Retired and Ready To Enjoy Life?

Don’t Let Fears Of Health Care Costs Put You Back to Work!

Whether retirement is on the near horizon or you’re currently swinging a six-iron on the Pebble Beach fairway, there’s an all-too-prevalent fear that inhibits investors from letting their grey hair down and truly indulging their golden years: health care costs.  Simply stated: Medical expenses are one of the most significant costs we incur later in life.  So, the question becomes, how can we realistically and rationally plan – when we may irrationally fear that these expenses could be so great that they might decimate our entire nest egg?  It’s never fun thinking about the implications of one’s own expiration date, but because the good folks at MIT haven’t yet invented a cure for mortality, we must do our due diligence to understand and anticipate the costs of doctor visits, medical treatment, assisted living and all the other health-related things our 25-year-old selves wished we never had to someday ponder.

But there’s a silver lining. Although the fear of exponential medical expenses is a valid one, before you start crunching the numbers on the going-rate for a CAT scan, consider this: retirement expenses that may increase due to health care actually decrease in other key arenas of life.

In fact, the decreases in retirement expenses that one puts toward food, entertainment, travel, transportation, etc., tend to offset much of the newly incurred expenses. As such, many financial planners believe that, when push comes to shove between Medicare assistance and other spending category  decreases, any increase in health care expenses are rather negligible.

To finish the post there would be foolhardy. Determining your health status can be done fairly easily with the help of, and matching the subsequent costs of that status is easy to determine. Once there, you will learn if you are in ‘Good,’ ‘Fair,’ or ‘Poor’ health once you match how often you frequent the doctor’s office, how many prescriptions you need, among other specifics. Perhaps allow your significant other to help you with this—you must let go of the fact that you are not invincible, you are not as fit as an ox, and that yoga will continue to help you age backwards.

Fidelity estimates an average individual spends a minimum of $6,900 a year in out-of-pocket health care costs. To be more conservative, let’s call it $10,000.  A $1 Million portfolio would only need to achieve a 1% real return to fund medical expenses with inflation throughout retirement, well below long term return averages.  So save regularly, invest for the long term and keep a diversified portfolio and your medical costs could be well taken care of.

To use any of these numbers as your baseline and your only baseline is not recommended. Know your health coverage, and estimate your expenses when it comes to the following: insurance premiums, deductibles and co-pays, prescription drugs, dental, vision, and hearing expenses, and long-term care.

Ultimately, use all the tools that are at your disposal when estimating your potential healthcare costs in retirement. And visit the following websites* for assistance:


*Not responsible for content on third party sites.

For more information about investing, financial planning and securing the retirement (for yourself) and the legacy (for your family) that you deserve, please contact us today at 312.669.1650 or use our “Let’s Talk” tool on the right-hand sidebar.

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