A new report from the National Center for Health Statistics (NCHS) estimated that the average life expectancy for Americans fell to 78.6 years in 2016 (most recent data). That was the second annual decline in a row and the first multiyear drop since 1963. However, one should not assume that funding retirement is going to get any easier because this popular statistic can be misleading. Indeed, headline life expectancy figures always refer to life expectancy from birth, whereas life expectancy after you reach a certain age can be much higher. If you are 65, for instance, then there is a 47 percent chance you or your spouse will live to at least 90, according to J.P. Morgan calculations using Social Security Administration data.
Further, the rates of fatal heart disease and cancer continued to fall in 2016. Although encouraging, these leading causes of death in America have yet to be completely eliminated, and any cutting-edge medical innovations that help treat these illnesses are far from cheap. Moreover, healthcare spending in old-age can be substantial, as evidenced by the latest data from the U.S. Centers for Medicare & Medicaid Services (CMS). Specifically, Americans spent a staggering $3.3 trillion on healthcare in 2016, equivalent to $10,348 per person, or roughly 18 percent of U.S. gross domestic product (GDP). The elderly (age 65 and older), though, represent only about 14 percent of the population but account for more than a third of the total healthcare spending in America, based on earlier CMS data.
What is worse is that the CMS projects national health spending will grow at an average rate of 5.6 percent per year through 2025. That is 1.2 percentage points faster than the overall economy is forecast to grow during this same period, meaning that healthcare spending as a share of GDP will also continue to rise. Altogether, such statistics should provide yet another reason why the best way to ensure a comfortable and financially secure retirement is to set aside as much money ahead of time as possible. The earlier one can start the better, and taking full advantage of 401(k)s, IRAs, and other tax-advantaged savings vehicles can help greatly. Additional assistance is available through regularly working with a professional financial advisor to make sure that you remain on track to achieve the retirement lifestyle you deserve after years of hard work.
Sources: NCHS, J.P. Morgan, U.S. CMS, CRRPost author: Charles Couch