Recent estimates have painted a bleak scenario for the state of American retirement. But one financial planner says that while costs are likely to increase for necessary health services in later life, it may not be as much of a doomsday scenario as some have characterized, at least from his perspective.

“[H]ere’s the gist: if you’re high-income, your premium costs may be high, but you can afford them,” wrote Michael Lynch, financial planner with the Barnum Financial Group in Fort Myers, Fla. in a column at The Street. “If you’re low-income, the entire system will be yours for free. If you’re middle-class, you’ll have a variety of options to make the expenses affordable and predictable.”

In addition to surveys like those from the Employee Benefit Research Institute (EBRI) finding that retirees are often satisfied with the state of their finances, he said, recent data on healthcare costs does not paint as dire a picture as some claim.

“The Bureau of Labor Statistics Consumer Expenditure Survey of 2021, for example, pegs total average annual health care spending for American households headed by 65- to 75-year-olds at just under $7,000,” he said. “An empirical study for T. Rowe Price by long-time health researcher Sudipto Banerjee places average annual out-of-pocket health costs for seniors at $700 to $900.”

Another study found that, on average, retirees spent $27,000 out of pocket from age 70 to 95, which does not include Medicare Part B premiums. He also cited other researchers including Vanguard Investments and New York Life that he contends illustrates healthcare costs as “manageable.”

Adding to the potential affordability of later-life costs — depending on net worth — are what Lynch calls “no-cost options,” which could include a reverse mortgage, he said.

“Income is not what you spend,” he said. “It’s what you remove from taxable accounts and other taxable sources, such as Social Security and pensions. Retire at 65 and delay your Social Security until age 70. Limit pre-tax withdrawals to $2,300 a month and you’re good to go. Remove the rest from a bank account. Take low-cost loans from your life insurance policy. Or maybe from a reverse mortgage. This is not considered income. These are just some options. There are plenty more.”

Also worthy of consideration are certain state programs which may be available to a particular retiree, since such programs for older citizens are not universally available in every state, he said.

“Check your state’s rules and plan accordingly,” he said. “What works in Connecticut won’t work in my new state of Florida.”

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