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The Investment Opportunity of a Lifetime

Healthcare Costs in Retirement

Aging is typically associated with increasing healthcare expenses, due to costs outpacing general inflation and the increasing likelihood of needing healthcare services as we age. Actual costs will vary considerably from person to person, depending on factors such as retirement location, retirement age, your health, and how long you live. 

Some will benefit by retiring in a country with good quality publicly funded healthcare. In these situations, you still need to be prepared for holes in coverage – such as medication costs in Canada, or long-term care costs related to diseases like dementia. Some also choose to pay for private care/insurance if they have concerns about the quality or limits of publicly funded care. 

Healthcare expenses for retirees in the US are more challenging to prepare for. The Employee Benefit Research Institute estimates a 65-year old couple would need $265k to cover total healthcare expenses during retirement. A Mercer-Vanguard study estimates the annual cost for a typical 65-year old couple in 2018 as $10,400 – which includes Medicare, insurance to address gaps in Medicare, and out of pocket expenses. These expense estimates exclude long-term care – which does not affect roughly half of retirees, but can cost over $250k for about 15% of retirees. Some purchase long-term care insurance to address this risk. 

For people retiring outside of the US and countries with publicly funded healthcare, international health insurance offers another solution. Popular insurers include firms such as Cigna, Allianz and Bupa. Country or region limited insurance plans offer potential savings. People in relatively good health can reduce premium expenses further by focusing on plans that are in-patient only and have very high deductibles. Ask your insurance broker to quote the plans at age 75 and 85 to better understand how premium expenses may adjust over time. 

Saving Extra is Not the Only Solution

Popular wisdom is to ‘prepare for the worst but hope for the best.’ Becoming better aware of these costs helps illustrate the importance of saving for retirement. However, for anyone concerned about how these costs could impact them – it’s possible to do much more than prepare financially and hope. Another way to address this challenge is by investing effort into living healthier today. 

Diet is the number one cause of premature death and disability. Choosing healthier habits does not guarantee good health – but it can put the odds heavily in our favor. There is an ever-increasing body of research linking our most common diseases to decades of abuse inflicted on our bodies through unhealthy lifestyle choices. By the time symptoms develop, it is sometimes too late to change course - even with costly pills and surgeries.  

“Prevention is better than cure.” -Desiderius

Part of the challenge is our understanding of diet and nutrition. The internet provides a wealth of information – including disinformation specifically designed to keep the public confused. Everyone has their own path to choose, but these are the resources I found most helpful: 

  • “How Not to Die” by Dr. Michael Greger. He uses evidence-based nutrition to describe the optimal diet, and identifies foods linked to chronic diseases. Greger’s book and website NutritionFacts.org have been life changing for me. 
  • “The Alzheimer’s Solution” by Drs. Dean and Ayesha Sherzai. While growing up, I watched my grandmother lose herself to this devastating disease, which led to mixed feelings when learning over 90% of dementia cases can be prevented through lifestyle choices, and for the 10% with ‘bad genes’ – it’s possible to push onset back by 10-15 years. Dementia is one of the diseases that surfaces after decades of unhealthy habits – and is forecast to rise significantly across the world. The scope of this book is wider than diet and is helpful to anyone interested in improving and maintaining brain health. 

We all know there are quality of life benefits to choosing healthier habits, but for most of us it's not enough to motivate change. The point of this post is that the financial incentives to take your health seriously are significant no matter where you plan to retire – and these figures are only expected to increase, especially related to dementia and long-term care. Taking your health seriously could be the investment opportunity of a lifetime.