Chronically ill clients may have lower healthcare costs in retirement

A recently released paper from the Empower Institute shows that if chronic health conditions shorten clients’ lives, even though their average annual expenses are higher, their overall retirement savings goal might actually be lower than a healthy person’s.

While we applaud the research around the impact of healthcare costs on retirement planning, the real question is: What should individuals do with that information?

They already have to consider market performance, inflation, longevity and late-in-retirement expenses, as well as their impact on retirement finances. Planning for the type of illness is probably a “bridge too far” for most investors.

Our view continues to be that if an individual has a reasonable expectation of longevity, they should generate income late in retirement that can be used for these healthcare costs, or gifted to children or grandchildren.

How retirement has changed in the last 30 years

Thirty years ago, retirement was mostly covered for you, between Social Security and the pension plans most employers offered.

Now individuals are more or less on their own.

Social Security covers fewer of our expenses now. Pensions have gone by the wayside for most people. We live significantly longer than 30 years ago, but only work a few years longer than then.

So, retirement savings has to cover a lot more than it did three decades ago.

However, that doesn’t have to mean undue risk. While Social Security and pensions may not provide for you in retirement the way they once did, there are options open to the individual investor that will enable them to create that secure income the prior generation had on their own.

They can do so through the use of income annuities, either immediate or deferred, to create that “personal pension” for themselves. Our Go2Income tool can show you how.