Surveys suggest that 92 percent of people believe there is a retirement crisis in America. Earlier this year, a report published by Sen. Tom Harkin – chair of the U.S. Senate Committee on Health, Education, Labor & Pensions — estimated the U.S. retirement deficit to be roughly $6.6 trillion, likely to continue growing in coming years. The report also found that just 14 percent of Americans believe they will have enough money to live comfortably in retirement.
Planning for retirement can be a nightmare. The current economic environment is uncertain at best, and most Americans are too concerned with overcoming the financial hurdles facing them right now to be bothered with thinking about the challenges down the road.
But foresight is critical for those who want to develop and execute a successful retirement plan. It’s up to each individual to take charge of his or her own retirement, especially because the long-term stability of Social Security is by no means clear.
Here are a few changes queued up for 2014 to keep in mind as you go about saving for or preparing for retirement.
1. Where Obamacare and retirement collide
According to a Gallup poll conducted last year, most Americans expect to retire around the age of 67, but if you’ve been successful and savvy, you can retire as early as your means allow. Social Security puts the full retirement age at 65, but you can start receiving benefits as young as 62 (although many retirement professionals would advise deferring benefits for as long as possible).
One of the problems with early retirement has been finding an appropriate healthcare plan. If you are kicked off an employer’s plan because you no longer work there at the age of 62, for example, you may have difficulty finding a plan that fits your needs and budget because of your age or a pre-existing condition.
However, under the Affordable Care Act, insurers cannot discriminate because of a person’s current health status or history, and retirees can shop through their state’s health insurance marketplace for the right plan. What’s more, as income often declines in retirement, retirees may be eligible for subsidies to help pay premiums.
2. Social Security just gets bigger
Inflation has been low in recent years but it’s not gone altogether. In order to keep up, Social Security is getting a 1.5 percent cost of living adjustment in 2014. The estimated average monthly Social Security benefits payable to retirees will increase from $1,275 in 2013 to $1,294 in 2014.
3. More coverage for medicine
Right now, there’s a problem with Medicare Part D coverage. Prescription medication is expensive and can cost thousands of dollars per year. Medicare Part D has a gap for those who spend more than $2,850 but less than $4,550, in which they have to pay for 79 percent of the drug’s cost. The Affordable Care Act will reduce the coverage to 72 percent in 2014.
4. Be rewarded for saving
The income cutoff to access the saver’s tax credit will increase by $1,000 for households to $60,000, by $500 for individuals to $30,000, and by $750 for heads of households to $45,000. The saver’s tax credit is small — about $128 for single filers in 2011 and about $215 for joint filers — but it stacks with other tax benefits for 401K and IRA contributions.
5. Beware the tax monster
If you earn between $113,700 and $117,000 per year in 2014, expect your taxes to increase slightly. The maximum earnings taxable for Social Security is increasing by $3,300 and is expected to impact about 6 percent of current taxpayers.
More From Wall St. Cheat Sheet: