00:00 Speaker A
Well, moving on, a new report found that the majority of Americans don’t know crucial information about their own retirement planning, answering just two out of six retirement-related questions correctly. Joining me now is Yahoo Finance senior columnist, Carrie Hannon. So, Carrie, why is financial literacy so important, especially when it comes to retirement?
00:27 Carrie Hannon
Yeah, this is huge, Allie. It’s surprising and actually quite shocking that people don’t know these basic concepts of what’s going to determine their future. But the fact is, it really isn’t that simple. Um, and so it’s important that you understand because it impacts all kinds of things. It’s budgeting 101. I look at it like, what kind of income might I have coming in, which would be your Social Security? And what kind of expenses might I have going out, meaning, how much is Medicare going to be part of the equation? Will they cover all my medical costs? And then it might even come down to some things as important as when you choose to retire, like how much longer do you need to work in order to finance the number of years you might continue to live after you step out of the workplace. So, Allie, all of this stuff comes together that makes important life decisions. And study after study shows that people who understand these concepts have the opportunity to plan and really have more successful, financially secure retirements.
02:03 Speaker A
All right. So let’s put our viewers to the test and get into some of the questions Americans really struggle to answer, starting with how much of your healthcare expenses are covered by Medicare. Turns out it’s about two-thirds. So, Carrie, why is that misconception so important?
02:30 Carrie Hannon
Well, yeah, because a lot of people think that hey, it’s gonna, great. I’m 65. I’ve signed up for Medicare. Boom. Every, that’s going to take care of my medical costs going forward. And in fact, it does not. And one study I saw shows that the average 65-year-old can expect to spend out of pocket an average of $165,000 between 65 and for the rest of their life. Now, that might be a bit large, but the fact is, people don’t account for some of these other medical costs that they need to have money socked away for.
03:27 Speaker A
Next, how likely it is, that you might think it’s just a few, but turns out a majority of older adults need care. Carrie, how does that expense sneak up on taxpayers?
03:48 Carrie Hannon
Oh my goodness. I mean, I don’t know. I went through this with my own parents, and seven out of 10 Americans are going to need some kind of long-term care. No one wants to think about it. And in fact, you always say, I’m fine. I can live on my own. It’s independently. But it happens. It absolutely happens. And here’s what the deal is. Today, these kinds of costs for an assisted care place, which Medicare does not cover, nor does Medicare Advantage for a long-term care, in assisted care or memory care, Allie, this can run from $75,000 to over a $100,000 a year. And this is really an exorbitant cost that most people are not prepared to absorb.
04:58 Speaker A
Carrie, finally, how long the average 65-year-old will live? Most will live an additional 19 to 22 years. Carrie, what’s the importance on knowing your time horizon?
05:20 Carrie Hannon
Oh, goodness. Okay. Now, you have a better shot of not outliving your money if, in fact, you get a concept of how long you might possibly have to finance, how many years you need to continue to pay the costs for. And this once you get a bead on that, you can really adjust your spending and kind of get a grip on what’s laying ahead of you. Um, and even such simple things, and it’s not simple, I understand. But you, it might encourage, hey, I’m going to live a bit longer. Study, the study shows that those folks are ones that are more than likely to say, I’m going to push back taking my Social Security benefit until I’m age 70 when I’m going to get the biggest bang for my, my buck going forward for the rest of my life. Not everyone can wait till 70, but it is the biggest check you’re going to be able to get. So planning for longevity helps you really control your spending, determine when you’re going to step out of the workplace, and also when you’re going to take your start taking Social Security.
06:36 Speaker A
Great stuff there, Carrie. Keep the quizzes coming. Appreciate it so much.
06:43 Carrie Hannon
Thanks.
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