HEALTHCARE WILL BE YOUR BIGGEST RETIREMENT EXPENSE

 The truth of this blog heading depends, of course, on the health and wealth of the individual.  But it is still rarely true.  In the plans I've developed, Taxes usually exceed projected health care costs 3 to 1.  I think a lot of health care cost calculators are unjustifiably alarmist for the purpose of selling insurance.  For example AARP's calculator said my health care costs would be close to $800,000 during my lifetime.

Huh?  If I met my maximum OOP every year for the rest of my life that would only add up to about $120,000.  Oh, you know, I'll bet they're referring to the total healthcare cost before insurance.  So why didn't they just say that?  How many age 65+ people are completely uninsured?

Vanguard Health Care Cost Estimator, on the other hand, seems to be more accurate.  I urge you to try it.  I plugged in all my details and here's what it churned out:

 

So that's a bit less than $120,000 in today's dollars.  And far less than the terrifying $800,000 generated by AARP's calculator. 
 

Taxes, on the other hand, take up the slack.  Below is a typical cumulative income tax projection that I create for clients.  (Here in Portland, OR we should probably include property taxes too as they average $500/mo. and increase about 3%/yr.  This is especially draining for fixed income folks.  But that's not included in the chart below).  Total tax bill for this client- without any strategizing -by 2040 is $837,000!!
Do you think it's essential, then, to have a retirement cash flow plan that factors in taxes?  A specific, written retirement cash flow plan is the only "insurance" for reducing that gigantic tax bill.

Your Constructive Comments are Welcome!

Don't listen to the hype about the Baucus Bill

S. 1796, the 1,502-page America's Healthy Future Act bill (aka the Baucus Bill) has been excreted from the Senate Finance Committee. And the hysteria about its length has already begun. Oh my, the table of contents alone is over 12 pages!
What you will not hear, however, is that all such bills are issued in "markup" format. They are double and triple spaced. They only use up the middle third of the page. This leaves room for Senators, staff & lobbyists to mark up the bill to render it totally contrary to its purpose, I mean, to be sure all interests are taken into account.
If you cut and paste the bill into Word, take out most of the spacing, and use 2/3 of the page instead of 1/3, the bill shrinks to 439 pages, about the size of the average trashy novel. So it is short enough for anyone to read and understand. Anyone. You can do it yourself at:
http://finance.senate.gov/press/Bpress/2009press/prb101909.pdf
So if your Congressperson bloviates about this bill being too huge to read, you might help him or her find another career when the next election comes around.
I would hope the bill is as long as it needs to be to be sure no one ever again goes bankrupt because of our health care system, that everyone is covered, and that our costs are reduced by 1/3. I'll let you know after I finish reading the bill. But of course by the time the mark ups are done it will be unrecognizable from its current form.
I guarantee you one thing though: this is a momentous moment in our country's history. Health care reform will only be as good as what is demanded by each and every American. I wish I could remember who first said this: the best measure of our humanity is how large a circle we have to draw to include everyone we think of as "us". On this issue, let's draw a circle large enough to include every citizen.