 Health
care: Retirement's wild card
| Want to know
the most unpredictable and out-of-control element that can cause your retirement
plans to fold like a house of cards? It's health-care costs.
And guess what? Many middle-aged
Americans are spacing out on this fact when planning their retirement. A recent
survey reveals that nearly 40 percent of pre-retirees (age 45-plus) spent
less than one hour in the past year planning for health benefits in retirement.
Another 30 percent don't know what to expect for health-care needs in retirement. Here's
why these figures astound me: That means that up to 60 percent of the survey respondents
spent an hour or more planning for health benefits, and up to 70 percent do know
what to expect. I confess, I'm among
the 30 percent who don't have a clue about what my health-care needs will be in
retirement. Companies are copping
out
My husband and I have a running joke about retiring
early. I say that we can't afford to because we need health benefits, and Medicare
doesn't kick in until we're 65. He says that I'll have to work and provide benefits
through my employer. I say he's the one who will have to work and provide these
benefits. And we go back and forth in this tag-game of "you're it!"
But the sad thing is, employers,
particularly small businesses, are increasingly dropping health-care benefits.
According to a recent
study by the Kaiser Family Foundation, only 60 percent of small firms offer
coverage, compared to 69 percent five years ago. Successful small businesses are
agile and willing to do whatever it takes to survive, even if it puts their own
workers in jeopardy.
The reason they're dropping coverage:
Premiums have risen 73 percent since 2000. The average annual cost
for family coverage is $10,880. That amount exceeds what a full-time
minimum-wage worker earns in a year.
Large companies
still offer health-care benefits to workers, and about two-thirds of them offer
benefits to eligible retirees, but have you been reading the headlines lately?
A lot of these big companies are dropping this coverage, even after they had promised
to provide it for the rest of their former employees' lives. How can they get
away with this?
Well, it depends. If you're a salaried
employee, you might be promised benefits at company expense for
your lifetime, but there may be a tiny clause, in itty-bitty print,
in the plan summary that says the company can change its mind about
these benefits down the road if necessary. If you're a union retiree
and promised lifetime benefits, an employer may later argue in court
that the word "lifetime" didn't mean YOUR lifetime. It
meant the lifetime of the CONTRACT, silly.
What these employers are trying to do is shake themselves
of these so-called legacy costs -- those expensive traditional pension
plans as well as retiree health-care benefits. They're like a big
weight on the balance sheet, dragging downward the side of the ledger
that's labeled "liabilities." So guess who gets to carry
the weight now? That would be us, the individuals, the ones with
the little voices that go unheard.
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