< Back

This Week In Your Wallet: You’ll Need An Extra $25k For Retirement

I’m writing to you from Washington, DC — an exciting place to be on the morning of the first Democratic debate of this election cycle.  No, the debate itself isn’t here (it’s in Vegas, baby), but the Fortune Most Powerful Women Summit is. This conference is always inspiring and sometimes news making. Yesterday, after attending a panel on cultivating introverts and moderating one on the new Fintech, the kick-off dinner featured Rep. Elise Stefanik, the youngest woman ever elected to Congress, who pointed out that of the 10,000 total individuals who’ve served in Congress, only 300 have been women. “We need to do better,” she said.  She was followed by interviews with Senator Kirsten Gillibrand and Yahoo’s Katie Couric, both of whom weighed in on whether Joe Biden would join the presidential race — Gillibrand said yes, Couric no. Tonight, we hear from First Lady Michelle Obama.  I’ll fill you in on that next week.

In other news, The New York Times has run a couple of disturbing stories about the fact that people are dropping the healthcare coverage they purchased last year under the system set up by the Affordable Care Act. Why? Cost. Which is why it was disturbing to learn last week that it’s time to budget an additional $25,000 for healthcare in retirement.

Fidelity Investments released its annual retirement healthcare cost estimate, showing the amount a 65-year-old couple is projected to need in retirement, specifically for healthcare, is $245,000. That’s up 11% from last year’s $220,000. It’s a big jump, and neither the Affordable Care Act nor healthcare inflation are the springboards for it — longevity is.

The average lifespan continues to increase for both men and women. Last year’s mortality tables say the average lifespan of a 65-year-old man jumped from 82 to 85 and that of a 65-year-old woman from 85 to 87. Great, right? Now, you just need to be able to afford it. As I reported for Fortune this week it’s a relatively fixed cost. For instance, let’s say someone goes on Medicare and chooses one of the more common supplement plans, Plan F, which runs about $300 per month per person (though costs vary regionally). Now, this person also has to pay Medicare Part B and Part D premiums, which run about $105 and $30 a month, respectively. All in all, that’s $435 a month or $5,220 a year – times two.

The bad news, however, is this cost is one most people don’t seem to be planning for. An earlier Fidelity study said that for 75% of couples, being unable to afford the cost of health care in retirement is their top concern. Yet less than 25% have factored it into their planning. I offer some tips to get your head (and savings) in the game here.

Kids Out = Party Time? 

Speaking of your retirement — Boston College’s Center for Retirement Research found that spending trumps saving for many empty nesters (which could lead to a small nest egg).  The researchers found that, on average, more than eight years after the kids leave, parents only increased their savings in tax-deferred 401(k) retirement accounts by less than one percentage point of income. And instead of prioritizing their savings, they’re spending more on travel, new cars and housing projects. Consequently, 52% of working-age households are at risk of being unable to keep up with their pre-retirement standard of living in retirement. If that’s you, then The Wall Street Journal has some questions for you to ask yourself so that you can turn it around.

Monkey See, Monkey Do

As parents, we are our children’s first, financial role models, which means we owe it to them — and to ourselves — to practice good behaviors. As a friendly reminder, Credit.com posted a list of 11 behaviors you don’t want your kids to learn from you. Topping the list? Not having a budget. If you buy whatever you want or need whenever you’d like — without factoring in the cost — then they’ll disassociate the act of buying from the cost. In that same vein: if your kids only see you swipe or dip cards, then they won’t see that spending money costs actual money. Using cash is a visual lesson.

Moreover, people say actions speak louder than words, but it’s important to talk to your kids about money, too. And it’s no doubt a tough subject, as is money overall. That’s one reason I’ve been collaborating with the folks at Time for Kids and the PWC Charitable Foundation to launch round two of Your $, a monthly magazine for school children in 4th, 5th, and 6th grades. If your children receive Time for Kids in their classrooms, they may bring a copy of Your $ home sometime soon. If not, and you’re interested, you can find the magazine, free, here.

$1,000 Gift To Yourself 

Treat yourself this holiday season by putting $1,000 back in your wallet. Kiplinger lists five easy ways to do it, starting with eating out less and cutting that cable cord (if you haven’t already). Last year, the Bureau of Labor Statistics said the average consumer spent about $2,800 dining out. That means using your Keurig, brown-bagging your lunch and staying in for dinner dates could save you at least $233 a month. Save an additional $66 — the average cost of cable, according to the Federal Communications Commission — by finally cutting the cord. Though, depending on what kind of viewer you are, it might amount to more or less savings. In an article I reported for TODAY.com, I list the questions to ask yourself to help you gauge how much cutting the cord is actually worth for you.

Have a great week,


Subscribe to my free weekly Newsletter

We collect, use and process your data according to our Privacy Policy.