The Top 5 Retirement News Stories of 2010
It's that time of year to reflect on the significant news events that occurred during 2010 and how they affected us, so let's take a look back and see what we can learn from them about retirement planning.
Story #1: Passage of Health Care Reform
With a lot of fanfare and dissent, President Obama signed into law the Patient Protection and Affordable Care Act, with the goal of providing access to medical care for all Americans. The act included reforms to Medicare that were designed to save money and provide more efficient care; it will also close the hated "donut hole" in prescription drug coverage by 2020.
But this new legislation couldn't change some basic economic facts of life:
- The cost of medical insurance will still be unaffordable for most people who want to retire before eligibility for Medicare at age 65, unless they're eligible to receive subsidies through their employer's retiree medical plan.
- Even with the donut hole closed, you could still end up paying a lot of money out-of-pocket for prescription drugs.
- The cost of long-term care will still be a threat to the financial security and enjoyment of your retirement years.
Story #2: Release of the U.S. Deficit Commission Report
In November, the bi-partisan U.S. Deficit Commission issued its Moment of Truth report that included sweeping recommendations covering all aspects of federal taxation and spending, including significant changes to Social Security and Medicare. While the report didn't get sufficient votes to pass the recommendations along to Congress, it did kick off a debate that will most likely continue into 2011.
It seems inevitable that Social Security and Medicare benefits will be reduced in some way, so stay tuned to see how your retirement might be affected. You'll most likely need to keep working later -- no big surprise but maybe that's not such bad news, as you'll see from the next story.
Story #3: Riots and Protests in France and Greece Over Higher Retirement Ages
Workers in France rioted over proposed legislation to increase the minimum retirement age from 60 to 62, while Greek workers vigorously protested a two-year increase in the retirement age, from age 61 to 63 by 2015. "This is worse than the occupation under the Germans," said one Greek worker. Really? I know a few older Greeks whose family members were killed by the Germans during World War II, and they would certainly disagree with that comparison. Meanwhile, in the U.S., we're shaking our heads and wishing we could retire as early as age 65.
These events are examples of the struggles faced by debt-ridden governments around the world as they try to rein in entitlement spending, and the resolution of these challenges will impact our own retirements.
In the irony department, later in the year, the Journal of Economic Perspectives published a study titled Mental Retirement that correlated early retirement with mental dysfunction. According to the study, countries with the lowest retirement ages - -France, Italy, and Spain -- scored lowest in cognition tests among their older citizens. Brings to mind that ancient curse -- Be careful what you wish for because you may surely get it!
This is just the latest evidence that shows that keeping active and engaged in your later years is one of the best ways to reduce the odds of getting dementia or Alzheimer's and increase your lifespan. And that's the bright spot in this story: We're seeing more research that offers advice on how to live healthy, vital lives in our later years.
Story #4: The Challenge of Generating Adequate Income from Retirement Savings
In February, the U.S. Department of Labor issued a request for information to pension industry specialists and the public at large about the challenge of using IRAs, 401ks, and retirement savings to generate reliable lifetime retirement income. The DOL received 780 public comments in response and held two days of testimony in September.
Not much consensus came from the comments and testimony other than that this is a significant challenge that deserves more debate and discussion. Meanwhile, if you're approaching retirement and are planning to use your retirement savings to generate reliable lifetime retirement income, the hard truth is, you're on your own when it comes to figuring out the best approach for you. The good news is, there's plenty of great information out there from unbiased sources who aren't trying to sell you insurance or investments.
Story #5: MetLife Halts Sale of New Long-Term Care Insurance
In November, MetLife, the largest U.S. life insurance company, announced it would halt the sale of new long-term care policies, citing financial challenges in the business. MetLife was ranked fourth in sales of long-term care policies in 2008, according to the 2010 Long-Term Care Insurance Sourcebook.
This points to the difficulties our nation faces regarding the aging of the Boomer population, as well as from medical threats such as dementia and Alzheimer's. The takeaway for you: Do everything within your control to reduce the odds of needing expensive, long-term care, and develop a strategy for paying for long-term care, if you should need it.
There are still many viable insurance companies offering long-term care insurance. And MetLife didn't cancel existing policies -- they just stopped the sale of new policies. So I wouldn't let this event stop you from buying long-term care insurance, if you're considering it. Be prepared, however, for premium rate increases after you buy the policy if the cost of care continues to rise.
"Knowledge is power." This famous quote from Sir Francis Bacon very aptly applies to retirement planning. As you're thinking about your New Year's resolutions, consider devoting some time to learning more about planning for the rest of your life. You won't be sorry you invested the time.
Image from iStockphoto contributor Marafona
More on MoneyWatch:
- Health Care Reform: Don't Count on Retiring Early
- "Closing" Medicare's Donut Hole: Why You Shouldn't Feel Relieved
- Medicare Part D Donut Hole: How to Close It Yourself
- Will Good Health Save You Money in Retirement or Not?
- Deficit Commission Proposals: What They Could Mean for Your Retirement
- IRAs and 401k: 3 Ways to Generate Lifetime Retirement Income
- Don't Let Alzheimer's and Dementia Spoil Your Retirement
- Does Early Retirement Lead to Memory Loss? One Study Says Yes
- Should You Buy Long-Term Care Insurance?
- Long-Term Care: What Are the Real Risks?
View all articles by Steve Vernon on CBS MoneyWatch»
Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops
and authored Retirement Game-Changers: Strategies for a Healthy, Financially Secure and Fulfilling Long Life and Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck.
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