How are you helping
clients overcome rising
health care costs? Go
to share your ideas.
Isometimes joke that the two greatest obstacles to a successful retirement are the enormous cost of health care before
retirement and the enormous cost of health
care after retirement.
Let’s start by talking about the health care
costs at a national level. The U.S. spends $3.1
trillion on health care, or $10,000 per year for
every man, woman and child in the U.S. That
is one-sixth of the gross domestic product
(GDP) of our country, and it is equal to the
entire GDP of Germany. Our government
now spends more on Medicare, Medicaid and
PPACA than any other expenditure.
The Congressional Budget Office says
those costs will continue to increase by
6 percent per year. In other words, those costs
will double in just 12 years. Our economy
is only growing at 2 percent, meaning our
economy only doubles every 36 years. Health
care costs will overwhelm our economy unless
something is done — and soon.
Now, let’s talk about health care costs on a
personal level. According to the well-respected
actuarial firm Milliman Medical Index, the
average cost of health care for a family of
four is $24,671 per year. If current increases
continue, that will rise to $50,000 per year by
2025 and $75,000 per year by 2030.
This will be a serious issue for baby boomer
retirees. How can they save for the cost of
health care after retirement when the cost of
health care before retirement continues to rise
at this amazing rate?
This is especially true because health care
costs will continue to dominate expenditures
after retirement. Studies by Fidelity, the
Employee Benefit Research Institute and
HealthView Services all find that a married
couple will require between $250,000 and
$500,000 just to meet their health care costs
in retirement. And that number is increasing
dramatically as people live longer and spend
more time in retirement than ever before.
At the same time, studies have found 90
percent of Americans have less than $140,000
in savings. What will happen to the quality of
life for our retirees in the years ahead?
Money must be set aside or
created to maintain access to
quality health care in retirement.
It will be difficult to create the
funds, but not impossible. You will
have to use all the tools at your disposal.
Start by asking people about Health Savings
Account (HSAs). Many of our clients are using these accounts to build money to pay for
health care costs after retirement. They save
in these accounts in addition to 401(k)s, IRAs
and the other tax deductible savings plans.
They do not use their HSAs until after they
retire to pay out-of-pocket health care costs.
Tax deferral helps to build an account to pay
ever-increasing health care costs.
Another way to provide money for the
health care costs baby boomers will face in
retirement is to leverage their parents’ assets.
Seventy percent of our country’s wealth is
concentrated in the hands of people over 65.
If we show those people we can turn $100,000
into $200,000 of tax-free money for their
children and grandchildren without making
them give up control of that money, many
grandmas and grandpas would do just that.
Candidly, that may be the only way we can
help families continue to have access to quality
health care. Families must work together as
families, and they must do everything possible
to keep money in the family.
You are the only financial professionals
who can deliver this opportunity. It is an
opportunity that will be missed unless you ask
every prospect and client if they understand
how important it is to use this wonderful tool
The greatest obstacles to