Healthcare May Be Broken, But Your Retirement Plan Doesn’t Need To Be

In Articles, Estate Planning, Income Planning, Investment Management, Long Term Care, Retirement Thinking, Social Security, Tax Planning, Weekly Articles by Adam Cufr

Live on less than you earn, pay less interest on debts than you receive on your assets, mind your taxes, and you’ll be fine. It sounds so simple, and it is. Similarly, eat fewer calories than you burn, exercise regularly, avoid running red lights in your car, and you’ll be fine. It sounds so simple, and yet it’s not. Why? Outside forces are conspiring against you at all times. The wind is often in your face, and when it’s at your back, it’s seldom even noticed.

One example of the forces conspiring against us financially is the cost of health care. Whether it’s the pure cost of receiving the care itself, or the cost of health insurance premiums to protect from the possibility of having to pay for a medical issue, recent and aspiring retirees are wrestling with the growing cost of getting the care they need. For those who feel that they can retire before age 65 – Medicare age – the burden of $1,400 or $1,800 per month for insurance premiums, plus the cost of co-pays and deductibles, has many people rethinking their retirement plans. For many, it’s simpler to work until 65 in an attempt to avoid the problem altogether.

It should be noted that while health care costs are rising, the stock market is soaring to new highs, building retirement nest eggs in the process. But let’s face it, a rising investment account balance would feel much better if the money wasn’t destined to leave right out the back door in order to pay for health care. It’s like getting a pay raise at work only to discover a leaking roof on your home the very same day. “Can we ever get ahead?” we cry out.

In the face of the persisting health care crisis, my best advice is to plan everything else you can, leaving the health care variable as the one big unknown in your planning equation. In other words…

get your non-medical monthly expenses understood and in order, reduce or eliminate debts, ensure your investment portfolio is managed well relative to your risk tolerance, have suitable insurances in-place for a premature death or long-term care event, and have a clear, focused retirement plan that can be adjusted as health care changes become reality.  This is what you can do, this is what you can control; the planning process.

Just as the best first step in assembling a grandchild’s new bike, or baking a new recipe is to gather all of the parts and ingredients first, review the instructions, and only then begin putting the pieces together. That way, if there’s a part that’s missing or broken, you know before it’s too late to address it. In our current financial landscape, healthcare costs are that missing or broken part. It’s only after we secure the rest that we can really know the full impact on our long-term plans.

This process doesn’t sound simple, it doesn’t sound easy, and it’s not. But the purchase being made at retirement is using a lifetime of savings to buy decades of freedom from paid work. The price may seem high, but the benefits are enormous.

All the best,

Adam Cufr Signature
Adam Cufr, RICP®