You can probably tell by the title of this post what I’m going to talk about. Time and money are inextricably related. So much as been written on this topic in the FIRE community that it hardly bears repeating, but, for those who may be new to the FI and RE concept, when you go to work you are trading your time for money. That is the whole point of it. The FI community is about helping you get to the point where you’ve created enough personal wealth so that you no longer have to work in order to meet your expenses. You may choose to, but by not having to, you are, by definition, Financially Independent. Time is money. Nothing could be simpler.
That Good Health equals time is perhaps one degree removed from the previous concept. While we all know that there are no guarantees that living a healthy lifestyle will increase the number of years you have on this planet (we all know someone, or some few, who have left us too young despite living healthily), I’m pretty sure we would all agree that being healthy gives us the best chance at a long life. Hence, Health equals Time.
By simple mathematical operation then (If A=B, and B=C, then A=C), Health equals Money. Perhaps not immediately intuitive the same way that Time equals Money, but the logic of it can’t be refuted. Health equals Money. But what does that mean in the context of a FIRE focused life?
One of the things that I have heard over and over in reading about and preparing for retirement is that the average retired couple will need about $250,000 during retirement for healthcare related expenses. This is in addition to what Medicare will cover. A quarter of a million dollars for healthcare expenses. And that is the average. What if you are not average. What if you haven’t spent your life living as healthy a lifestyle as you now wish you did? (Yes, I’m looking at myself in the mirror when I write this). Or, on the other hand, what if you have been the paragon of healthy living? If Health equals Money, then understanding what the variables can mean for you, matter greatly in your planning. Let’s take a look at a couple of different situations.
What I want to do is to illustrate how just minor changes in health can have a major impact in health care costs in the long run. I’m going to use the Health Care Cost Calculator at AARP to calculate what healthcare costs would be for both men and women who are currently 65 (Medicare Age). In each case I’m going to assume that we live to be 90 (knocking on wood here). I’m going to assume that we are slightly overweight, non-smokers, and with no chronic illnesses (like diabetes, high blood pressure, or arthritis). I’m going to assume height of 5’10” and 200 lbs for men, and 5’7” and 140 lbs for women (the variables I chose are arbitrary and meant to illustrate future medical costs for a relatively healthy person). This is the baseline against which we’ll check costs.
Then, I’ll make us just bit heavier and give us a couple of the usual maladies found among the older set (I’m going to use diabetes, high blood pressure, high cholesterol – all in the moderate range). Let’s see what that looks like.
|
Total Health Costs |
Medicare |
Shortage |
|
| Male, 5’10”, 200 lbs., No chronic illness |
$184,709.00 |
$109,043.00 |
$75,666.00 |
| Male, 5’10”, 220 lbs., moderate chronic illness |
$408,992.00 |
$277,256.00 |
$131,756.00 |
| Female, 5’7”, 140 lbs., No chronic illness |
$154,476.00 |
$86,369.00 |
$68,107.00 |
| Female, 5’7”, 150 lbs., moderate chronic illness |
$224,052.00 |
$138,550.00 |
$85,502.00 |
What the above chart indicates is that health care costs over and above Medicare are going to be substantial, and there is little we can do about it. But, being just a bit healthier can have a large impact on what our total out-of-pocket health care costs end up being. In my hypothetical, men were, at worst, 220 lbs. and women 150 lbs. The heavier you are the higher the total financial shortfall (I know this is intuitive, but it’s also instructive – weight has a greater impact than the moderate chronic illnesses). I remember my doctor telling me once, “Look around. How many 300 pound 90 year olds do you see?”
If this were a married couple, you can see that if they are both in first category, their total shortfall would be $143,773.00. If, on the other hand, both are in the second category then the total financial shortfall would be $217,258. That’s a difference of $73,485.00 for being just a bit healthier (it is probable that the loss of just a few pounds solves most of the problem, on average – again, I’m a lawyer, not a doctor).
What to do about it? I think the action points regarding your health is best left to health care professionals to tell you. However I will share one bit of wisdom. My wife and I are both well-educated, well read, and have done a lot of study in health and fitness (though it does not always look that way). We often say, “It’s not about knowledge, it’s about execution”. I think that is true on many fronts of our life.
In an upcoming post I’m going to discuss the best way to save for these health care costs, the oft discussed Health Savings Account (or as the Mad Fientist calls it The Ultimate Retirement Account).
So here is to picking ourselves up and executing on the knowledge. It will pay off in both health and dollars, because Health equals Money.
Until Next Time, FIRE On! – Oldster
