Health care costs don't have to derail retirement plansBlog added by Jacob Stern on July 31, 2014
Jacob Stern

Jacob Stern

San Diego, CA

Joined: September 20, 2012

According to Richard Barrington, Senior Financial Analyst at, “The Op4G-conducted survey ask[ing] 2,000 respondents in the U.S. how they expect [the Affordable Care Act (ACA)] will impact their exit from the workforce. Thirty-three percent said that [the ACA] will force them to delay retirement, compared with just 17 percent who said it will allow them to retire earlier. The remainder [was] split about evenly between those who do not think the program will affect when they retire, and those who do not know.”

Mr. Barrington went on to report that among workers who predicted that the ACA would delay their retirement, 70 percent said they expected the delay to be at least three years, including 39 percent who said the delay would be at least five years. Although it’s too soon to tell whether the ACA will actually delay retirement, its seems clear that the survey highlights that at least some American workers are concerned that health care costs could affect their retirement dollars and spending power.

Even without the ACA, health care costs have been eating up a greater portion of Americans’ budgets. According to the 2014 Milliman Medical Index, the average insured family of four will spend $23,215 on health care this year — more than double the average from just 10 years ago. Employers still foot the bulk of those costs — $13,520, or 58 percent of the total — but they’re increasingly asking employees to pick up a greater share of the bill.1 In 2014, the average family will pay $9,695 for health care-related expenses, up 73 percent — or 8 percent a year — from 2007.1 These higher health care bills can not only reduce the amount of money workers are able to set aside for retirement in the first place, but can also erode retirement savings once an employee has stopped working.

How can you help protect your clients? For many, an indexed universal life policy (IUL) can go a long way toward ensuring a more secure retirement. With an IUL, the insurance company absorbs the investment risk, guaranteeing that your client will never experience negative annual returns. This can help smooth out the investing bumps employees can experience in traditional retirement vehicles. An IUL, if set up properly, can also produce an income-tax free death benefit for your clients’ beneficiaries and the possibility of building cash value on a tax-deferred basis for retirement. This allows your clients to keep more of their hard-earned dollars in their pocket.

1. Christopher S. Girod, Lorraine W. Mayne, Scott A. Weltz, and Susan K. Hart. “2014 Milliman Medical Index,” Milliman, May 20, 2014
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