With increasing life expectancy and declining birthrates, it is no surprise that many developed nations are facing a threat to their state-administered retirement funds. According to the trustees who oversee Social Security, the program has enough income and reserves to pay out benefits in full for approximately another 20 years. But it already collects less from taxes than it distributes in benefits.
To complicate matters, people are living much longer beyond the traditional retirement age due to welcome advances in medical care. At the current time, an average woman will live for 20 years in retirement, while the typical man will live for 17, according to a study by the Organization for Economic Co-operation and Development. Those numbers are expected to increase by three to four years by 2050.
Unless something is done about Social Security, the next wave of retirees could potentially receive only a percentage of their benefits. Various entities, including OECD and the Congressional Budget Office, see raising the retirement age as a potential solution to anticipated program shortfalls. In the U.S., the retirement age is set to rise to 67 by 2022.
These uncertainties about the level of benefits people can expect to receive from Social Security in the future reinforce the need to engage in detailed elder law planning before a person approaches retirement age. The very thing that helps many of us live longer--better health care--is also extraordinarily expensive.
A proper elder law plan can address meeting the costs of medical treatment. Through the use of trusts, spend-downs and long term care insurance--if appropriate--a person can be prepared for health care costs while even preserving some assets to pass on to descendants.
Source: CNN Money, "Retirement age must rise - OECD," Emily Jane Fox, June 12, 2012.