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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.

Next: Planning for heath care in retirement is a little like planning for ...
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