I've said before that I think the biggest issue in retirement will be healthcare. As noted in that post, Fidelity estimates that a couple retiring today needs over $200,000 just to pay for healthcare costs alone. And you know the costs are going nowhere but up!
Market Watch attacks this issue head-on and offers five steps to pay for healthcare in retirement. Their list:
1. Create a retirement plan. It's vital that Americans create a plan that factors in current savings, income sources, lifestyle, expenses, geographic location and likely health-care needs, according to Fidelity. Why? Well, Fidelity's estimate is largely an average and actual costs will vary greatly.
2. Earmarks savings for retiree health-care costs as early as possible. Fidelity recommends that Americans enroll and save money in a health savings account (HSA) or other qualified account earmarked for health care.
3. Spend money/time on a healthy lifestyle now. The best way to avoid future health-care costs is to spend one's money and time wisely on health care today, said Cooper. He recommends, for instance, hiring a personal trainer who can help develop an exercise and nutrition program that will improve the odds of spending less on health care later.
4. Determine details of any employer-sponsored coverage.
5. Understand the financial impact of health-care costs on Social Security income.
To me, the best option for the younger/not-so-close-to-retirement crowd (those 55 and under) deal with options #1 and #3. In particular:
1. Determine your retirement number and start saving aggressively for it. To be conservative, assume you'll need 100% of your current expenses covered (adjusted for inflation) by your retirement savings.
2. Start taking care of yourself RIGHT NOW. As in "today". Stop smoking (it's costing you a fortune anyway), start eating better (you can still indulge now and then, just not every night), and get into shape. For me, it's biking but there are lots of options for getting into/keeping in shape that are fairly cost effective. And, not only will being in shape likely reduce your healthcare costs later in life, but might save on health insurance costs now.
Obviously, some Americans will not be prepared in retirememt.
I've done the math and expect that retirement won't even be an option for me, and that I probably won't be able to work indefinitely.
Als, I have an expensive chronic condition and already have high health care costs (which in conjunction with my low income, mitigate against building retirement savings).
What's going to happen to people who can't pay?
Posted by: Minimum Wage | March 20, 2008 at 10:20 AM
To All:
The above comment by Minimum Wage is an example of the situation you don't want to be in. Choose a career path that pays 4 to 10 times the minimum wage, choose a company that has benefits, and save enough money for retirement. Thank you for you example on how to fail so that we can all avoid what you did.
Posted by: Ryan S | March 20, 2008 at 11:25 AM
"What's going to happen to people who can't pay?"
The rest of us responsible citizens will be forced to foot the bill.
Posted by: James | March 20, 2008 at 11:52 AM
You know I've notice alot of people bash the minimum wage worker...but, I ask you where would all the career people out there. What would happen to careers if there was no one to work the minimum wage jobs? A company can not operate without someone somewhere working for minimum wage. Maybe the career people should take a small cut in their wages so that the minimum wage people could get a little bit large wage!
Posted by: Went for a career and didn't quit make it. | March 20, 2008 at 11:55 AM
Went --
Ryan isn't on MW's case for being a minimum wage worker, but instead for his regular "woe is me" comments. he's been given some opportunities and ideas for improving his lot -- he would rather complain instead.
Posted by: FMF | March 20, 2008 at 01:13 PM
If healthcare is going to be a big retirement issue, then I say that you simply aren't planning to retire on enough ... anybody aiming to retire on 'just' $1,000,000 will be caught short.
The solution? Take steps to grow your income NOW and invest more NOW, so that you can retire wealthy LATER ...
Posted by: AJC @ 7million7years | March 20, 2008 at 02:00 PM
I don't disagree with any of FMFs comments.
However, we seriously need to get a grip on health care costs in America. At the rate things are going, NO ONE is going to be able to afford health care except the very rich. Even if we go to government sponsored health insurance (uggh, I dread the thought!!!), we'll be paying half of our incomes in taxes to pay for health care at this rate.
See the book "Who Killed Health Care" by Regina Herzlinger for details on how our bloated health care system gets things wrong and what we must do to get it back on track.
Posted by: mysticaltyger | March 20, 2008 at 02:30 PM