The retirement landscape in America has always been changing in one way or another. Increasing life expectancy has been a major driver, giving many Americans longer retirements to enjoy, while recently low interest rates have had a negative impact on many retirees, giving them little income to hope for from savings accounts, bonds, and CDs. Three critical trends in retirement today are: widening income inequality, a growing focus on wellness in retirement, and fraud targeting the elderly.
Widening income inequality
Most of us have read something about America's growing income inequality. As the Center for American Progress has noted, "...although productivity growth for American workers has more than doubled over the past two decades, incomes for the bottom 50% of workers have barely increased in inflation-adjusted terms, and they have actually declined for the bottom 20%."
We tend to think about income inequality resulting in slow-growing or stagnant incomes for the middle class, while the rich get much richer, but there's more to it than that. It has some critical implications for retirement.
Consider, for example, the effect of income inequality on Social Security, where ultimately retirement benefit checks are based on your work history and past income. The amount of income that gets hit with the Social Security tax is capped at $118,500 for 2015. The millions and billions earned above that will not help fill the Social Security coffers. (Remember that capital gains, such as those generated from stock income, isn't taxed for Social Security.)
Meanwhile, the millions of Americans whose wages did not grow much over time have also filled the Social Security coffers less than they otherwise might have -- and have ended up with slimmer earnings histories, too, resulting in slimmer ultimate retirement benefit checks. Thus, America's growing income gap is dealing a double-blow to the Social Security system, and is also hurting the payments on which so many will depend.
What to do: Learn what you can expect from Social Security, and be smart about when you apply for it. To maximize your payments, aim to work at least 30 years and earn as much as possible.
A growing focus on wellness in retirement
In large part due to Obamacare, the health care industry is in the midst of major changes, such as shifting from a fee-for-service model to a model where health care professionals are rewarded more for improving the health of patients in their care. Retirees have long had Medicare to cover much of their health care needs, but the Affordable Care Act has enhanced that coverage, giving every patient a no-copay wellness visit each year and a host of preventive tests and screenings that are now also copay-free.
Even more significant is that due to the legislation, millions of Americans who are still many years from retirement, can now get coverage at a lower cost and not be refused due to pre-existing conditions. Thus they're now more likely to enter retirement healthier than they would have been without coverage, setting them up to spend less on health care in retirement and enjoy it more. The health care industry's focus on wellness and preventive health is growing, and many serious conditions may now be diagnosed earlier, leading to improved long-term health outcomes.
What to do: Join the health care industry in focusing on your health. Eat nutritious foods and exercise and you may extend your life and reduce your overall health care costs.
Fraud targeting the elderly
A last trend to be aware of is that of fraud targeting the elderly. As the elderly population grows and lives longer, the pool of potential victims is growing. The elderly are an especially attractive target because they often have assets of value, they are often trusting (at least of friends and family), and they can be persuaded by fear -- a con artist can convince them, for example, that they are at risk of losing some benefit. They also sometimes have diminished cognitive abilities, leaving them particularly vulnerable.
It's hard to find overall data on elderly fraud since there are many kinds of it and it's not all discovered or reported. The forms it takes include Medicare and Medicaid fraud, tax-return fraud, identity theft, exploitation by family or caregivers, and lottery scams, among many others.
Here are some details to know:
- In 2011, MetLife (NYSE: MET) estimated that the total annual losses due to elderly financial abuse amounted to $2.9 billion, up from 2008's estimate of $2.6 billion.
- The range of perpetrators includes scam artists, family members, caregivers, financial advisors, home repair contractors, and fiduciaries, such as agents under power of attorney and court-appointed guardians.
- It's estimated that about 5.2% of Americans ages 60 and up have been financially mistreated to some extent by a family member. That's more than 1 in 20.
- It's been estimated that only about 1 in 14 cases of elderly fraud are reported.
What to do: Keep an eye on our elderly loved ones and remind them about the threat of fraud and its many variations. And as we ourselves age, we need to be mindful that many people offering us help don't really want to help us. Vulnerability is an unfortunate side effect of aging.