Let’s take a break from discussing taxes and talk about health care costs – possibly the greatest threat to your retirement savings. Trigger warning: this is not good news – I recommend procuring a safe space and ice cream before reading on. However, good news will follow!

Before I go on, I urge my friends in the military, members of law enforcement, and others who will receive health care as part of their government pensions not to disregard this message as irrelevant. Because if the government has a difficult time delivering on all of its entitlements, all the while trying to service its astronomical debt, then aren’t things like Tricare, yet another government IOU, also at risk?

Information about health care costs

Costs for health care have compounded at the rate of approximately 6% annually for several years.

Multiple studies have estimated the cost of health care for retired couples as anywhere from $275,000 (2017 data, not counting nursing home or long term care) to 1 million dollars.

Americans turning 65 now have close to a 70% chance of spending time in a nursing home or being cared for at home in the future.

Around 20% of today's 65 year olds may need more than 3 years of long-term care in a nursing home or provided at home – costs most likely not covered by Medicare. 

As of December 2020, The Congressional Budget Office (CBO) projects that the Medicare trust fund will be exhausted in 2024, which is the nearest the fund has come to exhaustion in the 55 years of its existence.

The Bottom Line

The Government – whether federal, state, or local, has promised us Medicare, Medicaid, Social Security, Tricare, pensions, housing assistance and more. While they’re not likely to become extinct, ALL of these programs are in danger of enduring increased costs to consumers, reduced benefits, or a combination of both.

Simultaneously, Americans are living longer than ever before in history, and life spans are likely to increase dramatically due to scientific advances alone.

At the same time, less Americans are prepared for retirement than ever before. Retiree households had an estimated median income of just $29,000 before taxes in 2019, according to the 20th annual Transamerica Retirement Survey of Retirees. According to the Federal Reserve's Survey of Consumer Finances, the median retirement account balance for seniors just starting their retirements is $126,000. Who will cover their health care costs when they run out of money?

Could this situation – longer lives, higher health care costs, a higher likelihood of needing long-term care, the government’s inability to fund its promises, and our citizens’ utter lack of preparedness for retirement – be a perfect storm?

Even if you are prepared, won’t you be asked to make sacrifices for those who are not?

You can leave it up to the government or to fate, but we think the most prudent course of action would be to hope for the best, while planning for the worst.

Contact Arieff Consulting for a free financial analysis and to discuss how you can be in control and afford long-term care in the future, without spending any money health care premiums for care you hope you’ll never need.

Request a consultation or free financial analysis

Additional Resources

3 Retirement Costs You Probably Aren't Planning for but Should Be

New Report: Retirement Health Costs May Top $1 Million

 The Coming Crisis for The Medicare Trust Fund

Health Care Costs for Retirees Rise to an Estimated $275,000 Fidelity Analysis Shows

The Typical Retiree’s Income Is Shockingly Low

Coming in 2022: New WA State Payroll Tax for Long-Term Care Trust Fund

Washington becomes the 1st state to mandate a Long-Term Care Tax. Is your state next?

If you have to pay it either way, would you prefer YOUR PLAN or the Government Plan?

Health Care Costs Will Bankrupt Millions of Americans – April 2021 (Pdf Download)

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Disclaimer: This newsletter represents the opinion of Arieff Consulting, Inc, and does not constitute financial, tax, or legal advice.