Avoiding Costly Mistakes

The annual number is out from Fidelity about how much money someone who is 65 today can expect to spend on healthcare expenses for the rest of their lives. The 2026 number is $185,500 per person so $371,000 per couple which is up 7.5% from last year's number. 

One little detail in there that I suspected but wasn't sure is that "a little under half (45%) of Fidelity’s total comes from Part B and Part D premiums" but that excludes a supplemental plan like Part G. That makes the numbers a little less scary. A married couple might be looking instead at $204,050. Grok says the median Part G premium in Arizona is $170-$220 per person for 2026. Figure $4800 for the year times a 30 year retirement adds up to $144,000 so then we're left worrying about $58,050 from the Fidelity number?

That doesn't sound so bad but I don't believe it. We mention this number every year when the update comes out but deconstructing this way makes it seem useless. All I can say, repeat actually, is that it is up to us to prevent/solve our health issues. Eat less sugar/carbs and lift weights. 

The median number of prescriptions for a 65 year old is 4.3. I've told stories about going on medical calls with the fire department and the couple of instances where older people were very proud of not taking any prescriptions (the calls were for accidents/injuries, not medical events). Taking up some good habits can reduce the number of meds people take or push the need to start taking meds to an older age. If we're partially debunking the Fidelity number, ok but we can save quite a bit of money if we can avoid the polypharmacy treadmill altogether or at the very least, delay when we start. 

Bloomberg columnist Kathryn Anne Edwards said she can fix Social Security in six words. "Scrap the cap, invest the rest." Edwards says getting rid of the cap, the income level at which people stop paying payroll tax currently at $185,000, would solve half the problem and she is optimistic that investing a portion of the money into the stock market would work out well, maybe leading to a cut in payroll taxes at some point. 

If they eliminate the cap, will you be affected by that? Would you be paying more? If they do nothing and payouts actually get cut in 2032, would you be adversely affected by that? Everyone would be impacted but would you be hurt is what I am asking. Something will have to give for them to fix it. What's worse for you? Paying more on the way in or getting less on the way out? Whichever one is worse for you is the one to plan for. 

My all in as self-employed is 12.4% (with Medicare it's 15.3%). It's not like I make $400,000-$500,000 but at that level someone might be paying an extra $26,660 to $39,060. Although there is a write-off to offset that (talk to your accountant) paying a lot more in payroll tax for many years might work out worse than getting your benefit cut. 

The Washington Post wrote about long term care and assisted living expenses cutting into the "great wealth transfer" that is supposed to occur over the next ten or 20 years. There were of course anecdotes that are truly sad about people living in some sort of facility for many years, more years than is typical, draining a family's finances. 

This sent me on a little bit of a hunt to try to learn more. Take my comments as these might be good questions to ask an elder law attorney not as being definitive or declarative. 

When people run out of assets, Medicaid then kicks in to pay the cost. "Assets" does not include IRA accounts once someone has begun taking RMDs. "Assets" does not include the primary residence with some conditions including that one spouse is still living in the house (there are a couple of others). 

Second homes apparently do count as assets and would need to be sold. 

In quite a few previous posts I've said there are a lot of things that people can get wrong about retirement and estate planning if they don't hire someone to help. It's learnable but mistakes in this realm can be very expensive and the point of primary residences is one of them. The primary residence may need to be shielded from the state/government reclaiming some portion of what they paid for your loved one's advanced care and they can come after it once the second spouse dies (there's a little more nuance). Depending on the state you live in, the property can be deeded in such a way or titled in a certain type of trust to shield from dollars being reclaimed. 

I looked this up on two different AI's and there were some conflicting answers but I am very confident that in many states this can be done but again, I think it requires an elder law attorney. One of the anecdotes in the article was of a 96 year old woman who has been in a facility for 15 years for dementia. Being brutal, I believe that is an extreme outlier for duration but thinking in terms of reclaiming versus a home's value, there'd be nothing left for the heirs. 

To be clear, this is outside the sphere of what I do. Hopefully this promotes awareness and can help you ask some good questions to avoid an expensive mistake. 

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