Speaker 1  00:20

Hey everybody, welcome to the podcast. Thanks for hanging out with Jude and myself as we talk investing, finance and retirement. And Jude, we’ve got this kind of 2025, update to go over from this fidelity survey estimate, whatever we’re gonna link to it. It’s pretty massive. Man one 172,500 bucks for the 65 year old hitting retirement today. What you think about

 

Jude Wilson  00:43

that? 100% eye opening? And this is a topic that we talk a lot at the firm about with our clients, because what we’ve come to find out, many of our clients have either had financial advisors before or were managing their own finance, and we’re getting closer and closer to retirement, and wanted to talk to someone specifically that is an expert in retirement planning. And what we’ve seen is whether they have their own advisor or whether they’ve been doing them themselves, one of the biggest things that they’ve missed is budgeting for healthcare

 

Speaker 1  01:17

costs. Yeah, it’s it’s pretty massive. So we’re going to run down some of this conversation today, like I said. We’ll throw a link in the show notes for folks to check out as well, along with links to get in touch with Jude and all that good stuff that we talk about on a normal basis. So Jude break us down a few things to think about in this survey or in this this report. Why some of these numbers matter. Talk to us about some of these pieces you saw.

 

Jude Wilson  01:38

What’s fascinating about this report is that healthcare cost is growing at twice the rate of inflation. So if we look back at oh two, healthcare on average was costing about $80,000 by the time someone reached retirement, around 65 years of age or so, right? But now it’s about $172,000 on average at age 65

 

Speaker 1  02:02

and that’s, that’s kind of wild, right? I mean, it sounds like a massive number, but if you did the math, Jude over that almost 20 something year period, 23 years, it’s only about three and a half percent 3.6 and a half, or something like that. To your point, that’s kind of higher double than what average inflation was over that time period, except for that high period we saw, you know, obviously for a little while here recently. So it’s still a big number, and it’s still outpacing normal inflation. So what’s it going to be in another 15 years or

 

Jude Wilson  02:31

10 years? Yeah, that’s why we’ve got to account for this. Because here’s what I see most financial gurus or periodicals are telling people is that when, by the time you retire, you’ll probably only need anywhere between 70 to 80% of your pre retirement income. So if you were making $100,000 a year, or if you were living off of $100,000 a year, more appropriately, then you’d only need about $70,000 to live a successful retirement, right? I’ve been doing this for over 25 years. I’ve never seen that happen. Well, actually, maybe once or twice that Okay,

 

03:09

once or twice. All right, yeah, never say, Never, right,

 

Jude Wilson  03:12

yeah, in 25 years, that’s a pretty low ball number. But the point of the matter is, most people live up to their pre retirement income, and what they’re not taking into account that pre retirement income, part of that health care cost was being paid by their employer, and now a lot of that health care cost is going to be on them. Of course, you have Medicare at age 65 but as we get older, usually we have more frequent medical experiences, and the cost is going up.

 

Speaker 1  03:46

Oh, yeah. Well, and what’s included in this number? This is, now, this is the 172 five is out of your pocket. So 172,000 bucks is out of your home pocket, right? What’s included in that, right? So folks, so folks can know,

 

Jude Wilson  03:58

well, it’s even, it’s even co pays, prescriptions. It doesn’t account for long term care, which is another that’s a big factor. Yeah, it’s another big factor that we need to account for. So the so the gap is really huge. I mean, I’m not at retirement age myself, but even a few years ago, I had a medical issue that I was in the hospital for about a week, and the cost was astronomical, and I’ve got good health health insurance, yeah. So can you imagine, as we continue to grow, and some of these instances occur more frequently, if you’re not budgeting for that, what kind of strain is that going to make on your retirement plan?

 

Speaker 1  04:38

Yeah, for sure. Well, let’s talk about a few common blind spots, right? So, I mean, basically, the one that jumps out, you know, Jude, our generation, we’re Gen X, ers, right? Is 25% haven’t even considered it at all.

