Latest news with #AnqiChen
Yahoo
31-07-2025
- Health
- Yahoo
No relief: Retirees' out-of-pocket healthcare costs are spiraling
Retirees are going to need to have a substantial chunk of change saved to pay for their healthcare costs. Fidelity's annual survey of estimated healthcare costs in retirement shows that a 65-year-old retiring this year can expect to spend an average of $172,500 in healthcare and medical expenses out-of-pocket throughout retirement, up 4% from last year's expectation of $165,000. The estimate assumes enrollment in traditional Medicare (Parts A and B) and Medicare Part D, which includes premiums, co-payments, and other out-of-pocket costs for medical care and prescription drugs. It could be far higher for some folks. Fidelity's estimate does not include long-term care expenses which, of course, can be eye-popping. 'About 80% of those ages 65 and over will require some long-term care, with nearly 20% requiring high-intensity care for more than three years,' said Anqi Chen, associate director of savings and household finance at the Center for Retirement Research at Boston College. Consider this: An apartment in an assisted-living facility had an average rate of $74,148 a year in 2024, according to the National Investment Center for Seniors Housing & Care — and costs go up as residents age and need more care. Units for dementia patients can run more than $94,000. Costs keep on rising The Fidelity estimate has soared since it first ran this calculation in 2002. At that time, medical costs were estimated at $80,000 for a single retiree. Of course, there are plenty of caveats to consider when computing your figure — what you spend in retirement for medical care will depend on where you live, your overall health, and how many years you will live in retirement. Nonetheless, basic costs are continuing to rise. In 2025, for example, the monthly Part B premium rate is $185, up from $174.70 a year ago. The estimated monthly premium for 2026 is $206.20. 'Planning for healthcare costs in retirement is a crucial step in building long-term financial security, yet it's often overlooked,' John Burns, vice president at Fidelity Investments, told Yahoo Finance. Every generation is unprepared Recent Fidelity research shows 1 in 5 Americans say they have never considered healthcare needs during retirement — a figure that jumps to 1 in 4 among Gen X. Few retirees have budgeted for that kind of outlay and finding ways to grapple with it is not something you can avoid. About 15% of the average retiree's annual expenses will be health-related, per Fidelity. And nearly 4 in 10 retirees report health care expenses are higher than they expected, according to a survey by the Employee Benefit Research Institute and Greenwald Research. View Comments
Yahoo
31-07-2025
- Health
- Yahoo
No relief: Retirees' out-of-pocket healthcare cost are spiraling
Retirees are going to need to have a substantial chunk of change saved to pay for their healthcare costs. Fidelity's annual survey of estimated healthcare costs in retirement shows that a 65-year-old retiring this year can expect to spend an average of $172,500 in healthcare and medical expenses out-of-pocket throughout retirement, up 4% from last year's expectation of $165,000. The estimate assumes enrollment in traditional Medicare (Parts A and B) and Medicare Part D, which includes premiums, co-payments, and other out-of-pocket costs for medical care and prescription drugs. It could be far higher for some folks. Fidelity's estimate does not include long-term care expenses which, of course, can be eye-popping. Sign up for the Mind Your Money weekly newsletter By subscribing, you are agreeing to Yahoo's Terms and Privacy Policy 'About 80% of those ages 65 and over will require some long-term care, with nearly 20% requiring high-intensity care for more than three years,' said Anqi Chen, associate director of savings and household finance at the Center for Retirement Research at Boston College. Consider this: An apartment in an assisted-living facility had an average rate of $74,148 a year in 2024, according to the National Investment Center for Seniors Housing & Care — and costs go up as residents age and need more care. Units for dementia patients can run more than $94,000. Costs keep on rising The Fidelity estimate has soared since it first ran this calculation in 2002. At that time, medical costs were estimated at $80,000 for a single retiree. Of course, there are plenty of caveats to consider when computing your figure — what you spend in retirement for medical care will depend on where you live, your overall health, and how many years you will live in retirement. Nonetheless, basic costs are continuing to rise. In 2025, for example, the monthly Part B premium rate is $185, up from $174.70 a year ago. The estimated monthly premium for 2026 is $206.20. 