Health Care Costs Will Bankrupt Us All!!! Ummmm. No…

Health care costs in retirement are a HUGE concern for soon-to-be retirees and current retirees alike.

You can’t blame folks, actually, as so much ink has been spilled about the costs retirees face for health care.

Fidelity Health Costs In Retirement Study

Fidelity does a study each year that purportedly shows retirees need $260,000 to fund their health care costs.  “Oh no, honey, we don’t have that kind of money!!! What are we going to do???” (Give Fidelity more money to invest of course!)

Why doesn’t Fidelity also how much retirees need for food, housing, auto insurance etc…? If we use the same logic, we’d say retirees need to have $500,000 or more for housing costs in retirement and another $500,000 or so for food because both of these are higher on the list of retirement expenses for the average American.

Preying on fears of bankruptcy?

No one says that though. Why? Because it wouldn’t scare the way saying people will go bankrupt due to health costs does. For some reason, that fear has taken over for many retirees. And unfortunately, that fear has also kept those same retirees from actually enjoying their retirement out of fear of running out of money.

These retirees, and I’ve spoke to many of them in my career, see their future selves as paupers, eating Ramen noodles, having to move in with their kids.  So, to try to avoid that fate, they take minimum out of their accounts and live much more frugally than is required.

Missed Opportunity To Enjoy Retirement

This saddens me greatly because I can’t tell you how many widows, mainly, I’ve spoken to that have more money than they know what to do with but no one to share it with. Their husband has since passed, and now they’re in their mid 80s and not as sprite as they once were.

Their regret is not have doing more when they were younger and the hub was alive. That bothers me. It bothers me even more when the tax man comes knocking to claim an even bigger share of THEIR money because as you know widows pay MUCH more in tax than married couples.

EBRI Health Costs In Retirement Study

So along comes this study from the Employee Benefits Research Institute. This study shows the ACTUAL out of pocket expenses retirees have from a conducting interviews of over 8,000 participants every two years since 1993.

Lo and behold, what we find is the majority of these people had little to no out of pocket expenses. In fact, other than a tiny percentage of retirees most have very little expenses.

Hmmm… Could There Be A Reason To Frighten People?

Why this study hasn’t received more attention is beyond me, well I am a natural cynic, so I think I know. The investment firms, and the insurance industry, doesn’t want you to breathe easy when it comes to your retirement money. Fear is a great motivator to get you to buy the stuff they sell.

Before you part with your hard-earned money though please look a bit at your situation. Are you a woman with longevity in your bloodline? That is the person most at risk for major out of pocket expenses.

Consider All Your Options

You may want to consider some options to protect against those risks.

However, for all others, men and women alike, think twice before buying something expensive that offers protection against a risk that is not likely to matriculate and maybe consider ways to actually enjoy your retirement instead of constant worry.


Medicare does NOT cover long term care costs. Did you know that?
Probably not.

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.

Weird no??


See the video here.

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