 

Jude Wilson  04:52

There’s a misperception that by time I get 65 woo hoo, I paid it to the system. So Medicare is going to take care of all of my expenses, but Medicare was never set up to take care of all of your medical expenses, and I think particularly for our generation, that’s a common refrain that that I hear. So as we continue to do planning for for Gen X and baby boomers, at least in our planning scenario, we carve out an amount for medical expenses to increase, you know, over the lifetime of your retirement.

 

Speaker 1  05:28

Yeah, I mean, one in five people don’t even consider it. That’s pretty massive. And to your point, Medicare, you know, it doesn’t cover everything, clearly, and it’s not free, you know, now, yeah, I mean, you could maybe make the argument that a Part A is free, but it’s really it’s not free, right? I mean, it’s a good system. It does a lot of stuff, but you’ve got to kind of take into account, you know, the Part B and, you know, drug plan and all that kind of stuff. And so we’ll talk some more about that in a second, but I want to pivot for just a second to talk about another piece that’s in here, and that’s the tool that I know you guys love to use, and it’s a we’ve got one personally, and it’s a great tool. That’s the HSA the potential here. And we’ll probably actually do a deeper dive into HSA in a couple of episodes down the way here. But for now, in this study, in this report, let’s talk about what they found with the HSA potential. Yeah,

 

Jude Wilson  06:18

so as you stated, The HSA, the health savings account, is an amazing opportunity for people to put away additional funds to prepare for some of these medical expenses. Only about 23% of people even contribute to an HSA, and that’s a huge opportunity, not only to prepare for potential medical expenses. But for some of our clients who happen to be very affluent, the HSA could be another source of our retirement vehicle. In fact, like you said in an upcoming episode, we’re going to talk about the stealth Roth and little secret that might be the HSA that we’re referring to,

 

Speaker 1  07:01

yeah? Because, I mean, it’s triple tax advantage. We’ve talked about that on the show here before, right? So it has a lot of great potentials there, and you can use it as an investment vehicle, which, again, I really, according to this study, like three out of 10 people do that, which is that have one, right? That even bother to have one. So there’s a lot of ground you could cover there. So we’ll do a deeper dive in on that. And it’s something certainly to think about. So let’s go back to the Medicare conversation, the complexity of it. So what’s the information on, you know, just kind of how people feel, and what this report found,

 

Jude Wilson  07:33

yeah, it’s amazing, because exactly what we’ve been encountering in our office is exactly what this report points to. About 37% of people, unfortunately, believe that Medicare is going to take care of all of their expenses. And as we said before that that’s just not that’s that’s not true. We need to be able to pay for the out of pocket expense, and to pay for, for for for prescription drugs, of course, depending on the supplements that you may have, but the bottom line is, Medicare will not pay for all of your medical expenses. Yeah.

 

Speaker 1  08:09

I mean, it’s like 37% of the people on here. You know, it just doesn’t cover most of it. And also, the other interesting piece, and have you seen this as well in your own practice? It’s people feel like it’s very stressful. So according to this report, like 55% of people said, God, it’s going to be a pain in the butt to even sign up. My brother went through this as well. When he got to, you know, 65 he’s like, Oh, wait, I got to do it three months early, you know, and all this stuff. So do you guys see that as well?

 

Jude Wilson  08:35

Yeah, and it kind of points to the reason why we did that, that previous episode, having a Medicare and Medicare specialist on the show. He was great. Oh, he was great. In fact, we’ve gotten so many compliments and people wanting to speak to him after the show. But the thing that was very apparent to me through the conversation was medicare supplement does have a lot of choices and can be a little bit confusing, but the actual application of signing up for Medicare isn’t as daunting as people think, and if you have a good financial advisor, they may be able to point to an expert in that field that can provide you some additional information, or help walk through all of the different choices. Yeah, to

 

Speaker 1  09:25

the point of having the guest on the show, it’s like a lot of advisors that I know across the country. They they don’t, some have a Medicare specialist in house, and some have just a few that you know they work with around the area that they can refer you to, should you need some more help and some guidance, because it can get a little complex, you know, getting the right things underway. So you certainly want to get, you know, get your options dealt to you. But I think just the general stress of going through it, it’s like, oh, I got to fill out this government paperwork and blah, blah, blah, it stresses people out, you know, heading into it, which is understandable, but again, can be avoided with a little bit of planning and a little bit of prep. So I. All right, what else we got here? Strategies? What are some strategies due to think about, to maybe reduce the burden of the whole healthcare conundrum?

