Healthcare, Social Security and Other Macro Impacts to Retirement Income
On October 6th, 2014, the CBS news broadcast 60 Minutes, produced a segment on healthcare costs and the profound
impact it will play in personal finance. Dr. Leonard Saltz of Memorial Sloan Ketterling cancer Center, one of the
Nation’s top cancer centers said: “We are in a situation where cancer diagnosis is one of the leading causes of
personal bankruptcy. He went on to add patients are spending well over $100,000 per year on single drugs.
Many baby-boomers and retirees focus much of their retirement income attention on social security. Social security
income will account for a major portion of retirement income and often times is a core asset when calculating how
much outside income is needed for retirement planning. But social security requires more than a quick decision to
run down and apply, when available age opens. Starting social security benefits at age 62 results in a permanent
reduction of 25 percent in monthly benefits compared to delaying to the current full retirement age of 66. For
spousal benefits, the number jumps to 30 percent.
As a fan of professional hockey, team endorsement withheld except to say I was born and raised in the windy city, I
have always enjoyed the term “one-timer”. In hockey, it is a shot that occurs when a player meets a teammate’s pass
with an immediate shot on goal, without control of the shot. For most retirees, retirement income planning does not
include any one-timers. A hip replacement not covered by health insurance, a loan to a son or daughter that defaults,
even a mortgage that goes south because of bad finance terms in the past, are each examples of one-timers that
could require immediate restructuring of the retirement plan including in some cases, liquidity.
Without proper healthcare, social security and other macro factors planning, the retirement income model could be
severely and dramatically impacted, and force modifications. From alterations to future income amounts to
surrender charges if liquidity is needed, these often-overlooked planning measures must be brought to surface from
plan inception, to help the client understand potential effects.
If annuities and life insurance are core assets used in your retirement income models, consider a pool of assets held in
a cash management account or short term laddered MYG annuity portfolio. If you are also a holistic wealth manager,
it is prudent to understand what might impact the brokerage or advisory accounts, should any of the described events
occur. Then decide which assets will be used to repair or replace the retirement income plan if needed. Unlike the
healthcare and macro one-timers, social security can be more readily planned for. FIG offers its advisors social
security planning solutions to help make these decisions, and create models best suited for your specific client needs.
As new and consistent factors continue to stress retirement income planning, the need for a retail client to
thoroughly plan with their trusted advisor is mandatory. The risk of outliers like these, and others, could swing the
pendulum from a sound retirement income plan to worry about standard of living continuation, and could erase years
of sound financial planning.
Nicholas Ross
Nicholas Ross is founder of Surge Business Consulting; A Dallas, Texas based business consulting firm specializing in financial services professionals
nationwide, through its partnership with Financial Independence Group. Nicholas can be reached @ [email protected]. Sources: CBS News, Journal of
Financial Planning, Financial Independence Group.
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