We all know the saying, "Nothing in life is certain except death and taxes," but every American must face reality and modify it to: "Nothing in life is certain except death, taxes, and healthcare expenses."  According to Nationwide Financial, “76% of future retirees say their top fear about retirement is health care costs going out of control," so it’s pretty clear that most people already agree with the revision.   

Unfortunately, most in the advisory community engage in what they consider serious planning or discussions with clients while doing their best to ignore all things healthcare related.  Modeling the costs associated with healthcare in retirement — from ever-increasing Medicare premiums to out-of-pocket expenses — is a problematic variable for comprehensive planning.  Yet every American, and everyone in the advisory community, must face this reality and address the mandatory Healthcare Expense certainty in life.   

The TRUE Cost of Healthcare In Retirement

Fidelity Investments' annual study on retiree healthcare costs concludes that " a 65-year-old retiring in 2025 can expect to spend an average of $172,500 in health care and medical expenses throughout retirement.”  That’s $345,000 for a couple – With an exclusion for Long-Term Care (LTC) buried in the footnotes.  Fundamentally, your discussions about healthcare costs must first extend beyond Medicare and then include the future cost of LTC.  Argue with Fidelity about the rest, but without accounting for LTC, a massive unfunded liability is sitting on your client’s balance sheet, and Medicare specifically excludes it, as confirmed on the Medicare website.  Whether it’s the consumer or anyone advising them, there must be a better understanding of Medicare's limitations and plan accordingly.

Not only is Long-Term Care a missing component in every facet of a consumer’s planning, it’s one of the most misunderstood elements of healthcare in retirement and one of the largest potential risks all Americans face.   According to Kevin McGarry, director of the Nationwide Institute for Retirement Income, "One reason people may underestimate the amount of money needed to cover their health care costs in retirement is that many workers do not think they will ever need long-term care.” Unfortunately, he’s correct!!   Even those with optimistic views of the future should recognize the need for a more proactive approach to address the true cost of "Healthcare In Retirement."   And those costs keep rising!   

For those over age 65 and/or eligible for Medicare Part B, the cost of basic coverage has increased 5-6% annually over the past two decades, with some years spiking even higher. The expense is even higher for those hitting income thresholds based on the Income Related Monthly Adjustment Amount (IRMAA).  It shouldn’t be a surprise then that the cost of Long-Term Care is rising at an equal or greater rate, as the federal government estimates that "about 60 percent of us will need assistance with things like getting dressed, driving to appointments, or making meals. Planning is critical, but many people are not sure what is covered by insurance, and people are often misinformed about what is covered by Medicare."  

No one can control or avoid the cost of healthcare, so, by definition, it must be considered a certainty in life — just like death and taxes.  And when it comes to death and taxes, there are strategies, like tax-deferred accounts and municipal bonds to manage taxes, or an active, healthy lifestyle increase longevity.  What is the consumer’s strategy to mitigate the cost of healthcare?  How are advisors engaging them about Healthcare In Retirement and Long-Term Care?   What happens to their planning — and their loved one — with the status quo?  

Because now you know:  "Nothing in life is certain except death, taxes, & healthcare expenses"

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