Here is the answer that someone got from one of the authors cited above:
You raise a good question, but I wonder whether you do so at the cost of ignoring a more important one.
It is certainly implausible to imagine a future where a 65-year-old will live 35 more years, each of which records medical inflation of 14%. My personal view is that double-digit increases in anything are unlikely to continue for more than 3-5 years. The facts are that we've seen medical inflation of this magnitude and it may be occurring at the moment, although we've not seen it continue for decades. Similarly, most people won't live to reach their hundredth birthday.
Nonetheless, both are possible, particularly the latter. And while you can bet on the averages, you run the risk of those who are now watching their 401(k) accounts dwindle despite projected annual stock market appreciation of about 7% annually.
The real issue is that retirees face substantial medical costs over the remainder of their lives and often are not prepared for them. The numbers you cite are an extreme case, but the logic holds with smaller numbers as well.
Sorry if you disagree with our use of the word disparity. Perhaps we could have made you happier by calling it a major disparity.
Thanks for reading our materials. I do hope you find them helpful despite the imperfections you believe you've found.
I observe that the response was timely and more tactful than the stimulus. I object to the assertion: you run the risk of those who are now watching their 401(k) accounts dwindle despite projected annual stock market appreciation of about 7% annually. (For now, I'll just ignore the vigorous rally we've seen in the last twelve months, as the author did. My IRA is up about 18% in that period, with no deposits and no withdrawals.) If people making those 7% projections were careful at all, they made clear that the 7% is only a long term average, that there has been great variability in the return, that that variability is highly significant, and that the future long-term average returns could be less than the historical average. People ignored those warnings at their own peril. I give him credit for quoting the real return of 7% rather than the nominal return over 10%. I also object to his implication, restated in the response, that double-digit real increases in any significant sector can persist for decades since, as I pointed out originally, that sector would grow to consume all of GNP when real annual GNP growth is in the single digits.
I agree with the assertion "The real issue is that retirees face substantial medical costs over the remainder of their lives and often are not prepared for them". The original article used a scare headline to attract attention, using assumptions that the author now calls "implausible".
He who has lived obscurely and quietly has lived well. [Latin: Bene qui latuit, bene vixit.]
Chips