Reader Mailbag: “I’m just trying to find a way to survive retirement and deal with rising medical insurance costs…”

Dear DTA,

I’m just trying to find a way to survive retirement and deal with rising medical insurance costs.

-Jeff C.

Great to hear from you, Jeff. We really enjoy receiving feedback and questions from our readers.

Your concerns are more or less complementary to one another (surviving retirement would more or less involve limiting healthcare expenses).

And your concerns are also quite common and relevant, as many potential retirees are faced with the burden that is rising, crippling healthcare costs.

Fortunately, there are options here.

Now, I don’t know your age, income level, health condition, or pretty much anything else.

As such, without specifics, I can only highlight some concepts from a very high level.

However, I do think these high-level concepts can provide some value for you in terms of developing your own framework to build out an enjoyable retirement that isn’t too severely affected by healthcare expenses.

First, there’s Medicare to keep in mind.

For most people, this government healthcare coverage kicks in at 65 years old.

All of the intricate details of Medicare are beyond the scope of this article, but the good news is that Medicare Part A and Part B should cover the majority of any healthcare costs you’ll likely experience.

The bad news, however, is that the remaining portion of your healthcare costs that will result in out-of-pocket expenses could be rather significant.

For perspective, a 2010 report by the U.S. Centers for Medicare and Medicaid Services revealed that the average annual spending on healthcare costs for people aged 65 and over was $18,424 per person.

And a study by the National Bureau of Economic Research found that Americans over 65 were, in 2015, covering approximately 20% (after Medicare, Medicaid, and private insurance coverage are all accounted for) of their overall annual spend on healthcare.

So we can do the math and say that, on average, you’ll be looking at almost $4,000 per year on healthcare costs past 65.

Now, that’s average. You may be in excellent health. Or you may be in poor health, which means the sky is the limit.

The crux of the matter, though, is that even excellent health still has a (relatively high) floor on the costs in the States, meaning you’re still going to be spending quite a bit of money on healthcare costs every year no matter what. 

That’s because the premiums are almost a guarantee. Medicare Part B had a monthly premium of $134/month in 2017 for most people. And then you have the deductibles, doctors’ fees (even for very routine check-ups), and other out-of-pocket costs.

If you’re in poorer health, especially if you need in-home or out-of-home nursing care, the bills could be massive.

The reason for much of this is the overall high cost structure of the US healthcare system.

And so that’s why I recommend people who are aiming to have a comfortable, healthy, and stress-free retirement should strive to be as healthy in all aspects of their lives as possible.

As Ben Franklin so eloquently put it, an ounce of prevention is worth a pound of cure.

That means one should eat right, exercise regularly, and adopt healthy habits throughout their daily routine.

I personally work out six days per week. I only eat twice per day. I walk everywhere (I own no car). I don’t smoke. I avoid stress. And I only work with people and on projects that make me happy.

Living a holistic lifestyle that feeds into itself, where success begets success, is a high-level concept that not enough people properly implement.

But there’s still that fairly high floor of healthcare expenses to contend with, even if one plans everything perfectly.

Plus, there’s always the chance that something truly catastrophic could occur – which could cost someone thousands, or hundreds of thousands of dollars, even with proper coverage in place.

And that’s why I’m proposing an even more radical concept.

Retire outside of the United States by taking advantage of geographic arbitrage. 

I can tell you that I became financially independent at 33 years old, when the passive and growing five-figure dividend income my real-life and real-money dividend growth stock portfolio is generating started covering my core living expenses in life.

All fine and dandy to be able to cover rent, food, transportation, etc.

But I, like you and everyone else, still had to face down the boogeyman that is the dysfunctional US healthcare system and its high cost structure that could, in the event of a real health emergency, put me in a bad spot.

For this reason, among many other reasons, I elected to move overseas.

I now live in Chiang Mai, Thailand.

Due to what’s a threefold increase in my local purchasing power (earning in dollar and spending in baht), I’ve turned myself into a millionaire overnight. 

And that translates very well into healthcare spending, as a regular doctor visit runs less than $10 here.

That’s for an English-speaking doctor at a high-quality, private facility.

Compare that to $100+ pretty much anywhere in the US.

Furthermore, that example scales across the spectrum of healthcare issues.

Almost no matter what kind of health issue you could think of, the healthcare costs here would almost certainly be between 50% an 90% cheaper. 

I personally self-insure, but I don’t recommend anyone else do that. You could just as well acquire international health insurance – these are usually offered across a range of coverage that would see you insure everything from your comprehensive healthcare to catastrophic issues only.

Because of the much lower cost structure here, your insurance would be much lower. Plus, the amount that you might end up covering, if any, will also be much lower.

But in order to put yourself in such a position, you must first have a proper financial framework in place.

The framework I’ve put in place is a collection of wonderful businesses that pay me growing dividends, which are funded by the growing profit these businesses are generating as they go about selling more products and/or services to more people all over the world.

And I do everything in my power to share great ideas in this space.

You can check out those compelling long-term dividend growth stock investment ideas via my Undervalued Dividend Growth Stock of the Week series.

This series, every Sunday, highlights a high-quality dividend growth stock that appears to be undervalued.

These stocks are sourced from David Fish’s Dividend Champions, Contenders, and Challengers list, which is a compilation of more than 800 US-listed stocks that have paid rising dividends for at least the last five consecutive years.

If you can build a portfolio of high-quality dividend growth stocks that sends you out a significant amount of passive dividend income, you could put yourself in a position to live anywhere in the world.

Once you have that opportunity in front of you, you might come to the conclusion that the best way to limit your healthcare costs as you age is to simply leave the US and its outrageous healthcare system.

Of course, Jeff, that lifestyle choice isn’t for everyone.

And if it’s not for you, the concept I discussed earlier on will likely serve you well.

Either way, however, it would likely behoove you to put your capital to work as intelligently as possible, as fast as possible. The more opportunities and flexibility you have, regardless of where you live, the better off you will be.

And there’s no better time for saving and intelligent investing than today. 

I wish you luck and success.

Jason Fieber

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Disclaimer: Jason Fieber is not a licensed financial advisor, tax professional, or stock broker. Please consult with a licensed investment professional before investing any of your money. If your money is not FDIC insured, it may decline in value. To protect the privacy of our readers, any names published in this article are under aliases. In addition, text may be edited, omitted or paraphrased for grammar or length.