The most consistent topic of conversation among aspiring retirees has become healthcare. The discussion surrounding the possible repeal or replacement of the Affordable Care Act (Obamacare) has made healthcare costs and availability a huge variable for people who haven’t yet reached 65, the qualifying age for Medicare. Employers and employees alike are playing a game of musical chairs, circling the chairs waiting for the music to stop…but it doesn’t.
How do you plan a retirement when there are so many unknowns in healthcare?
Reduce the variables. Like in a mathematical equation, too many unknowns create an unsolvable problem. In retirement planning, I have seen many people allow too many variables to prevent them from adequately addressing any particular concern. The result is a swirling storm of questions and partial answers. Your kids or grandkids might call it a ‘hot mess.’
Here’s how you can reduce the variables:
1. Rather than guessing at the effect on your finances of an increased cost of healthcare during retirement, consider tracking spending for a month or two. Learn how much money truly is going out each month to maintain a chosen lifestyle.
2. Compare spending to known income sources like Social Security, pension, income available from the investment portfolio, etc. Once true lifestyle costs and income are known, you may discover that the situation isn’t as dire as you had assumed. In other words, you have reduced a variable (or two) by knowing the true income need.
3. Look closer at how an increase in health care cost will either delay retirement by a now-calculable period of time or maybe inspire delaying a major purchase like a new car or costly travel in order to afford the specific healthcare cost increase when it occurs. In other words, save and earmark money for the healthcare cost increase before it’s a problem.
At the risk of sounding glib, simply transform unknowns into knowns. Reduce the variables by putting every account statement and benefit statement into one big pile and analyze it. Understand current portfolio risk, income options, estate planning desires, Social Security benefits, pension choices, and match them with your retirement goals. The closer you can get to isolating health care costs as a single variable, the better the night’s sleep when news of Obamacare repeal tempts you into madness.
Naturally, if we can help you in any way, please reach out to us. Simply hit ‘reply’ to this email and we’ll go from there.
All the best,
Adam Cufr, RICP®