Health Care Costs Early Retirement
What You Don’t Know
Healthcare is expensive when you retire at the common age of 65 or older, but consider calling it quits before then and there will be hefty costs associated.
The Cost Of Early Retirement
Early retirement is a dream of many, but a reality that not many can afford. Just like owning a multi-million dollar mansion or cruising through town in your Maserati, there are substantial bills that come along with a lifestyle of this nature or with retiring at say age 55.
Retiring early can be great if you have been fortunate enough to save up a large nest egg to cover your expenses for a longer period of time. However, throwing in the towel early also comes with a few downfalls worth mentioning.
– The salary you will miss out on
If you retire at the age of 55 instead of the now traditional 65, you will be missing out on – as defined by the Social Security Administration – ten years’ worth of working salary. Say that you make $80,000 a year – that equates to $800,000 that you are forfeiting – but wait, there’s more! Say that you receive the common 3 percent annual raise (as most do) that would mean that come time to retire you would be making close to $100,000 in your annual salary. Which results in an overall forfeiture of close to a million dollars should you decide to retire early.
– Social Security benefits
For every year that you retire early Social Security deducts 7 percent from what you would normally receive monthly in benefits. So, say that you elect to begin receiving Social Security at the youngest possible age (62) then you will be sacrificing around 25 percent of your monthly benefits, forever.
– Depleting your savings
When you leave the workforce early not only do you have the additional health care costs in early retirement, but you are also foregoing the ability to continue earning. If you are not making money, then you are just spending it, which leads to depletion of your savings. By electing not to work when you are capable, you are taking away from capital that you would have had later in life, when you are less capable.
You Will Be Responsible For Your Healthcare Costs In Early Retirement
Are you currently receiving health insurance through your employer? If so, the rate you pay is a group rate – where your employer pays a portion of the premium to offer you a discounted rate. Opt for leaving the workforce before age 65 and you will be on your own in terms of health care costs. Early retirement does not make you eligible for Medicare. That means that with no group rate and no enrollment eligibility with Medicare until age 65, you will be stuck with the full burden of purchasing a health insurance policy on your own. The Affordable Care Act is supposed to make health insurance more affordable for some, however if you have the capital to retire early it is unlikely this will be of any benefit to you.
Out-Of-Pocket Healthcare Costs In Early Retirement
According to the industry a couple that retires this year at the age of 62, can expect to spend a minimum of $17,000 on out-of-pocket health care costs. Early retirement is glamorous on the forefront, but when additional costs, lost wages, forfeited benefits and sacrificed savings come into play the reality of the situation may not be all that great. When you factor in Fidelities estimate of an average $10,000 savings per year for couples that wait to retire until age 67, it makes it a bit less tempting to consider early retirement. Unless of course you can just afford it.
What Will Your Healthcare Costs In Early Retirement Be?
It is near impossible to give a surefire number one can expect to pay for healthcare costs in early retirement. Many factors must be considered and the equation tends to get a bit messy, to say the least. However, if you plan on retiring early it is essential that you reliably estimate what health care in early retirement might cost you prior to throwing in the towel.
Many unexpected costs and unforeseen events could toss a wrench in the gears of your financial plans in terms of early retirement. Therefore, it is imperative that you look at the numbers very closely to ensure no expense has been overlooked.
Calculating Your Healthcare Costs In Early Retirement
If all potential medical expenses are not considered when configuring your financial plan for retirement the likelihood of outliving, or rather running out of your savings is great. All things considered, a sufficient retirement plan will consist of factors bearing in mind long-term medical expenses, premiums, out-of-pocket costs and potential unforeseen medical emergency expenditures. Proper education and the use of professional estimation tools from Jester Financial will help you more adequately calculate your expenses.
Using our FREE online calculator will help you to reliably estimate what your health care costs in early retirement might be, in order to better help you prepare for future financial security. Contact us today.
What is HealthcareRetirementPlanner.com
Healthcare Retirement Planner (HRP) is a comprehensive solution that helps identify potential problem areas in a retirement plan and design options to minimize the problem.
On an ongoing basis, HRP conducts research and aggregates all data to be used in its analysis algorithm. Pulling from areas such as The Congressional Budget Office, Centers for Medicare and Medicaid, polling individual insurance carriers across the United States along with private research firms, and positions HRP as having the most accurate information and calculations available.
Within the calculation process there are many variables that need to be considered, as the solutions are customized to each individual’s retirement plan. Variables that are required to analyze financial situations include, but are not limited to: age, gender, location, overall retirement income, types of retirement income, inflation and COLA. HRP has simplified this process.
The process of using HRP is straight forward. Simply by answering a few simple demographic questions, entering retirement asset information and income, along with assorted growth rates, you are supplied with a detailed year by year analysis that projects out 20+ years as to how the investors’ current financial plan will be impacted by their Medicare costs and the impact on their Social Security benefit.
Who is Jester Financial?
We are comprised of Financial Professionals, Medicare Specialists, Technology Experts and the foremost authorities on how this one cost will affect your bottom line especially when your health is on the line.
There are many financial institutions that do tremendous work when it comes to asset building, planning for college or creating stock/bond/mutual fund portfolios, but addressing concerns of affording health care costs…well for that, there is us.
Healthcare Retirement Planner was created with one purpose in mind: to provide data, education and tools necessary to help the financial industry create better financial futures and to plan for one of the biggest expenses in not only retirement, but life – their health.
In a time where health costs dominate the media, the political landscape and your bottom line, retirement planning with all of the facts have never been more important.
Origin of Our Data for Healthcare Cost in Retirement
On an ongoing basis, HRP conducts research and aggregates all Healthcare data to be used in its analysis algorithm. Pulling from areas such as The Congressional Budget Office, Centers for Medicare and Medicaid, polling individual insurance carriers across the United States along with private research firms, and positions HRP as having the most accurate Retirement information and calculations available.
Healthcare Retirement Planner offers research and Service to the Financial Industry, however we do not sell retirement products the general public