Planning for Health Care: How Excellent Health and Longevity Impact Retirement Income Planning

IRI Report: Being Healthy Adds Up in the Long Run

New Study Shows Healthy Retirees May Pay More in Total Health Care Costs;
Costs Better Managed with Income Annuities in Retirement Strategy

WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today released a new report showing that healthy retirees, as a result of longer lifespans, may pay more in health care expenses throughout their retirement years than their less healthy counterparts. According to the report, which analyzed data from HealthView Services, a 65-year-old male in excellent health can expect cumulative health care expenses in retirement – including premiums – to total $345,000. This is nearly $100,000 more than his counterpart in poor health, who can expect to pay $246,000 in total health care expenses. 

“There’s no question that a long, healthy retirement is an overwhelmingly positive thing,”IRI President and CEO Cathy Weatherford said. “But even those in excellent health will need to finance health expenditures, and with longer lifespans, these costs will add up quite significantly. Fortunately building a retirement income plan with guaranteed lifetime income increases the probability that healthy retirees will be able to manage health care costs and maintain their standards of living throughout their retirement years.”

Other key findings from the report: 
  • A healthy 65-year-old male can expect to live to age 87 on average, while his counterpart in poor health can expect to live to only age 81. A healthy 65-year-old female can expect to live to age 89 on average, while her counterpart in poor health can expect to live to only age 84. 
  • A typical 65-year-old will live on average 5.2 years beyond “health expectancy” age, the age at which one can expect to live relatively healthy. 
  • The healthiest individuals, who have the highest probability of living beyond life expectancy age, have the highest risk of exhausting their assets and consuming their Social Security income on health care costs. 
  • A retirement income approach using either single premium immediate annuities or a deferred income annuity in combination with systematic withdrawals will provide a healthy individual with a larger portfolio balance at life expectancy age, and more lifetime income beyond that age, than a retirement income approach relying solely on systematic withdrawals. 
  • Medicare Part B premiums increase with annual income, and thus total expected health care costs in retirement also increase with income. 
The entire report, “Planning for Health Care,” is available HERE.