The Downside of Retiring Healthy

A few weeks ago, I was having a wonderful discussion with my wife about how in addition to improving our financial health, we’ve also stepped up our physical health game.  We agreed that there might very well be some correlation between physical health and financial health.  This has certainly been our experience — for instance, in contrast, we recalled concurrency between when we were in our worst physical shape and when we were in our worst financial shape.  On this day, however, we were basking in the glow of an unprecedented new parallel level of optimal health — both financially and physically speaking.

The realization got me thinking about how financially beneficial it might be that we were also following a healthy path physically speaking.  In particular, I began to think about how we might enjoy lower health care costs in both pre- and post-retirement life.  As the Center for Retirement Research at Boston College (yes, you read that right: there is an actual Center for Retirement Research) so aptly puts it:

(If) current good health is a predictor of low health care costs over one’s remaining lifetime, healthy households could set aside less for health care expenditures than the unhealthy…

This mirrored our logic.  And because I wanted to write about this topic, you can imagine how happy I was to find CRR’s report titled DOES STAYING HEALTHY REDUCE YOUR  LIFETIME HEALTH CARE COSTS?. The answer to this question was exactly what I was looking for.

But while this question matched what I was looking for, the answer did not.  Put frankly, here is the somewhat hard to accept — although logical — conclusion:

  1. People in good health can expect to live significantly longer. At age 80, people in healthy households have a remaining life expectancy that is 29 percent longer than people in unhealthy households, and, therefore, are at risk of incurring health care costs over more years.
  2. Many of those currently free of any chronic disease will succumb to one or more such diseases.  For example, our simulated individuals who are free of any chronic diseases at age 80 can expect to spend one-third of their remaining life suffering from one or more such diseases.
  3. People in healthy households face an even higher lifetime risk of requiring nursing home care than those who are not healthy, reflecting their greater risk of surviving to advanced old age, when the risk of requiring such care is highest.

Overall, healthy couples can expect to pay 18% more on post-retirement healthcare than unhealthy couples.  Given the study, and the explanation of this counter-intuitive finding it all kind of makes sense.  But nonetheless kind of a bummer.

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