Live Long and Prosper?

I’ve been a huge “Star Trek” fan all the way back to when I had to watch the original episodes on a tiny black-and-white, 13-inch television set with rabbit ear antennas (and, yes, adorned with aluminium foil). Unlike most of my friends at the time, my favorite character was Mr. Spock, whose understated strength, brilliant mind, and quiet commitment to logic had an appeal to a young kid who fancied himself to have all those attributes (thankfully, my ears weren’t pointed).

Perhaps as a result, early on, I mastered the “infamous” Vulcan salute that many people struggle to perform unassisted (it consists of raising your hand and spreading your fingers apart between the middle and ring finger), and the Vulcan greeting/blessing that accompanied the gesture—“Live long and prosper”—always struck me as being as elegant as it was simple.

While we all hope to prosper and live long, a recent Issue Brief released by the Center for Retirement Research at Boston College reminds us of the financial challenges that are often attendant with living long, but that tend to be glossed over in retirement planning. That particular study claimed that those who are in good health heading into retirement had better brace themselves for higher, not lower, health-care costs in retirement—since the researchers determined that the expected present value of lifetime health-care costs for a couple turning 65 in 2009 in which one or both spouses suffer from a chronic disease (defined in that research as diabetes, cancer, lung disease, heart disease, or stroke) is $220,000, while the comparable tally for a healthy couple was projected to be—$260,000 (see “Being Healthy Could Cost You More in Retirement”). Now, as usual in such matters, there is a certain amount of interpolation and extrapolation at work. Still, without wandering into the statistical “weeds,” a primary reason for that somewhat counterintuitive finding is that people in good health can expect to live significantly longer than their less-healthy counterparts—and thus, according to the report, are at risk of incurring health-care costs over more years(1).

Now, the point of the report wasn’t to encourage an unhealthy lifestyle; rather, it seemed designed simply to underscore the need to set aside money (2)—and a significant amount of money at that—for health-care expenses in retirement, regardless of how healthy you are (or expect to be).

Healthy or not, all other things being equal, the longer we live, the longer we must rely on our retirement savings. Not surprisingly, confronted with the potential of outliving one’s retirement savings, participants frequently fall back on an assumption that they will simply work longer. Now, that’s a good solution, at least in theory; saving, rather than spending, for additional years can do wonders to shore up one’s financial security—as long as you can count on being able to actually remain employed, that is. Unfortunately, even those physically able and willing to do so don’t always have that option.

That’s a reality that participants don’t always appreciate—and, IMHO, one that is all too often shrugged off in the retirement planning process.

The better option, if one hopes to both live long AND prosper, is to prepare as though you won’t have the time or the luxury to do so; to take action here and now, rather than banking on the opportunity to “make good” later on.

Anything else would be—illogical.

—Nevin E. Adams, JD

1 The report also acknowledges that, over those longer lives, those relatively healthy individuals may, nonetheless, eventually contract one of those chronic diseases.
2 More precisely funding. The report notes that “Households that delay purchasing insurance until their health declines run the risk of facing higher premiums, or for long-term care insurance, being denied coverage altogether.”