Medicare does NOT cover long term care costs. Did you know that?
Health Care Costs In Retirement
I bet you did know, though, that you’re going to spend a TON of money on health care in retirement. Fidelity for instance says you’re going to spend $275,000 in costs on health care and that’s BEFORE you even visit a long term care facility.
And I can see it now… We hardly have enough in my retirement account to put food on the table, and now Fidelity and a lot of other firms are saying we’re going to need nearly $300k to pay for health casts in retirement??!! What are we going to do???
$300k for Health Care In Retirement?
The answer is…stop worrying about this. Do you know you’re going to need over $500k in retirement in order to put food on the table?
Did you know you’ll need another $500k in your retirement to pay for housing costs, and that’s before you factor in if you have a mortgage or not???
OMG, OMG! We’re all doomed!!!
How Much For Housing in Retirement, Food?
STOP the insanity! We’re not all doomed.
How these researchers like Fidelity get their numbers is basic stuff. They calculate the costs of “Free” health care via Medicare and compound that number over the number of years you will be in retirement.
Costs of “FREE” Medicare
Believe it or not, FREE Medicare has Premiums for Part B and D. Those premiums START at almost $200 a month, per beneficiary and go up as income levels increase.
Then there are co-pays, co-insurance, deductibles etc.
You may have a Medigap or Medicare Advantage plan which also could have premiums too.
Those expenses adjusted for inflation over say a 25 year time frame are where Fidelity gets that dastardly number of $275k or whatever it is in the year they publish the study.
Don’t worry though, Fidelity has solutions for you to deal with that huge cost. Simply invest more money with them! Works like a charm.
Frighten people to save more and hopefully those same people in the course of their savings will use their funds in which they get fees. Amazing piece of salemsanship.
Boston College Center For Retirement Research
The thing that bothers me most though is that so many people fall for this. Even the Boston College Center for Retirement Research jumps on the bandwagon by warning people how they could be destitute if they don’t factor in health care costs in retirement.
Wonder if Fidelity is a benefactor of their research? I don’t know. I went online to see who their benefactors are and could only find that Peter Lynch and one other Fidelity big wig are donors to Boston College on the whole. Not sure how much of their $ goes to the Center specifically.
Is Fidelity a Benefactor?
Yeah, I hate to sound so doggone cynical. But when it comes to the investment industry, I can’t help it. In fact, if you’re NOT cynical when it comes to this industry you’re naive. Don’t be naive when it comes to your retirement planning.
So, without even setting food into a nursing home, you’re going to need upwards of $300k over the course of your retirement to fund health care costs.
Nursing Home Care
But what if you do need nursing home care? Then your costs will be $500k! A half mil…do you have that??? No??? Well you better start saving, right???
Well, no, not necessarily. The vast, vast, vast majority of people will never use a nursing home. Never. And the vast majority of people who do will use it on average of 6 months or so.
So, to worry so much about a nursing home in your future is akin to worrying so much about a car crash taking you out.
Yes, they happen. Yes, it is horrible and can devastate those to whom it happens. But stats being stats, it’s just not likely to happen…to you.
It will happen to a few people in your demographic. Stats can show that with scientific precision. But who those few people are is uncertain.
Stop Wasting Valuable Brain Power!
So, to worry about being one of those few people is simply a waste of valuable brain power.
This does not mean you should not get Long Term Care Insurance, by the way. Shoot, my wife and I BOTH have it!
We insure for the catastrophic events that could destitute our family. That’s what insurance is for. If I were to have a stroke and needed assisted living, or worse full time care, my wife and 4 kids, wouldn’t make it financially. Thus we insure against that happening.
But that is a different discussion point that saying retirees are going to spend a quarter to half a million on health care in retirement. That spending is going to happen no matter what. Just like spending on food and yet no one is out there writing studies about the increasing costs of food in retirement, insinuating that will make us all paupers.
See the video here.