There are demographic and cultural shifts occurring in the United States. The baby boomer generation continues to “gray” the country and is changing the way individual states set budgets and health care policies. More attention will be paid to the needs of the post age 50 generation(s). Changing attitudes towards working past the age of 65 has taken root in this country and “retirement age” does not necessarily mean a senior is leaving the workforce.
A Gallup poll recently found that 74% of US adults plan to work in some form or another past the age of 65. Some will work out of necessity to earn more money because of increased longevity, health care costs, and reduced Social Security payouts, while others will leave their career and strike out in a different direction often pursuing a lifelong dream or spending time and energy in volunteer work and/or philanthropy causes. Whatever the senior individual’s pursuit, it is clear that new patterns have emerged in the past 10 years and it has a profound budgetary effect on individual US states.
Baby boomers want to age in place and are committed to staying vital, fit, and independent for as long as possible. They want to die in their own homes, not in a hospital or facility. A record high 64 million Americans are now living in multigenerational homes which makes aging in place more possible. These Americans are primarily the younger generations moving into established parent or grandparent home environments. Over 32% of the 64 million are comprised of two-generation families and over 28% have three generations (www.pewresearch.org/fact-tank/2018/04/05/a-record-64-million-americans-live-in-multigenerational-households). In 2016 these blended generation homes accounted for 45% of Americans ages 55 and older and the trend is likely to continue.
So why does this demographic and economic shift put a strain on so many state budgets? The answer is twofold; there is an increase in health care burdens while at the same time remittances from tax revenues decline since Americans tend to pay fewer taxes as they get older. According to the Bureau of Labor Statistics, this is due partially to senior retirement but also because seniors tend to spend less money than their younger counterparts. This means more health services are needed and fewer tax dollars are available to fund the programs. The revenue collected in 33 states was lower than forecasted for the fiscal year 2017 and the aging population is one of the reasons why.
Even the states that are best rated for aging, ranked by overall health, senior unemployment, life expectancy, and nursing home quality, are challenged because of health care costs. Rising health care costs have been taking a large portion of each state’s government budget and will most likely continue to do so.
Health care costs are also hitting baby boomers hard. There is a trend in people aged 50 to 65 having more incidence of disability, obesity, and diabetes thus increasing their need for medical care and services. In August of 2017 Fidelity Investments estimated that the average 65-year-old couple retiring in 2018 will need $275,000 to cover health care costs alone over the remainder of their lives. That is a 6% increase from the previous year and with no substantive health care pricing reform on the policy horizon that amount will continue to increase.
Now is the time to work with a legal and financial professional to work on a retirement plan that is personal to you and takes your future care needs into consideration. We would be honored to work with you on this important planning step.
If you have any questions about anything you have read or would like additional information, please contact us for a consultation.