DANVERS, Mass. and WASHINGTON, Sept. 25, 2018 /PRNewswire/ -- With total lifetime healthcare costs for a healthy 65-year-old couple retiring this year projected to exceed $360,000, ensuring sufficient savings are available to address healthcare is a growing retirement planning challenge.
A new white paper, "Healthcare, Annuities, and Retirement," from HealthyCapital and the Insured Retirement Institute (IRI), shows savings that can be realized from improved health and how they can be used to reduce the burden of healthcare costs in retirement.
"Retirement healthcare premiums and out-of-pocket costs are 'guaranteed' expenses that will rise faster than inflation and Social Security COLAs," said Cathy Weatherford, President of IRI. "Americans are increasingly focused on ensuring they can cover these costs. This paper shows the potential for guaranteed income products to be part of the solution."
With approximately 50 percent of adult Americans classified as having a chronic condition, including type 2 diabetes, high blood pressure, and/or high cholesterol, the paper details actuarially calculated annual savings from simple behavioral changes such as taking prescribed medications. It also outlines the potential increase in retirement balances when these savings are invested.
In a case study, a 30-year-old woman with type 2 diabetes who adopts a few basic lifestyle changes can reduce her annual healthcare expenses by a range of $1,041 - $9,713 (future value) between the ages of 30 and 64. If she invests the savings and generates a six percent annual return, she has the potential to add $240,000 (future value) in additional retirement savings at age 60.
By investing these savings using a laddered annuity strategy, she will be able to cover her healthcare costs in retirement. In the white paper case study, she purchases a variable and deferred income annuity at 60 (with payments beginning at 65), and single premium income annuity at 75, to provide a stream of guaranteed income that will grow to meet rising healthcare expenses at different stages of retirement. To illustrate the increasing burden of healthcare over time, data from HealthView Services shows costs will be 200 percent higher at age 87 for a 65-year-old retiring this year.
Although the case uses the example of a 30-year-old, the principles are applicable for different age groups. Different combinations of annuities may also offer the flexibility to address specific client needs, including, long-term care expenses.
"The laddered annuity approach outlined in the paper offers one potential path to ensure sufficient income will be available to cover these expenses during retirement," said Ron Mastrogiovanni, CEO of HealthyCapital and HealthView Services. "By including healthcare as part of retirement planning conversations, advisors have the opportunity to work with clients to create a guaranteed income stream that meets an individual's healthcare, income, and even legacy goals."
HealthyCapital, a joint venture between HealthView Services and Mercy, draws upon 70 million healthcare cases, and actuarial, government, and economic data to project an individual's out-of-pocket cost savings through condition management. The company's data and applications incentivize individuals to adopt healthy behaviors that can increase life expectancy, reduce personal and employer healthcare costs, and generate additional retirement income.
The Insured Retirement Institute (www.irionline.org)
The Insured Retirement Institute (IRI) is the leading association for the retirement income industry. IRI proudly leads a national consumer coalition of 40 organizations, and is the only association that represents the entire supply chain of insured retirement strategies. IRI members are the major insurers, asset managers, broker-dealers/distributors, and 150,000 financial professionals. As a not-for-profit organization, IRI provides an objective forum for communication and education, and advocates for the sustainable retirement solutions Americans need to help achieve a secure and dignified retirement.
Simon Erskine Locke
Tel: (202) 469-3026
SOURCE HealthyCapital and Insured Retirement Institute