'Planning for healthcare costs in retirement is a crucial step in building long-term financial security, yet it's often overlooked,' John Burns, vice president at Fidelity Investments, told Yahoo Finance. Every generation is unprepared Recent Fidelity research shows 1 in 5 Americans say they have never considered healthcare needs during retirement — a figure that jumps to 1 in 4 among Gen X. Few retirees have budgeted for that kind of outlay and finding ways to grapple with it is not something you can avoid. About 15% of the average retiree's annual expenses will be health-related, per Fidelity. And nearly 4 in 10 retirees report health care expenses are higher than they expected, according to a survey by the Employee Benefit Research Institute and Greenwald Research. Increasing out-of-pocket healthcare costs, including the likelihood of long-term care expenses, is a huge concern for retirement security, said Richard Johnson, director of the Program on Retirement Policy at the Urban Institute. Even now, 1 in 10 people age 65 or older with healthcare debt owe $10,000 or more, according to a KFF study. Potential but underutilized way to defray costs For younger workers, one way to prepare for higher future costs is to invest in a health savings account (HSA). An HSA lets you put money in on a tax-free basis, lets it build up tax-free, and lets it come out tax-free for qualified healthcare expenses. (One downside: Some states assess state taxes.) To put money into an HSA, you must be enrolled in a high-deductible health plan where you pay a lower premium per month but a higher annual deductible. You can also open an HSA as a self-employed freelancer or business owner if you have a qualified high-deductible health plan. Your contributions roll over year after year and are yours to take along when you retire or change employers. The 2025 contribution limit for an HSA is $4,300 for individuals and $8,550 for families. Individuals who are 55 or older can contribute an additional $1,000. These accounts got small tweaks expanding access in Trump's tax package. Read more: HSA contribution limits: Here's how much you can save 'HSAs are a smart way to plan ahead for the rising cost of healthcare and help protect your retirement income,' Burns said. 'Save as much as you can, when you can, and make sure you leverage accounts where your savings can be invested.' In the real world, though, most account holders pull funds from their HSAs to cover current medical bills. The average withdrawal from an HSA account last year was roughly $1,300, according to HSA advisory firm Devenir.'People use it as a checking account, not an investment account,' Paul Fronstin, director of health benefits research EBRI, said. They're using it to cover current healthcare expenses right now. Plus, maxing out a contribution each year is unrealistic for many workers. 'Most people have competing needs ... if you're coming out of school, you've got student loans, if you've got children, or you're buying a house, trying to save for retirement, helping your kids with their school, and so on,' he said. Read more: How much should I have saved by 50? Only about 3.2 million health savings accounts have at least a portion of their HSA dollars invested, per Devenir. Most just leave the money in cash or spend on current bills and lose sight of one of the account's key advantages that can help retirees meet these costs down the road. Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including the forthcoming "Retirement Bites: A Gen X Guide to Securing Your Financial Future," "In Control at 50+: How to Succeed in the New World of Work," and "Never Too Old to Get Rich." Follow her on Bluesky. Sign up for the Mind Your Money newsletter
USA Today
20-04-2025
- Business
- USA Today
401(k) retirement saving hits a milestone. Has it finally caught on?
Half of all workers in private-sector America now participate in 401(k) plans, a sign that tax-advantaged retirement savings may be catching on at last. As recently as 2010, federal data shows, barely two-fifth of workers in private industry held 401(k)-type accounts. Between that year and 2024, however, the participation rate tiptoed up to 50%. Over the past half century, the federal government has been trying to persuade Americans to build savings to cover their retirement, and to supplement Social Security, using tax breaks as a lure. With participation reaching 50%, it would seem that effort is half successful. To optimistic observers, the 401(k) has nowhere to go but up. 'I think what these stats are showing is steady improvement year over year,' said David Stinnett, head of strategic retirement consulting at Vanguard. 'I think it will keep increasing. I think employers understand that this is a retirement benefit that employees care a lot about.' Need a break? Play the USA TODAY Daily Crossword Puzzle. Other retirement experts note the frustrating flipside: Half of private-sector workers still do not participate in 401(k)s. 'There's two ways to look at it. Is the glass half full, or is the glass half empty?' said Anqi Chen, associate director of household finance and savings at the Center for Retirement Research at Boston College. 'Fifty percent of American workers not having a retirement plan is not fantastic.' 