Health Care Costs After Retirement

average health care costs for retirees

Even with the use of trusted financial advisors, counselors and planners, retirement plans still somehow tend to lack one very important key component – health care costs in retirement. Many Americans are under the impression that all health care costs in retirement will be covered by Medicare. This is not the case. Far from it, in fact. Not only that, but it is also a common occurrence for those few individuals who take the time to “prepare” a financial retirement plan to actually underestimate the costs associated with health care in retirement. And then there is the vast majority who simply choose not to put forth any effort in considering health care costs in retirement, for whatever reason. According to a recent study interviewing individuals who had developed financial retirement plans only 8 percent of them actually accounted for any type of medical expenses whatsoever.

Legislative Changes Effect On Health Care Costs After Retirement

Recent legislative changes have had a significant impact on health care costs after retirement. Provisions created by Congress have led to decreased Social Security benefits, increased health care costs and increased taxes. So what does that mean for you as an aspiring retiree, you might be wondering? It means that as you enter retirement you have higher medical insurance premiums to look forward to, with less coverage options, along with decreased Social Security benefits. To put it a different way, you will be required to pay more money for less coverage with less support. Sounds great, right?
Hardly. However, with proper financial planning the burden that legislation has placed on you – the retiree – can be lifted.

Health Care Costs After Retirement Are Inescapable

Changes in the Programs Operations Manual system of Social Security implemented in 1993 made health care costs after retirement mandatory. The provision states that all eligible seniors must enroll in Medicare when applicable or forfeit any future, present and past earned Social Security benefits. Fortunately, further changes were made in 2003 when the program again underwent changes that allowed for eligible seniors to enroll late in Medicare. However, when enrolling late the individual will be hit with a Late Enrollment Penalty that will stay with the senior for the rest of their life.
As a result, for the first time in history retiree face unavoidable mandatory health care costs after retirement.

Can I Expect That Medicare Health Care Costs After Retirement Will Be Expensive?

Generally speaking, Medicare should provide a more affordable health care solution for seniors in retirement. However, it is important to take note that Medicare does not cover all medical expenses in retirement. In fact, according to the Employee Benefit Retirement Institute Medicare currently only covers about 51 percent of health care costs after retirement.
There are a few things that you should take into consideration when reviewing your anticipated costs for health care coverage in retirement.
• According to the Medical Board of Trustees the rate at which Medicare is inflating is three times that of what Social Security is projected to see over the next decade.
Through 2022 Medicare Part B is estimated to inflate at a rate of 7.1%, while Part D will see an inflation rate of 7.6%.
• As previously mentioned Medicare will not cover all health care costs in retirement. Any dental, vision or hearing services are not covered at all unless a supplemental plan is purchased.
• Both Medicare Part B and Part D plans have an Income Related Monthly Adjusted Amount (IRMAA) that will determine premiums for those retirees deemed to have “too much” income.

Have You Considered What Your Health Care Costs After Retirement Will Be?

Even when you factor Medicare into your financial retirement equation the effect of health care costs in retirement can be rather impactful. It is important when figuring what you can expect to pay out throughout the duration of your retirement to consider unforeseen medical emergencies, services that are not covered by Medicare, as well as your overall age and health history.
Whether you consult a professional or decide to take matters of your financial planning into your own hands, take the time to consider all possible options that may affect what you can expect to pay in health care costs after retirement.

Will My Health Care Costs In Retirement Be Expensive?

It is hard to determine exactly how much your health care in retirement will cost you, as a lot of factors come into play when determining such a value. There really is no reason to sugar coat the fact that health care expenses in retirement WILL be expensive and not accounting for them prior to entering into retirement can completely derail your entire financial plan before your very eyes.

Determining Your Health Care Costs In Retirement

It is impossible to determine the exact cost of what your health care will be when you enter into retirement. However, there are tools that available to you that will better help you come up with an accurate depiction of what you might be able to expect. Taking the time to properly educate yourself on costs associated with health care in retirement will ultimately give you the upper hand in adequately preparing yourself for what you can expect expense wise as a retiree. Check out our FREE online calculator for a reliable estimate of what your health care costs after retirement might be. At Jester Financial we make determining your health care costs in retirement easier. Contact us today.

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