Special Retirement Risks For The Upper-Middle Class

{{ When surveyed, most in the group believe the main risks to their retirement financial security are the stock market, inflation, and changes in government policies.

Those are real risks, but they aren’t the risks that should most concern the moderately-affluent and those who are wealthier.

The main risk to this group is longevity. Upper-income people tend to live longer than average, and that makes them more likely to outlive their resources or be hurt by inflation over the long term.

The affluent are at higher risk from longevity because they receive a lower portion of their total retirement income from Social Security than people with lower incomes and net worths. The affluent are more likely to depend on savings that are invested in the markets and that are vulnerable to market declines or even years of below-average returns. }}

If the Gov’t is willing to “sell” me an inflation-adjusted life annuity for about half of what a for-profit insurer would charge by waiting until age 70 to collect Social Security, it’s worth a look.

NY Times notes that “Between 1994 and 2018, life expectancy at age 60 increased twice as much for upper-middle-class men and women as for those in the lower middle class.” Top 10% of the income/wealth pyramid is now living 5 or 6 years longer than the median income Social Security beneficiary.

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I would add healthcare costs to that. Affordable Care Act helps those who retire early. Retirees are highly dependent on Medicare to cover costs. Running out of funds could be difficult.

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This is obviously correct. However, Congress will find a way to solve the problem because they want to stay in office. (There is nothing worth less than a politician out of office.)

There are two obvious pieces of low hanging fruit when they get serious. Drug prices and hospital costs.

Today ERs must treat anybody who shows up - these places a very inefficient. The threat of reduced Medicare reimbursements will quickly get hospitals disclosing their costs and a list of costs at nearby hospitals.

A more complex approach is break the health insurance employment tie. This could be done by making employer paid insurance costs taxable and removing the employer’s tax deduction for employee health costs.

Drug costs can likely be cut in half by serious negotiation in combination with Medicare & Medicaid tying reimbursement to prices no higher than any other health system world wide.

Another step would be insist on drug testing that does not just compare efficacy vs nothing to efficacy vs the current best options (both best generic and best branded drugs).

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I agree. Some good ideas.

On insurance costs, Affordable Care Act had provision to tax “Cadillac” plans. A step in that direction. But Congress backed out.

We shall see how far negotiated prices on drugs goes. Will competitors match the govt price?

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But don’t the statistics show that, for people with their retirement assets properly invested and taking a safe withdrawal rate, the biggest “risk” of longevity is dying with an absurdly large pile of money?

If, for example, you were to live to over age 100, having withdrawn safely for 60+ years, what do the charts show? They show a ridiculously high terminal value in almost all cases!

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That’s my goal. I’m not going to stint on myself, but I really want to pass along a nice big pile. :sunglasses:

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Yes, I was quoting the article in saying that “there’s a risk of running out of money”. There’s obviously not if you’re following the principles of FIRE and the 4% rule, but how many are doing that?

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Yes, you are much more likely to be dead than broke. Fun calculator has the deets:

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Of course no one knows what the future holds. What your future requirements will be. How much they will cost. That favors being conservative and benefits your heirs.

I don’t doubt that many have trouble making ends meet when the unanticipated turns out to be costly. I would list those as wannabees. Probably not your typical participant on TMF.