How to Wreck Your Retirement #4: Ignore Your Health

TL;DR

Ignoring your health can wreck your retirement by increasing medical costs, forcing unplanned financial tradeoffs, and making retirement harder to enjoy. Healthcare is typically a retiree’s second-largest expense after housing, while someone with no chronic conditions spends about $4,000 annually compared with about $6,100 for five or more conditions. Read on to see how lifestyle choices and advance planning can protect both your finances and happiness.

Transcript

what's the fourth way that I can wreck my retirement ignoring your health so for the typical retiree health care is the second biggest expense after housing and then housing usually goes down for people because they've paid off their mortgage healthcare is the one expense that goes up throughout retirement and we're all going to need a little bit o... Read More

Key Insights

• 😨 Health care is a significant expense in retirement, second only to housing.
• ❓ Lifestyle choices greatly impact healthcare spending in retirement.
• 🧑‍⚕️ The number of health conditions directly influences healthcare expenses.
• 🌱 Failure to plan for healthcare costs can undo retirement efforts.
• 😀 Being healthy is crucial for a happy retirement, with health being the top determinant of happiness for 81% of retirees.
• 🧑‍🏭 Financial well-being is also important, with 58% of retirees considering it a top factor.
• 🧑‍⚕️ Having friends and family around is essential for retirement happiness, but poor health can hinder enjoyment.

Questions & Answers

Q: What is the fourth way retirees can wreck their retirement?

The fourth way is ignoring their health. Healthcare is typically the second-largest expense for retirees after housing, and unlike housing costs, it tends to rise throughout retirement.

Q: How do chronic conditions affect healthcare spending in retirement?

More chronic conditions are associated with higher annual healthcare spending. The transcript cites about $4,000 for someone with no chronic conditions, $4,600 with two, $5,600 with three or four, and $6,100 with five or more, including Medicare premiums and out-of-pocket costs.

Q: Why are healthcare costs especially dangerous to a retirement plan?

Healthcare problems can create unpredictable, large expenses that derail retirement plans. Retirees who did not prepare may need to use home equity, even after working hard to pay off their mortgage.

Q: Which lifestyle choices can increase healthcare spending?

The transcript identifies smoking, poor diet, and insufficient exercise as lifestyle choices that can contribute to healthcare spending. It notes that the precise share of spending caused by lifestyle is debatable, but emphasizes that people can take meaningful steps to improve their health.

Q: How many couples plan for unexpected healthcare costs in retirement?

A Fidelity statistic cited in the transcript says three-fourths of couples named the ability to afford unexpected healthcare costs as a top retirement concern. However, only 22% included those costs in their financial plans.

Q: Why should retirees plan for healthcare costs before retirement?

Planning can reduce the risk that an unexpected medical expense will undo efforts such as paying off a mortgage. If the reserved money is never needed, the retiree simply ends up with more money than expected.

Q: What is the top determinant of a happy retirement?

In an Age Wave and Merrill Lynch study cited in the transcript, 81% of retirees age 50 and older identified health as the top determinant of a happy retirement. Financial well-being was selected by 58%.

Q: How can poor health affect enjoyment of retirement?

Poor health can make it difficult to get out, pursue desired activities, or enjoy time with friends and family. Although 36% in the cited study identified having friends and family nearby as a leading determinant of retirement happiness, pain can make their company harder to enjoy.

Summary & Key Takeaways

• Health care is the second biggest expense after housing for retirees and tends to increase throughout retirement.

• Lifestyle choices, such as smoking, poor diet, and lack of exercise, greatly impact healthcare spending.

• The number of health conditions directly correlates with higher healthcare expenses in retirement.