401(k) participation is rising along with access The simplest reason why more private-sector Americans are participating in 401(k) plans is that more employers are offering them. Between 2014 and 2024, employee access to 401(k)-style plans marched up from 60% to 70%, according to the Bureau of Labor Statistics. Access to tax-favored retirement plans is widening as more states introduce 'automated savings' programs, prodding companies to offer retirement plans and enrolling workers automatically. Collectively, those initiatives have helped employees amass nearly $2 billion in retirement savings. Starting in 2025, most new 401(k) plans must automatically enroll workers, rather than leave the decision to them. 'We used to spend a lot of time designing education programs to try to entice people to participate in the plan,' said Stinnett, a longtime 401(k) advocate. 'Now, people are being defaulted into the plan.' The COVID-19 pandemic, too, boosted 401(k) participation: In a tight labor market, companies offered retirement savings as an incentive to applicants. Has 401(k) savings reached critical mass? The 401(k) and its personal savings counterpart, the Individual Retirement Account, emerged in the 1970s as tools for Americans to build retirement savings. The plans have gradually replaced traditional pensions, which deliver monthly benefits to retired workers. With half of the nation's private-sector workers now participating in 'defined contribution' retirement savings, some observers sense the long federal campaign has reached a tipping point. 'I think what's happened is, we've gotten smarter about 401(k)s,' said Chris Littlefield, president of retirement and income solutions at Principal Financial Group, the nation's third-largest 401(k) administrator. Littlefield points to the trend toward automatically enrolling workers in retirement savings, a step that dramatically boosts participation. 'It's not that we're without challenges,' he said, 'but we're closing the gap on the challenges.' That view is not universal. In a 2024 paper, two economists from opposing ideological camps made the provocative case that the federal government should abolish the tax-sheltered retirement programs, branding them a failure. 401(k)s favor wealthy Americans Federal data suggests 401(k)s and IRAs mostly help well-heeled Americans. For households in the top 10% by income, the median retirement account held $559,000 in 2022, according to the federal Survey of Consumer Finances. An overwhelming 93% of those households held retirement accounts. For middle-income Americans, those in the 40th to 60th percentile by income, the median retirement account held just $39,000. Nearly half of that group had no retirement account. The goal of the tax subsidies was to encourage more Americans to save for retirement. But the paper notes that participation in employer-sponsored retirement plans seems to have stalled around 50%. 'There's a group of people that always have retirement plan coverage,' Chen said. "And then you have this group that very rarely or never have retirement plan coverage.' Access is key to participation. Data from Vanguard shows that average participation in 401(k)-type plans rose from 79% in 2014 to 85% in 2023. When companies automatically enroll workers in retirement saving, participation rises past 90%. Retirement saving is 'one of the few very bipartisan areas' of federal policy, Stinnett said. Congress passed a series of retirement savings initiatives in 2022 as part of SECURE Act 2.0, with support from retirement plan administrators. Among them: The Saver's Match Under the Saver's Match, starting in 2027, nearly 22 million low- and middle-income employees who contribute to a retirement savings account become eligible for matching funds from the government. The maximum match is $1,000 per person, according to a Pew analysis. The Saver's Match replaces the current Saver's Credit, a nonrefundable tax credit for lower-income taxpayers. The big difference: The Saver's Credit only reduces the tax you owe. The Saver's Match puts dollars into your retirement account. Auto-portability This initiative encourages workers to 'roll over' retirement savings into an IRA if they leave a job, whereupon the money can automatically transfer to a retirement plan at a new employer. The auto-portability program applies to accounts valued at $7,000 or lower. Research shows workers often cash out low-value accounts, potentially losing thousands of dollars in compounded interest over time. In 2022, a consortium of private retirement-plan providers announced a collaboration to boost the portability of small retirement accounts. Auto-enrollment Starting in 2025, most new 401(k) plans must automatically enroll employees, rather than leave the decision to workers. Many older 401(k) plans are voluntary, meaning that employees must sign up to participate. Under auto-enrollment, an employee who does nothing opts in. Auto-enrollment is a powerful tool for saving. Vanguard found that workers with auto-enrollment plans participated at a rate of 94% in 2023, compared with 67% enrollment in voluntary plans. Long-term part-time workers As of 2025, part-time employees who work at least 500 hours in two consecutive years are entitled to participate in workplace 401(k) plans. Part-time workers have struggled to gain access to retirement savings.
Yahoo
19-04-2025
- Business
- Yahoo
401(k) retirement saving hits a milestone. Has it finally caught on?
