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Fidelity Says Baby Boomers Haven’t Even Saved Enough To Cover Their Healthcare In Retirement

Courtesy of ZeroHedge. View original post here.

While statistics are somewhat sketchy on the topic, most research suggests that the average retirement-age household has managed to set aside roughly $200,000-$250,000 for their golden years.  Unfortunately, they'll need more than that just to cover their healthcare costs.  Per Bloomberg notes today, the average 65-year-old couple will need roughly $275,000 to cover their healthcare costs during retirement…and that's with Medicare.

A 65-year-old couple retiring this year will need $275,000 to cover health-care costs throughout retirement, Fidelity Investments said in its annual cost estimate, out this morning. That stunning number is about 6 percent higher than it was last year. Costs would be about half that amount for a single person, though women would pay a bit more than men since they live longer.

You might think that number looks high. At 65, you’re eligible for Medicare, after all. But monthly Medicare premiums for Part B (which covers doctor’s visits, surgeries, and more) and Part D (drug coverage) make up 35 percent of Fidelity’s estimate. The other 65 percent is the cost-sharing, in and out of Medicare, in co-payments and deductibles, as well as out-of-pocket payments for prescription drugs.

And that doesn’t include dental care—or nursing-home and long-term care costs.

Of course, the problem remains the staggering inflation of healthcare costs that continue to rise at many multiples of overall inflation and wage growth. 

U.S. retiree health-care costs are likely to increase at an average annual rate of 5.5 percent over the next decade. That's nearly triple the 1.9 percent average annual inflation rate in the U.S. from 2012 to 2016 and more than double the projected cost-of-living adjustment (COLA) on Social Security benefits.

The premiums on supplemental insurance, also known as Medigap, that many people buy to cover costs that Medicare doesn't, such as co-payments; on Medicare Part B, which covers payments for doctors, tests, and other medical services; and on Part D, prescription drug coverage. Here's how your Social Security benefits are likely to stack up against some of those costs.

Meanwhile, the shocking inflation of healthcare costs spells disaster for younger families who will have to set aside millions to cover their healthcare in retirement.

Of course, excessively rising costs, for our legislators who may not be so good with the math, is usually the result of demand outstripping supply and/or perverse regulations that serve to distort free market forces.  In the case of Obamacare, we have both. 

As an example, before Obamacare many healthy young people, who we'll refer to collectively as John Doe, chose not to even carry health insurance because it was a truly wasteful expense for them.  As it turns out, millennials can actually do some basic math and figured out that they didn't need to spend $5,000 a year for an insurance plan when the odds are that they'll get a cold one time, pay $150 to visit a doctor and $40 to buy some antibiotics.

But then Obamacare came along and forced John Doe to, not only purchase insurance, but to purchase a 'souped up,' expensive plan with all sorts of bells and whistles. 

Now, Democrats knew that that 'souped up' healthcare plan was really just a thinly veiled tax on John Doe…he wasn't supposed to actually use it. 

But John Doe, didn't see it that way.  From his perspective, if he's paying for a service, he might as well use it…and hence the demand issue.

Moreover, that simple example says nothing about the adverse selection bias created by Obama's subsidies and exchanges where people with absolutely no "skin in the game" can get 'free healthcare,' courtesy of the millionaire, billionaire, private jet owners in the country, and consume as much healthcare as they want basically free of charge. 

To make a long story longer, the net effect of Obamacare was that it added a ton of demand to an already undersupplied healthcare market which is why healthcare premiums are soaring.  Perhaps, just maybe, basic economic principles actually work and more 'skin in the game,' rather than less, and more people making their own decisions, rather than less, are actually good things?  Just a hunch but we hear that a lot of work has been done on the topic.

Of course, we highly doubt that any of this will stop our politicians from turning the healthcare debate into a fued between young and old and the rich and poor…afterall sowing division is how elections are won…and lost.


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