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iors, like everyone else, spend an ever-increasing percentage of their income on medical care. Such costs usually far outpace benefit cost-of-living increases and interest earned on investments.
• Baby Boomers have begun tapping Social Security and Medicare benefits; and far fewer younger workers now fund those programs, so it's possible that benefits will decrease, premiums will rise or taxes will increase - or a combination of all three; all options would strain fixed incomes.
• When the market was booming, many people retired early, assuming they could afford to bridge the gap before receiving Social Security and Medicare. But plummeting home equity and reduced 401(k) balances have forced many retirees to aggressively withdraw from savings, trim expenses or even return to work.
• Many seniors help their children and grandchildren pay for high-ticket expenses like home down payments and college. Although such gifts reduce the eventual value of their estate, there are certain tax advantages (lower estate taxes, state tax deductions for 529 Plan contributions, etc.). If you're the recipient, don't take such assistance as license to take on additional debt.
• Unless they've purchased comprehensive long-term care insurance, your parents will likely burn through most of their savings should they ever require assisted living. And keep in mind that Medicaid will only pay for a nursing home once they've exhausted most of their assets.
• Bottom line: With seniors facing increasing financial challenges, don't depend on an inheritance to provide your financial security.