High Healthcare Costs in Retirement Are Making Americans Broke
Fair warning, folks: This week’s slap will hurt.
It’s time again for the quarterly retirement update. This is usually the most depressing “Slap in the Face” Award of every quarter, but according to new reports, there’s good news this time around.
Well, in terms of retirement savings, you might consider it good news. You’ll be the judge. Of course, I’ll give you a few nudges along the way.
And unlike most weeks, I apologize in advance if my tone is a bit sarcastic. But these numbers are getting so absurd and so little has been done to remedy the situation.
Last year, 55% of people over the age of 55 reported that they thought they would go broke in retirement. Not low on cash, not struggling… broke.
The good news – which I have trouble saying with a straight face – is that this year, that number is down to 42%. But, remember, this is a self-reported study. Those are as reliable as most 13-year-old kids.
To add a little reality to this good news, let’s look at one big number we can expect in our golden years. Not the day-to-day costs that most people report are the reason they haven’t been able to save for retirement… but one unavoidable number.
Healthcare will cost us around $275,000 per person! That’s not even including all medical expenses like over-the-counter medications or long-term care.
Most of us can’t get our heads around this idea. And the vast majority of us have been healthy most of our lives, so it doesn’t feel real to us yet. But let me put it into perspective in terms of savings and our ability to pay.
The average Social Security check is $1,300 per month, and almost half of us rely on that as our primary income source in retirement.
It will take 211 months of Social Security checks to equal $275,000. That’s 17 1/2 years. If you don’t eat, pay rent or do anything else, you break even in 17 1/2 years.
And one-third of us have less than $10,000 saved for our 20-plus years of unemployment.
Last month, I sprained my ankle. My out-of-pocket costs so far, counting my deductible, are about $1,300 for X-rays, doctors’ appointments, physical therapy and follow-up appointments. That’s 13% of the $10,000. For a simple sprain!
What do you think a heart attack, cancer, a broken hip or a stroke would cost?
But on the upside, 23% of us have $300,000 or more saved. If we use the 4% rule, we can withdraw $12,000 per year in income to help make it through retirement.
If you max out your Social Security contributions, your monthly check will be $2,500 at age 66. With your $12,000 from investments, you’ll only be $1,600 below the average annual cost of $46,000 per year per retired couple.
Congratulations! Twenty-three percent of us are close to paying our expenses, but virtually no one has the cash for the medical side of the equation, which is – in almost all cases – a guarantee.
So I ask you… where is it coming from?
This is what the money press considers good news.
And no one in D.C. is doing anything to address this train wreck. Yet we’re dropping millions on investigating Trump for collusion with the Russians during the campaign.
Save as much as you can. We’re going to be here a whole lot longer than any of us thought we would be, and being broke is no way to spend your last 20 to 30 years.