Wild Card blog 4

Today I read an interesting article titled "Will Your Next Egg Last as Long as You Do?", at Marketwatch.com

(1) http://www.marketwatch.com/news/story/Will-Your-Nest-Egg-Last/story.aspx?guid=%7BB7B5A6BD-FB85-48DE-9BB8-2CC5A556053E%7D

The article really got me thinking about my long term financial positions and what kind of costs I should anticipate for retirement.  I know that when the time comes for retirement I hope to have enough funds so too avoid outliving my savings.  That is why now during this economic downturn instead of selling, or sitting on the sidelines, I have decided to invest what I can, when I can.  I have stopped making any unnecessary purchases, and directed those funds into stocks.  The way I see it, I have 20-30 years to ride the profit wave up from historic lows.

The marketwatch article provided some examples of  high vs. low vs. national average cost of living in retirement situations.

They are as follows:

In Home care: National average -- $24,375. 

Lowest, Louisiana -- $19,296.

Highest, Alaska -- $30,849

Assisted-living facility: National average -- $38,529. 

Lowest, Missouri - $25,900.

 Highest, Maine - $65,700.

Nursing home (semi-private): National average -- $66,367.

 Lowest, Texas - $37,960.

 Highest, Alaska - $161,450.

Nursing home (private facility): National average -- $74,368.

 Lowest, Louisiana - $40,241. 

Highest, Alaska - $177,634.

With todays retirement averages you can come close to a prediction of what it will cost you at the time of your desired retirement.  By using Time Value of Money and factoring in rate of inflation at 3% you can determine Net Present Value.  The example I used to calculate was 20 years from now using todays national average @ 3% rate of inflation which provided Future Cost Prediction of:

In Home Care National Avearge 20 years from now = $44, 023

Assited Living National Average 20 years from now = $69,587

Nursing Home (semi private) National Average 20 years from now = $119,866

Nursing Home (private) National Average 20 years from now = $134,306

As you can see in just 20 years time the costs jump dramatically.  And that is given the rate of inflation does not exceed 3%, which everything the treasury and fed are doing right now point to figures higher than 3% over the next couple years.

Listen to your elders; its never too early to start saving for retirement.

  

Wild Card blog 3

In this blog I want to touch on the amount of money the United States spends annually on health care, and compare it with another country.  The figures are very interesting and illustrate the vast scale of money spent on health care.  It also brings into focus how difficult it is to think that by just throwing money, and new programs at the health care system, that somehow our problems will be alleviated.  The money spent annually is tremendous and when you add it up over the years; wow.

 According to the CMS the National Health Expenditure for 2006 was $2,105.5 trillion dollars (#1.www.cms.hhs.gov).  The CMS forecast projection was to see an increase in the National Health Expenditure for 2007 by 6.7% (#1.www.cms.hhs.gov).  The math shows when you multiply 6.7% by the expenditure figure from 2006 of $2.105 trillion, you reach an estimated figure of  $2.246 trillion dollars.  The CMS projected figure for 2007 is $2.245 trillion (#1.www.cms.hhs.gov).  

Comparison of the U.S. figures with that of the Netherlands shows that in 2006 the Netherlands GDP was $597.23 billion (#3.www.oecd.org).  A cost breakdown for the national health expenditure for the Netherlands shows they spend $55.54 billion per year (#2.www.oecd.org)

GDP (gross domestic product) is defined as, “the market value of the final goods and services produced in a country during a given period” (#4.Bernanke & Frank G-3).  According to the Bureau of Economic Analysis, the United States GDP for 2005 was $12,421 trillion, and $13,807 trillion for 2007 (#5).  The percentage of the GDP that was spent on health care was 15.9%, or $1,973 trillion for 2005, and a projected 16.3%, or $2,245 trillion for 2007 (#1.www.cms.hhs.gov).

I then compared the 2007 projected 16.3% health care expenditure of the United States with that of the Netherlands recorded 2006 health care expenditure of 9.3% (#2.www.oecd.org).  Also note that in 2006 the Netherlands spent an average of $3391 per capita on health care, versus the United States average of $6714 per capita in 2006 (#2.www.oecd.org).

 

Works Cited

1)   Centers for Medicare and Medicaid Services. (2008).  Retrieved Sep 13, 2008 from:http://www.cms.hhs.gov/NationalHealthExpendData/Downloads/proj2007.pdf

2)   Organization for Economic Co-Operation and Development (2008).  Retrieved Sep 13, 2008 from: http://www.oecd.org/dataoecd/46/8/38980162.pdf

3)   Organization for Economic Co-Operation and Development (2008).  Retrieved Sep 13, 2008 from: http://stats.oecd.org/wbos/viewhtml.aspx?queryname=474&querytype=view&lang=en

4)   Bernanke, B.,  & Frank, R.  (2007).  Principles of Macro Economics: Third Edition.  Boston: McGraw-Hill Irwin.

5)   Bureau of Economic Analysis.  (2008).  Retrieved Sep 13, 2008 from:http://www.bea.gov/national/index.htm#gdp