At SWA, we help clients to develop a well-thought-out game plan to save for their retirement goals. That plan typically has clients retiring anywhere from age 55 to age 67. However, that most certainly doesn't mean all things go according to plan.

What happens in the case of a diagnosis like cancer, or chronic issues from an accident related injury, or worst case, the unexpected death of a spouse? The answer is that we have to be flexible. Retirement plans need to be flexible and it's important to note that one small "wrinkle" may cause considerable modifications to your plan. Here are some of the topics we discuss with clients who may experience an issue that causes them to reconsider their retirement plan:

• Discuss how their cash flow needs might change in the upcoming weeks, months or years. Perhaps more aggressive gifting to family or charity might be in order or a special trip might be planned.
• Review of Social Security benefit strategies may be in order as it may make sense to accelerate or delay the receipt of benefits (to protect the surviving spouse).
• Ensure wills, health care directives and financial powers of attorney are up to date and align with goals.
• Review beneficiary designations for retirement accounts and life insurance to ensure those named are appropriate and the clients are comfortable with handing over their assets at the beneficiary's designated age(s).

A thought process we try to instill into each new SWA client relationship is not to save every penny they have for some fictitious retirement date but to be sure to live life along the way. Learn and appreciate the value of creating memories along the way knowing that tomorrow, next week or next month is not guaranteed for any of us.

Even if you're not quite sure exactly what Bitcoin is, the one thing you've probably heard is that it has had significant price appreciation and wild price swings over the years. There's no question that if you had put some money into Bitcoin a number of years ago and held onto it, you could exchange it back into an impressive sum of U.S. dollars. That assumes that you didn't lose your Bitcoin wallet password or weren't hacked or a trading exchange you used wasn't hacked, etc. To many, it seems that the fact that Bitcoin has gone up in price is a sign that it is highly successful, but does that actually make sense?

You see, the idea behind Bitcoin is that it would serve as an alternate form of currency via a unique payment system. If you don't want to transact in government-denominated currency or use credit card payment systems, for example, you could opt to transact in a crypto-currency like Bitcoin. But some of the critical features of a good currency are that the values are stable and holders want to use them for transactions, not hoard them. Alas, the creator(s) of Bitcoin may not have foreseen that Bitcoin trading exchanges would pop up and turn it into the equivalent of a speculative stock that can swing wildly by 20-30% in either direction within a few days.

Just think about the problems this would create as a currency. What if you chose to receive a $1,000 paycheck in Bitcoin instead of dollars, not knowing whether the value will be worth $1,200 or $800 a couple days later? If you are running a business with tight margins, you couldn't even consider taking a risk that your revenues and costs would have widely mismatched exchange values.

Bitcoin is an inventive technology and we shouldn't be judging it solely based on what happens to its price. If it is to serve its purpose as a reliable alternative currency, price is the one thing you shouldn't have to monitor closely. It seems that with every speculative investment cycle we've seen over the years, when price becomes the primary focus and ignores most everything else (like profits of a company, for example), it's a sign that the market function might be broken.

Let the crypto-currency buyer beware.

We've been reading quite a bit of news regarding the rising health care costs for retirees and this information just confirms the urgency with which Congress must address Obamacare aka the Affordable Care Act.

• According to the third annual "Retirement Health Care Data Report," lifetime health care premiums for Medicare Part B and D, supplemental Medigap insurance and dental insurance for an average 65-year old couple retiring in 2017 will be about $322,000 (in today's dollars).
• When other out-of-pocket costs such as deductibles, co-pays, hearing, etc. are added in, total lifetime healthcare costs could exceed $400,000.
• The annual retiree health care inflation rate will likely average about 5.5% for the foreseeable future. That is almost triple the U.S. inflation rate of 1.9% from 2012 to 2016 and more than double the projected Social Security cost of living adjustments of 2.6%.
• A HealthView Services report shows that a 66-year old couple retiring in 2017 will need about 59% of their total Social Security benefits to cover their projected lifetime retirement healthcare costs.
  • However, a 55-year old couple retiring at age 66 will need about 92% of their Social Security benefits to cover theirs while a 45-year old couple retiring more than 20 years from now will need about 122% of their Social Security benefits to cover their projected lifetime health care costs.

Not that we didn't already know there was a problem with the current health care system, but the statistics outlined above are alarming.

For our clients, as we update their retirement projections moving forward, we will be breaking out the projected costs of their health care as a separate / specific line item so they will have a better feel for how much of their projected lifestyle cash flow will be available for their retirement goals, not including their lifetime health care costs. If you have questions about how your projected health care costs in retirement will impact you, please let us know as we are glad to help.

Social Security beneficiaries may see an increase in 2018. Based on the Consumer Price Index (CPI) data through April of this year, the consumer advocacy group estimates that the Social Security cost-of-living adjustment for 2018 will be about 2.1%, which is significantly higher than the 0.3% increase in 2017. The official announcement about next year's COLA (Cost Of Living Adjustment) is in October, so it could change.

Social Security's COLA is governed by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) which gives less weight to medical care and housing costs, two categories that have experienced rapid inflation and represent the larger portion of the budgets of older households than younger workers.

Social Security Inflation adjustments have averaged only 1% since 2012, including no increase in 2016. Since 2000, Social Security benefits have increased 43% while typical senior expenses have jumped 86%. Social Security beneficiaries and federal retirees have lost about a third of their purchasing power since 2000, making it more difficult for retirees to afford necessities such as medical care, food and housing.

Also consider higher-income retirees pay a higher monthly premium for both Medicare Part B, which covers doctors' fees and out-patient services, and Part D, which covers prescription drugs. Those higher-income retirees subject to monthly Medicare surcharges may be in for a shock next year. New income brackets, based on 2016 tax returns, take effect in 2018. As a result, retirees who currently pay a high income surcharge pay even more next year even if their income remains the same.

If you have any questions about your Social Security benefits or the role it should play in your retirement plan, please contact us today.