Today we’re addressing our clients’ top two concerns reflected in our recent client questionnaire (see chart below).
Specifically, the two concerns are:
#1—The Economy
#2—Health Care Costs
Outliving Your Money tied for second. We’ll address this concern in a future client letter.
Windsor Wealth Management Client Questionnaire Anonymous Responses
The Economy
It’s not surprising the economy is a priority for many.
Let’s take a look at what’s happening with the economy, and then what we’re doing to strengthen your financial portfolio.
Recession Concerns
There’s a lot of talk about a recession, and it’s often exaggerated due to various opinions and agendas.
Historically, recessions happened about every five years. Today, they’re further apart because the Fed is doing a better job cutting back on the highs and lows. Said differently, economic management is better.
Nevertheless, most of the current recession talk is hype.
We’re not in a recession.
Consumer Spending
Consumer spending is down. The recent inflation has caused many households to spend more cautiously. Remember, consumer spending makes up about two-thirds of the economy.
Interestingly, inflation was low for so long, that many younger people don’t know what inflation looks like. When confronted with an unfamiliar situation, they become cautious and reduce spending, compounding the slowdown.
Economic Growth
Overall, the economy is slowing.
A year ago, the growth rate was 2.9%, today it’s about 2.0%. Some economists believe it’s even lower, hovering around 1%.
This decrease in economic growth is directly related to reduced consumer spending and higher interest rates.
In fact, in nearly every recent client conversation, when the topic of rising costs comes up, typically it’s about the increasing grocery prices.
Still, it’s not just reduced consumer spending slowing economic growth. The $6 trillion spent by the U.S. government because of Covid had many far-reaching effects, and it’s catching up to us.
The Economic Reality…
It’s true, food and other items continue to be expensive and the economy is slowing.
Nevertheless, we can’t stress this next point enough—everything you’re experiencing in regard to pricing and possible feelings of caution are part of a normal process; specifically, we’re in an economic cycle.
Rarely is there a straight line to creating growth within your portfolio.
Generally, to grow your portfolio we need market ups and downs. Of course, it doesn’t always feel good when there’s a sense of uncertainty. But, we need to hang in there and ride out market swings.
Historically, we’ve always recovered from recessions.
Furthermore, the economy is growing—slowly, but it’s still growing.
Unemployment remains low, jobs continue to be created and strong corporate earnings continue to support the market.
Remember, the media often amplify fears to drive viewership and ad sales, i.e., recessions make for a good scare.
Don’t take the bait.
Instead, let us worry about the economy for you.
It’s our job; mitigating your financial stress and seeking financial buying opportunities during turbulent and uncertain times. We monitor the markets every day so you don’t have to. Our key goal is to help ensure you don’t outlive your money.
Health Care Costs
Understandably, health care costs are top of mind for clients.
According to Fidelity’s 22nd Annual Retiree Health Care Cost Estimate, “A 65-year-old retiring this year (2023) can expect to spend an average of $157,500 in health care and medical expenses throughout retirement.”
In our experience, once you retire and begin using Medicare, you’ll likely pay about what you’re paying now through your employer’s plan, including premiums and out-of-pocket expenses. A key exception to this statement is if your employer covers a lot.
Also, for those self-employed, the costs are often lower.
For specific costs, here’s a detailed chart on our website for 2024 Medicare premiums and deductibles. Also, we have an excellent brochure detailing the ins and outs of Medicare. Please reach out if you’d like us to mail you a copy. Or stop by, we’d love to see you!
Keep in mind, similar to most employer-sponsored health insurance plans, with Medicare Advantage plans (Part C) you’re generally protected by an annual out-of-pocket maximum (excluding nursing home and assisted living care). However, Original Medicare does not have out-of-pocket maximums. It’s a key reason why many individuals have Medicare Advantage plans.
Resource: Compare Original Medicare & Medicare Advantage
Day to day, most clients do well managing their health care costs in retirement.
Nevertheless, it’s important to revisit your household budget annually, including updating your health care costs. Use our detailed budgeting worksheet. (Depending on your computer settings, the worksheet may download automatically from our secure website.)
Key Retirement Health Care Financial Challenge
For retirees, the health-care cost challenge generally happens if you need assisted living or nursing home services. In general, both Original Medicare and Medicare Advantage plans might offer limited short-term nursing coverage after a hospital stay; however, not long-term care.
Long-term care insurance can help with some of these costs. Generally, a long-term care insurance policy costs about $7,000 per year. It won’t cover everything, but it helps preserve your money.
For Example:
A nursing home may cost $400 per day. Long-term care insurance will pay about $250 of that, leaving you with $150 per day. No policy is ideal, but it can help protect your estate. (As a fiduciary, we don’t sell insurance. However, we have longstanding relationships with insurance specialists. Several of our clients have long-term care insurance. If you want to work through the numbers, give us a call.)
Here’s a detailed breakout of nursing home care costs by state.
What’s our role in helping you manage your health care costs?
Health care is another topic the media often spin negatively. It’s important to recognize this, since negative news can heighten feelings of uncertainty.
We’re here to help you forecast and budget for your health care costs. We’ll get as involved as you want in this financial discussion. In addition, we help you understand what you can spend during retirement from year to year, given how the markets are performing.
Remember, a key charge for us is to grow your portfolio both now and while you’re retired. This potential growth helps you keep pace with rising inflation and increasing health care costs.
Before You Go
Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.
Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.