September 30, 2009
Here’s a little math problem. Let’s see who can solve it first. The question is this: How much money would you need to give to a 21-year old today, in a lump sum, so he can invest it and pay for his lifetime of healthcare?
Your assumptions are as follows:
– Life expectancy: 85
– Health insurance currently costs $6,000 per year
– Healthcare costs rise 10% per year
– Investment income averages 4% per year after taxes
– You can spend your principle too, so you have zero left at death
Feel free to add any assumptions I left out, except for assuming a higher investment return. You would invest your healthcare money in something safe, such as municipal bonds.