Affordable Health Insurance

I published a blog the other day discussing the potential trillion-dollar shortfall in the funding of state-employee pension plans. Here we have another study showing people will need to work longer to fund their health and pension benefits.

The Employee Benefit Research Institute published a study recently showing that Americans age 55 and older are staying in the workforce longer as they are faced with higher health costs and economic losses. For those age 55 to 64, which EBRI labels the “near elderly,” this increase is due almost exclusively to the more women staying in the workforce. However, among those age 65 and older, labeled the “elderly,” the labor force is increasing for both men and women.

Workers are facing more responsibility in paying for their retirement expenses typically through self-funded 401k plans, and retiree health insurance is becoming increasingly scarce. As a result, the study says that workers today have greater incentives to stay in the workforce to accumulate additional assets in defined contribution plans and to have access to employer-based health insurance coverage. The alternative is to tap into their savings to pay for their expenses.

The study, which is based on U.S. Census Bureau data, shows that private-sector Americans, age 55 or older, who were in the labor force declined from 34.6 percent 1975 to 29.4 percent in 1993. However, since 1993, the labor-force participation rate has steadily increased, reaching 39.4 percent in 2008.

The study also shows that education is a strong determinant in an individual’s continued participation in the workforce at older ages. Individuals with higher levels of education are significantly more likely to stay in the labor force than those with the lower levels of education.

The upward trend is not surprising and will likely continue because of workers’ needs to access employer-based health insurance and for more earning years to accumulate assets. This also drives home the point that it is not too late to sit down with your agent or other financial professionals to determine a plan of action and set obtainable goals for a deferred retirement. If you have not done this, pick up the phone and do so now. If you wait too long, some planning options may no longer be available.

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