Health care costs for retirees rising twice as fast as Social Security income

Aug 22, 2017 1:28:00 PM / by Darwin Bayston, CFA

It’s no secret that health care costs in America continue to escalate, creating anxiety for many over how they will afford medical expenses that could strike at any time. The ongoing political drama in Washington, D.C. over the future of health insurance policy in the nation only exacerbates this uncertainty.

But a new report has startled many seniors and their financial advisors by documenting that retiree health care costs are actually rising twice as fast as the average increase in Social Security benefits, an alarming imbalance between projected future expenses and projected future income for many Americans living in retirement.

The HealthView Services “2017 Retirement Health Care Costs Data Report” indicates that retiree health care expenses will rise at an average annual rate of 5.47 percent for the foreseeable future. The report notes that this rate is “almost triple the U.S. inflation rate from 2012-2016 (1.9%) and more than double annual projected Social Security cost of living adjustments (2.6%).”


Healthcare Costs

In more concrete terms, HealthView’s Retirement Health Care Cost Index finds that a 66 year-old couple retiring this year will require 59 percent of their Social Security benefits to cover total retirement health care costs.

“The problem isn’t just rising health care costs; it’s the fact that most seniors are entering retirement without enough savings,” according to “And while those without adequate savings might be banking on Social Security to pick up the slack, given that medical costs are rising much faster than benefits, a frightening number of seniors might be in for a serious shock.”

For seniors seeking to navigate these financial currents, one option is to revisit all of your assets, even those that you might have assumed were illiquid. For example, take a look at your life insurance policy and make a determination as to whether the policy is still needed or affordable. Some seniors decide the coverage isn’t required anymore because their kids are no longer dependent on them financially. Others have seen their premiums go up in recent years and now find the costs to be too high for their fixed income to afford.

If one of those scenarios applies to you, you may want to consider selling the policy through a life settlement transaction. Candidates for life settlements are typically aged 70 years or older, with a life insurance policy that has a death benefit or at least $100,000. The sale of a policy can bring you roughly seven times more money than the cash surrender value of your policy.



According to the Social Security Administration, roughly half of married seniors and 7 in 10 unmarried seniors rely on Social Security for at least half of their income. The latest report that retiree health care costs are rising at twice the rate of Social Security benefits should be a cautionary alarm for seniors to take stock of all assets available to them, including those that might have previously considered illiquid.

To learn more about life settlements, how they work and if you’re eligible, call the LISA office at (888) 521-8223 and we’ll be happy to answer your questions about options available to you.

Darwin Bayston, CFA

Written by Darwin Bayston, CFA

Darwin Bayston is President and CEO of the Life Insurance Settlement Association (LISA). His charge is to extend the outreach of the Association to all participants of the life settlement industry from consumers to capital providers, including producers, brokers, providers and service providers who are part of the life settlement market. He was previously Managing Director of Life Settlement Consulting & Management (LSCM), founded in 2004 and specialized in life settlement policy and portfolio valuations, and life expectancy analysis. He has published several articles and participated as speaker at a number of life settlement conferences. Previous to that he operated an investment advisory firm. From 1980 to 1993, he served in several capacities, including President and CEO the CFA Institute (and its predecessor organizations). While at CFA, he founded the continuing education program, was editor of the CFA Digest and supervised research projects funded by the Research Foundation of the ICFA. He began his career as an investment analyst with a Midwest life insurance company. Mr. Bayston has been Chairman of the Martha Jefferson Hospital Foundation ($100 million), a member of the Hospital’s Finance Committee and a past member of the Board of the Institute for Quantitative Research and Finance (Q Group).