Half of all workers in private-sector America now participate in 401(k) plans, a sign that tax-advantaged retirement savings may be catching on at last. As recently as 2010, federal data shows, barely two-fifth of workers in private industry held 401(k)-type accounts. Between that year and 2024, however, the participation rate tiptoed up to 50%. Over the past half century, the federal government has been trying to persuade Americans to build savings to cover their retirement, and to supplement Social Security, using tax breaks as a lure. With participation reaching 50%, it would seem that effort is half successful. To optimistic observers, the 401(k) has nowhere to go but up. 'I think what these stats are showing is steady improvement year over year,' said David Stinnett, head of strategic retirement consulting at Vanguard. 'I think it will keep increasing. I think employers understand that this is a retirement benefit that employees care a lot about.' Other retirement experts note the frustrating flipside: Half of private-sector workers still do not participate in 401(k)s. 'There's two ways to look at it. Is the glass half full, or is the glass half empty?' said Anqi Chen, associate director of household finance and savings at the Center for Retirement Research at Boston College. 'Fifty percent of American workers not having a retirement plan is not fantastic.' The simplest reason why more private-sector Americans are participating in 401(k) plans is that more employers are offering them. Between 2014 and 2024, employee access to 401(k)-style plans marched up from 60% to 70%, according to the Bureau of Labor Statistics. Access to tax-favored retirement plans is widening as more states introduce 'automated savings' programs, prodding companies to offer retirement plans and enrolling workers automatically. Collectively, those initiatives have helped employees amass nearly $2 billion in retirement savings. Starting in 2025, most new 401(k) plans must automatically enroll workers, rather than leave the decision to them. 'We used to spend a lot of time designing education programs to try to entice people to participate in the plan,' said Stinnett, a longtime 401(k) advocate. 'Now, people are being defaulted into the plan.' The COVID-19 pandemic, too, boosted 401(k) participation: In a tight labor market, companies offered retirement savings as an incentive to applicants. The 401(k) and its personal savings counterpart, the Individual Retirement Account, emerged in the 1970s as tools for Americans to build retirement savings. The plans have gradually replaced traditional pensions, which deliver monthly benefits to retired workers. With half of the nation's private-sector workers now participating in 'defined contribution' retirement savings, some observers sense the long federal campaign has reached a tipping point. 'I think what's happened is, we've gotten smarter about 401(k)s,' said Chris Littlefield, president of retirement and income solutions at Principal Financial Group, the nation's third-largest 401(k) administrator. Littlefield points to the trend toward automatically enrolling workers in retirement savings, a step that dramatically boosts participation. 'It's not that we're without challenges,' he said, 'but we're closing the gap on the challenges.' That view is not universal. In a 2024 paper, two economists from opposing ideological camps made the provocative case that the federal government should abolish the tax-sheltered retirement programs, branding them a failure. Federal data suggests 401(k)s and IRAs mostly help well-heeled Americans. For households in the top 10% by income, the median retirement account held $559,000 in 2022, according to the federal Survey of Consumer Finances. An overwhelming 93% of those households held retirement accounts. For middle-income Americans, those in the 40th to 60th percentile by income, the median retirement account held just $39,000. Nearly half of that group had no retirement account. The goal of the tax subsidies was to encourage more Americans to save for retirement. But the paper notes that participation in employer-sponsored retirement plans seems to have stalled around 50%. 'There's a group of people that always have retirement plan coverage,' Chen said. "And then you have this group that very rarely or never have retirement plan coverage.' Access is key to participation. Data from Vanguard shows that average participation in 401(k)-type plans rose from 79% in 2014 to 85% in 2023. When companies automatically enroll workers in retirement saving, participation rises past 90%. Retirement saving is 'one of the few very bipartisan areas' of federal policy, Stinnett said. Congress passed a series of retirement savings initiatives in 2022 as part of SECURE Act 2.0, with support from retirement plan administrators. Among them: Under the Saver's Match, starting in 2027, nearly 22 million low- and middle-income employees who contribute to a retirement savings account become eligible for matching funds from the government. The maximum match is $1,000 per person, according to a Pew analysis. The Saver's Match replaces the current Saver's Credit, a nonrefundable tax credit for lower-income taxpayers. The big difference: The Saver's Credit only reduces the tax you owe. The Saver's Match puts dollars into your retirement account. This initiative encourages workers to 'roll over' retirement savings into an IRA if they leave a job, whereupon the money can automatically transfer to a retirement plan at a new employer. The auto-portability program applies to accounts valued at $7,000 or lower. Research shows workers often cash out low-value accounts, potentially losing thousands of dollars in compounded interest over time. In 2022, a consortium of private retirement-plan providers announced a collaboration to boost the portability of small retirement accounts. Starting in 2025, most new 401(k) plans must automatically enroll employees, rather than leave the decision to workers. Many older 401(k) plans are voluntary, meaning that employees must sign up to participate. Under auto-enrollment, an employee who does nothing opts in. Auto-enrollment is a powerful tool for saving. Vanguard found that workers with auto-enrollment plans participated at a rate of 94% in 2023, compared with 67% enrollment in voluntary plans. As of 2025, part-time employees who work at least 500 hours in two consecutive years are entitled to participate in workplace 401(k) plans. Part-time workers have struggled to gain access to retirement savings. This article originally appeared on USA TODAY: Has 401(k) retirement savings finally caught on? Sign in to access your portfolio
