WBIR: Aging Baby Boomers: Costs in Retirement

by Paul K. Fain, III, CFP® | May 16, 2017

You’ve been busy raising your children and saving for college and now you are helping your aging parents! It may be difficult to set aside money for your own future — planning for retirement is tough but figuring out how much money you’ll need for health care is even tougher.

BABY BOOMERS SAY THEY ARE TERRIFIED OF THE UNCERTAINTY:

Americans are living longer than ever.
66% of older Americans suffer multiple chronic diseases (cardiovascular, arthritis, diabetes).
Rising costs – Health care will likely be your biggest expense during the golden years:
- More out-of-pocket expenses will be required to maintain health care benefits
- Medigap insurance premiums are expected to have double-digit increases
- Number of employee-funded health care steadily decreasing

HOW MUCH DOES RETIREE HEALTHCARE COST?

A 65-year-old, healthy couple can expect to spend $266,600 over the course of their retirement (estimates range from $240k to $377k!!!).
Average annual out-of-pocket spending for recurring health care costs: premiums, doctors, etc:
- Age 65+ couple: $7,725
- Age 85+ couple: $28,644
Not including possible Long-Term Care expenses!

SAVE NOW! GET READY FOR FUTURE HEALTHCARE EXPENSES:

Health Savings Accounts (HSA)
- IF you have a High Deductible Health Insurance Plan (HDHP) it can be paired with an HSA.
- 2017 Max: $3400 individual; $6750 family.
- Can be saved and invested for future retirement health expenses!
- Tax deductible. Tax free.
And/or Bump or Max-out your 401k and IRA opportunities!
And/or, earmark a separate investment fund for “Future Healthcare.”

HOW DO WE KNOW IF WE ARE ON TRACK WITH OUR RETIREMENT SAVINGS?

By age 35: 2 x Salary

By age 45: 4 x Salary

By age 55: 6 x Salary

By age 65: 8 x Salary

Ex: Based on a $50,000 salary:

Age 35: 2 x $50,000 = $100,000

Age 65: 8 x $50,000 = $400,000

SUMMARY: Rule of 10