$1.4mm in Out of Pocket Medical Costs for Retirees? Come on...

Milliman, an actuarial and consulting firm (and a very good one by the way), recently released a report suggesting that the “average” healthy 45-year-old couple that retires at age 65 can expect to pay $1.4mm out of pocket in their retirement years for retiree healthcare.  Before anyone gets excited, let’s think about this.

Milliman is full of excellent actuaries who are skilled at “running the numbers.”  The problem with running numbers out over many years is you can get some crazy results.   I would like to suggest that the results of this report are indeed crazy.  I am not going to argue with the way the numbers were calculated; Milliman’s actuaries are much better at math than I. Rather, I am going to suggest the numbers simply don’t make sense from a practical standpoint.

Milliman suggests that the average couple will have $1.4mm in just retiree healthcare costs.  However, I can tell you that the average retiring couple will not have $1.4mm in TOTAL, let alone for just healthcare costs.  I can appreciate the point being made which is healthcare in retirement is going to cost A LOT of money.  Got it.  But it’s not going to cost $1.4mm per couple on average because on average couples don’t have $1.4mm.
 
So, we have come to an impasse.  Milliman calculates $1.4mm in cost per couple, but most couples don’t have this amount of money.  What do we do?  Something has to give, right?  And don’t forget, these costs are after Medicare has paid because we are talking about a retired couple.  Nothing like pointing out a problem without offering a solution.

I’m not going to suggest that I have the answer to this one, but I can tell you that couples are not going to pay what they don’t have.  What is the best that you can do today to plan for this less than rosy future?  You can certainly start maxing out your Health Savings Account (“HSA”) assuming you have one.  This might be one of the best long-term vehicles to fund retiree healthcare costs.  You can also start planning for Long Term Care needs, as a significant portion of retiree healthcare costs are expected to fall into this category.
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Want to learn more about how to prepare?  Give me a call and let’s have a conversation.