 

Jude Wilson  10:09

Well, number one thing is to know that this does exist. This is a real thing. Because, as we’ve talked about in the article, most people have various misconceptions on how they’re going to pay for health care costs, and believing that Medicare may be the end all solution. Number one, knowing that there is a potential bomb in your financial plan if either yourself or your financial advisor hasn’t discussed the rising cost of out of pocket health care costs. And number two, that leads right into talking to someone who’s very familiar with this and can help you build a plan, not only for the income that you need in retirement, but also the expense. Because let’s face it, two of your biggest expenses in retirement are going to be health care and taxes. Hence the Roth guy, but I deter a little bit the healthcare cost is something that should be part of a sound financial plan, and the earlier you start, the more you have time on your side and compounding that can help, but that needs to be part of it, also looking at that HSA, because that HSA is like a Swiss army knife. There’s so many different ways to be able to use it in your advantage, and someone that’s knowledgeable about that can talk to you and strategize. And then lastly, I would say, be careful, particularly a couple of years before you get on Medicare, we have something called Irma. And Irma is not your aunt. Irma can can absolutely cause the cost of your Medicare to be much more expensive. Medicare looks at your income two years prior to you qualifying for Medicare, yep. And sometimes people are doing Roth conversions, which could kick their income to a much higher level, and then cause a shock for them two years down the road when they apply for Medicare. So bottom line, speak to somebody that’s that’s knowledgeable on this area. Yeah, that’s

 

Speaker 1  12:15

great point. And we’ve talked about Irma before, but yeah, I mean, it can certainly easily bite you in the tush there. So you know, at the end of the day, and again, we’ll put a link into the show notes here. It’s, it’s there, right? And so the huge takeaway is that one in five people are not even talking about health care in retirement. And that’s nuts, right? Because you just don’t, stuff’s gonna happen. We’re aging. Stuff’s coming. It comes out of the blue. You got to do it. So it’s one of the biggest wild cards, absolutely in retirement and Fidelity’s estimate. You know, it’s a reminder that costs are rising. It’s not meant to scare people. It just is what it is. It’s meant to hopefully prepare you and kind of get yourself rolling in the right direction, thinking in the right direction. So if you need some help, reach out to Jude and his team. We’ll have links in the show descriptions below so you can get yourself, get yourself some time, onto the calendar, and don’t forget to, you know, check out the tax bomb.com you can go there to run some numbers as well, but take some action for yourself. That’s really what it boils down to at the end of the day. So, Jude, thanks for hanging out,

 

Jude Wilson  13:12

buddy. Always a pleasure. Make sure you talk to someone knowledgeable in this

 

Speaker 1  13:16

area, absolutely. And we’ll see you next time here on the Roth guy, hit the subscribe button, thumbs up and notification bell, and we will see you next time.

 

Walter Storholt  13:27

Financial Planning and advisory services are offered through prosperity Capital Advisors, PCA, an SEC registered investment advisor with its principal place of business in the state of Ohio, centrist financial strategies and PCA are separate, non affiliated entities. PCA does not provide tax or legal advice. Insurance and tax services offered through centrist financial strategies are not affiliated with PCA. Information received from this podcast should not be viewed as individual investment advice. Product discussions and illustrations are hypothetical in nature and will vary based on many factors, including, but not limited to age, health, product insurance carrier and product design, you should consult the insurance carrier website and policy for detailed information, for information pertaining to the registration status of PCA, please contact the firm or refer to the Investment Advisor public disclosure website, www.advisorinfo.sec.gov, for additional information about PCA, including fees and services, send for our disclosure statement as set forth on Form ADV from PCA using the contact information herein, please read the disclosure statement carefully before you invest or send money.

 

14:37

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