Health Care Spending in Retirement

average health care costs for retirees

Preparing an accurate financial plan for your golden years is not precise if you do not factor in health care spending in retirement. Which, believe it or not, many planning for retirement neglect to do. It is no fault of their own, as more often than not such an important piece of the puzzle is overlook by our trusted financial advisors, mentors, employers and financial counselors. However, such a seemingly minute factor in your retirement plan actually has the capability of derailing your entire budget in the blink of an eye.

Changes In Legislation That May Affect What Your Health Care Spending In Retirement Might Actually Cost You

Recent changes in legislation have had a large impact on health care costs for retirees. Congressional provisions have led to increases in health care spending for retirees, increased taxes and decreased Social Security benefits. For over 66 percent of American citizens Social Security makes up greater than 52 percent of their annual income in retirement. Since 1962, according to the Social Security Administration, the percentage of Americans entering retirement with any sort of retirement asset has remained relatively constant at about 53 percent. Therefore these rising costs and declining benefits are significantly affecting those who are in retirement today without assets and further threatening the security of those looking ahead towards retirement tomorrow. In addition, other legislative changes have resulted in higher health care costs for those retirees that actually have retirement asset or rather larger retirement income. So what does that mean? It means in reality that retirement nest egg you have worked your whole life to accrue may actually count against you in your golden years, in terms of what you can expect your health care spending in retirement to be.

Health Care Spending In Retirement Is Now Mandatory

A 1993 change to the Program Operations Manual system for Social Security is a change that affects all Baby Boomers as well as following generations. This ruling makes health care spending in retirement obligatory, as it states that all retirees who are eligible must enroll in Medicare or will forfeit all past, present and future Social Security benefits. Fortunately, in 2003 these program changes were reconfigured a bit allowing for a late enrollment. However, those who do not enroll immediately upon being eligible will be hit with a Late Enrollment Penalty on Part B and Part D of the program that will follow them for the remainder of their life. The result of these statutory provisions is that for the first time in history retirees have mandatory costs, in terms of health care, throughout the life of their retirement.

How Does Medicare And Social Security Relate To Health Care Spending In Retirement?

According to the Medical Board of Trustees report the rate at which Medicare is inflating is three times that of Social Security. The Social Security Trustees report predicts that Social Security will not see the same rate of inflation as Medicare. In fact, quite the opposite, where they are predicting Social Security to remain constant and even perhaps decline through 2022. So what does this mean with regards to your health care spending in retirement? Under the Medicare and Social Security Guidelines if you are a retiree receiving Medicare (as you are required to be) your premium is directly deducted from your Social Security benefit. Therefore, as the price of health care continues to rise and the amount of your benefit remains constant or perhaps slightly decreases, your retirement income will as a direct result decrease. For those who have no retirement assets, or do not plan to when they enter retirement – who live solely off of Social Security – this is of monumental concern. As health care spending in retirement unavoidably increases for retirees their amount of income in which they have to live off of is declining to a nearly unfeasible amount.

Have You Factored In Your Health Care Spending In Retirement Into Your Plan?

Regardless of how good Medicare plans may be the do not cover everything. Not even close, in fact. According to the Employee Benefit Retirement Institute Medicare only covers roughly 51 percent of medical expenses in retirement. More bad news for those entering retirement without any assets.
A recent study revealed that among Americans who had built their financial plan for retirement, only 8 percent considered what their health care spending in retirement would be. Are you part of the minority that have adequately planned for a stress-free retirement? Or have you neglected to factor in your costs of health care spending in retirement at all?

Will My Health Care Spending In Retirement Be Significant To My Budget?

There is no sense in sugar coating it, with or without Medicare your costs of health care in retirement will be expensive. There are many unknown factors that simply cannot be accounted for, however there are some that can. When figuring your cost of health care in retirement it is important to consider:
• How healthy you are
• Whether or not you will be receiving employer-provided retirement benefits
• Medicare coverage and whether or not you have gap coverage

How Can I Estimate My Health Care Spending In Retirement?

Estimating what health care might run you as a retiree has never been simpler thanks to Jester Financial Technologies. Use our FREE online calculator to estimate what your health care spending in retirement could be and bring yourself one step closer to proper financial planning and freedom in retirement, today.