, and this is following the Thanksgiving week where the market was sharply down. (Low volume but still sharply down.) And it’s my belief that this type of volatility, and not just in the last couple of weeks, we’ve seen a lot of volatility in the last year or so, I believe it is going to continue going forward. And if that is true, it’s also my belief that some active management should be considered for client’s portfolio. That’s something that I’m going to be talking with my clients about in the coming months. That’s also something I’m going to be talking about in these videos in the coming months, that it may have a place in a volatile environment- how can we best position our portfolio to take advantage of that particular market condition? So, if you’re not one of my clients, I recommend you give me a call so that we can talk about it, kind of one on one, and your personal situation.
And the second thing I’m thinking about this week is well, healthcare costs; and specifically as it relates to retirement.
I heard a statistic yesterday that is very interesting. The Fortune 100, 91 out of the Fortune 100, in 1985, had traditional pension plans. Today, the Fortune 100, only 19 of them have traditional pension plans. If you’re a GE employee, starting today, you know, day one of your employment, you are not offered their traditional pension plan. And that is, GE is one of the largest companies, with the largest pension plans. So, I think this is a trend that is going to continue going forward. And what this tells us is that you’ve got to take control of your saving and investing for your own retirement. Don’t assume that someone else, either some big corporation or even Social Security is going to handle it. You’ve got to take control of it!
And one of the largest expenses you’re going to have in retirement are your health care costs. And fifty-three per cent of individuals recently polled couldn’t even estimate what those health care costs are. We’re talking Medicare A, and B, and D, and your estimated premium payments, and your estimated out of pocket expenses. These are some expenses that you’re going to have to, you know, pay in your retirement. So the question is, in your life expectancy, what are they going to be, what kind of a lump sum, under certain assumptions, will you need to have in retirement? And of course the question is- do you have that set aside? You may, you may not, but let’s try to quantify that on a piece of paper.
I have some wonderful software that I’m going to be working with clients with in the next couple of months to try to put that number down on a piece of paper so that we can say, “Boom! This amount of money is what, under these assumptions, we’re going to need for the healthcare costs for the rest of your life.” So the question is, have you done that for yourself? Maybe you have. If you haven’t, give me a call I can try to help you answer that question. It’s a hard number to really put down, things are always in motion, but you know what, let’s try to estimate as best we can. An estimate is better than not having any idea at all. And it is something we can revise as the years go forward.
So anyway, that’s kind of what’s on my mind this week. Mike Brady, Generosity Wealth Management, 303.747.6455, here in Boulder, Colorado. A comprehensive, a full service wealth management firm; I love my clients, I have a great passion to treat my clients like members of my family, and if you’re not my client, I’d love to talk to you about whether it makes sense if what I do is right for you, or if I’m the right person to help you with that. So, anyway, you have a wonderful week and we’ll talk to you later bye bye now.
I believe that the coming 2 to 3 years will be pivotal in how our changing government relationship with medical care will affect the healthcare industry.
“Duh?” you say?…….
I bring this up because this is a huge part of our economy and it will have an impact on your portfolio and personal expenses. Unfortunately, the early signs are not encouraging.
Recently the 23% cut in federal Medicare reimbursements to doctors has been delayed….for 1 month.
To do: What is your healthcare exposure in your portfolio?
