Health Care Costs In Retirement

average health care costs for retirees

Many individuals nearing retirement have concerns about whether or not they are adequately prepared to handle their health care costs in retirement and rightfully so. The transition to retirement can be daunting in itself. The preparation, however, can be terrifying! At Jester Financial Technologies, we are dedicated to providing individuals, advisors and producers with the tools that they need to educate themselves on one of the largest expenses in retirement – their health. Did you know that your cost of healthcare in retirement is dependent on your income in retirement? That means that the hefty nest egg you have spent your whole career life building up will actually be the very factor that determines your cost for health care in retirement.

Legislative Changes Effecting Health Care Costs In Retirement

Recent legislative changes have had a large impact on health care costs. In retirement, these provisions created by Congress have led to increased taxes, increased health costs and decreased Social Security benefits. So what does this mean for retirees? It means that these increased costs are mandatory and that due to these legislative changes, the more retirement income that you have, the higher your cost of health care in retirement will be. This also means that working your whole adult life to build your 401k, as well as maximizing your Social Security Benefit along the way, may actually play against you in your retirement.

Mandatory Health Care Costs In Retirement For Baby Boomers

There was a change in the Program Operations Manual system for Social Security in 1993. The change affects all baby boomers – the largest part of our population. Included in the ruling is that all eligible must enroll into Medicare when applicable or otherwise forfeit all of their future, past and present Social Security benefits. In 2003, the Medicare Modernization Act tweaked the rules a bit in implementing the Late Enrollment Penalty on Part B and Part D. This penalty was set to affect those seniors that do not enroll into Medicare when eligible and further do not have any other coverage. If faced with such a penalty, the senior can expect it to follow them for the remainder of their life. This means that for the first time in history, retiring seniors will be faced with mandatory expenses in retirement – health care costs.

Are Medicare Health Care Costs In Retirement Affordable?

Generally speaking, Medicare should be a more cost effective health care solution for seniors in retirement. However, there are a few things that should be taken into consideration when comparing the cost of Medicare in retirement to say, past employer health plans.
• The rate at which Medicare is inflating is three times that of Social Security and inflation.
– Note: According to the Medical Board of Trustees Report, the rate history of inflation of the Medicare Part B plan is 7.6%, while Part D plans are expected to inflate at a rate of 7.1% through 2022.
• Medicare does not cover everything. In fact, according to the Employee Benefit Retirement Institute, Medicare only covers roughly 51% of medical health care costs in retirement.
• Medicare Part B and D plans have an Income Related Monthly Adjusted Amount (IRMAA) that is associated with health care premiums for those seniors who are considered to have “too much” income.

Have You Factored In Your Health Care Costs In Retirement?

Even with Medicare, health care costs in retirement can be quite shocking and if not factored into a retirement plan, can quickly derail even the most intricate financial planning. According to a recent study, out of the Americans who have built their financial plans for retirement, only 8 percent of Americans have even considered health care cost in retirement. Additionally, less than that had considered recent legislation that could affect what health care will cost in retirement. Have you begun your financial planning for retirement, and if so, have you thought about what your health care may cost you?

Can I Expect That My Health Care Costs In Retirement Will be Expensive?

There is really no way to put it lightly; health care cost in retirement will be expensive. Especially when you factor in that you no longer have a steady income coming in, but rather, only what you have saved up until this point. There are many factors to take into consideration when figuring your cost of health care in retirement, such as:
• Whether or not you have employer-provided retirement benefits
• How healthy you are
• Medicare coverage, i.e. What will be covered and what will not

These are just a few things to consider when planning for what health care will cost you in retirement, in addition to many other unknowns.

Figuring Out What Your Health Care Cost in Retirement May Be

Though there is no surefire number that can be provided to you in terms of what you can expect to spend on your health care cost throughout your retirement, luckily at Jester Financial there are tools that can be used in order to point you in the right direction. Being properly informed about what unforeseen costs may become a financial burden on you in retirement will better help you now to financially plan for such an occurrence in your future. Use our FREE calculator to estimate what your potential health care costs in retirement could be, contact us and start planning your way to financial peace-of-mind in your retirement, today.

Top