There may be another compelling reason to save and that is that while many aspects of retirement savings are predictable, the big unknowable is health care costs. \u201cIf you believe in the logic of the life cycle model, then once you get used to peanut butter, all else follows,\u201d\u009d said Jonathan Skinner, a economics professor at Dartmouth College who has studied retirement issues and recently wrote a paper titled \u201cAre You Sure You\u2019re Saving Enough for Retirement?\u201d\u009d for the National Bureau of Economic Research. \u201cThat\u2019s the assumption that I am questioning: Do people want to be stuck in peanut butter in retirement?\u201d\u009d<\/p>\n
He said he came to the conclusion that a strategy to reduce retirement expenses \u201cwill be dwarfed by rapidly growing out-of-pocket medical expenses.\u201d\u009d He noted projections based on the Health and Retirement Study, a survey of 22,000 Americans over the age of 50 sponsored by the National Institute on Aging found that by 2019, nearly a tenth of elderly retirees would be devoting more than half of their total income to out-of-pocket health expenses. He said, \u201cThese health care cost projections are perhaps the scariest beast under the bed.\u201d\u009d<\/p>\n
As Victor Fuchs, the professor emeritus of economics and health research and policy at Stanford University, told me, money is most useful when you are old because it makes all the difference whether you wait for a bus in the rain to get to the doctor\u2019s appointment or you ride in a cab.<\/p>\n
\u201cSaving for retirement may ultimately be less about the golf condo at Hilton Head and more about being able to afford wheelchair lifts, private nurses and a high-quality nursing home,\u201d\u009d Professor Skinner said.<\/p>\n
His best advice for people in their 20s and 30s: maximize workplace matching contributions, seek automatic savings mechanisms like home mortgages and hope \u201cthat their generation can still look forward to solvent Social Security and Medicare programs.\u201d\u009d<\/p>\n