Prepare for Retirement

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chaz
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Prepare for Retirement

Post by chaz » Sat Sep 19, 2009 10:48 am

http://feedproxy.google.com/~r/vanguard ... ement.html

Tax policy and political policy questions are not acceptable on this forum. It's legit to discuss how we can invest to pay health care costs, but policy issues where the only possible effect is to get people arguing is not acceptable.--Mod
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page

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chaz
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Post by chaz » Sat Sep 19, 2009 10:55 am

"Health care costs in retirement, like health care costs generally, continue to explode. The numbers are daunting. In a June 2009 report, The Employee Benefit Research Institute in Washington estimated that a 65-year-old couple retiring in 2009 would need $268,000 to $414,000 in savings to pay for out-of-pocket health expenses during retirement."
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page

tibbitts
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Post by tibbitts » Sat Sep 19, 2009 11:25 am

chaz wrote:"Health care costs in retirement, like health care costs generally, continue to explode. The numbers are daunting. In a June 2009 report, The Employee Benefit Research Institute in Washington estimated that a 65-year-old couple retiring in 2009 would need $268,000 to $414,000 in savings to pay for out-of-pocket health expenses during retirement."
While that's interesting, it's just a fact that most people will never have $268-440k in savings, yet it's likely that somehow most of those people will get at least the minimum healthcare they actually need. So I'm not sure how that should factor into planning. Let's say you think you will be able to save at most $300k over a lifetime if you are thrifty. It's not much of an incentive to save that money if you know it will all be spent on healthcare that you'll somehow receive anyway if you need it.

Paul

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mickeyd
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Post by mickeyd » Sat Sep 19, 2009 11:43 am

[quote="chaz 65-year-old couple retiring in 2009 would need $268,000 to $414,000 in savings to pay for out-of-pocket health expenses during retirement."[/quote]

Wow! When I read scary stats like this it really brings home to me the value of my years of military service and the promise of medical care for life for me and DW. With Tricare, TFL and Medicare after 65 all that I have to worry about is making sure that I have at least about $97 available for premium payments monthly.
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle

m_j_paquette
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Post by m_j_paquette » Sat Sep 19, 2009 12:22 pm

chaz wrote:"Health care costs in retirement, like health care costs generally, continue to explode. The numbers are daunting. In a June 2009 report, The Employee Benefit Research Institute in Washington estimated that a 65-year-old couple retiring in 2009 would need $268,000 to $414,000 in savings to pay for out-of-pocket health expenses during retirement."
When I was preparing for my early retirement, I ran my numbers through every online retirement planning software in sight. One of these, Fidelity's retirement income planner as I recall, wanted healthcare costs for the current year, and then allocated a 7.5% inflation rate for that cost.

It had me paying over $300,000/year in my 90s. :shock:

Amazingly, that's also when it had me running out of money. Coincidence?

Note that if I actually believed the 'if this goes on' assumptions, I'd need an 8 digit portfolio to safely retire. I thought that was getting sort of silly, and retired anyway. If I'm wrong, well, there's the dementia thread...

S&L1940
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Post by S&L1940 » Sun Sep 20, 2009 9:48 am

I am having trouble relating to these numbers. I did not read the entire twenty page report word for word yet I have my doubts.
I am 70, four weeks out of a major operation and just now seeing just the costs for all the MRI's, CT's, Pet's and invasive tests that were pre-op. without Medicare I would be destitute. the doc and hospital costs will surely be well over the hundred thousand mark. yet except for a $100 charge not covered (and being contested) there have been no out of pocket costs
now my wife and I pay about $8,000 a year for Medicare, the gap supplement and the ratty but helpful part D drug coverage for the both of us.

our only income is SS and what will flow out of a very modest (well below $1M) bucket of assets. yet we have budgeted and planned for the $8,000 and the inflationary rise in costs over the years and the only kicker we see - other than being too conservative on inflation -- is that we chose not to carry long term care insurance. that is our gamble along with the always possible (though we likely will fall into a grandfathered group) cut in Medicare coverage.

what else am I not seeing?

Rich

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baw703916
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Post by baw703916 » Tue Sep 22, 2009 11:08 am

Vanguard has a recent blog entry discussing the issues of projecting healthcare costs in retirement. The author's basic conclusion is that healthcare spending increases above the growth in incomes can't, and won't, go on indefinitely.

http://www.vanguardblog.com/2009.09.18/ ... ement.html
All long-term estimates of retiree health expenses assume rapid growth in health care costs for the foreseeable future, well in excess of growth in incomes and the economy. When health costs compound at a high rate, they explode and swamp everything. It’s not just retirees who are impoverished—so are governments and private employers and active workers. Entire countries even.

John Maynard Keynes famously observed: “In the long run we’re all dead.” Today’s variant would be: “In the long run, we’re all bankrupt—from heath care.”

The question is, can health care costs compound at high rates forever? The short answer is, no. We will not have an economy devoted exclusively to health care and nothing else. But because we cannot see a world in which health care costs grow at slower rates—we cannot today imagine the mechanism by which costs will eventually slow—we take past history, namely rapidly growing costs, and simply project it forward.
Brad
Most of my posts assume no behavioral errors.

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Opponent Process
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Post by Opponent Process » Tue Sep 22, 2009 11:17 am

tibbitts wrote:While that's interesting, it's just a fact that most people will never have $268-440k in savings, yet it's likely that somehow most of those people will get at least the minimum healthcare they actually need. So I'm not sure how that should factor into planning.
Bingo. Having that kind of money earmarked for health care just means you'll have the privilege of spending it on health care. Not having it means someone else picks up the tab.
30/30/20/20 | US/International/Bonds/TIPS | Average Age=37

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