A February 2010 Urban Institute report titled “Will Health Care Cost Bankrupt Aging Boomers?” finds that rising health care costs pose a significant threat to boomers’ retirement security. These include out-of-pocket expenses related to premiums, deductibles, copays and holes in Medicare for all adults age 65 and older.
Their finding highlights issues such as:
- Median annual out-of-pocket costs between 2010 and 2040 for Americans age 65 and older will more than double, from $2,600 to
about $6,200 with nearly 1 in 10 older American’s spending more than $14,000 per year on health care in 2040.
- For adults age 65 and older real median sized-adjusted household income will increase more slowly, from $26,800 in 2010
to $34,600 in 2040.
- Older Americans' out-of-pocket health care spending will consume 60 percent of their real household incomes between 2010 and 2040.
A study done by the American Bankruptcy Institute’s ABI Journal found that baby boomers
were disproportionately represented
in bankruptcy proceedings. The steepest increase in Chapter 7 filings occurred among people older than 55.
Another concern that may affect surviving children — who themselves are approaching retirement and their parents planning in their
retirement is a new, unanimous Supreme Court ruling, reported June 12, 2014 — is that inherited individual retirement accounts are not shielded from creditors in bankruptcy proceedings, a decision that is slated to clear up confusion about the status of unspent IRAs that parents leave to their children.
This decision comes from a Wisconsin case where a couple declared bankruptcy
yet wanted to prevent creditors from going after $300,000 in an IRA that was inherited from a passing parent. Previously, bankruptcy law typically protected retirement assets from the reach of creditors.
See also: It’s your inherited IRA, not creditors’
This may present an opportunity for advisors to bring adult children
into the fact-finding conversation when doing retirement and estate
planning with clients. It brings to the table the real life events affecting families, providing opportunity to offer a wider protection for clients and their families while building in future wallet share of multi-generation households surrounding lifestyle issues that are becoming more common than uncommon.
So rather than looking at the glass as half-full or half-empty, maybe this will allow “ice” to be added to the glass, showing advisors
insight and professionalism in protecting clients best interest.