As we all are painfully aware, the costs and complexity of healthcare are skyrocketing, and nothing seems to be slowing things down. Granted, the incoming administration is making overtures to give attention to the problem, but… as we all know, paths to places we don’t want to go are often paved with good intentions. At this point I would not hold my breath for the next great proposal on healthcare costs, the problem is enormous and not easily resolved.
Recent information from Fidelity suggests that a 65-year-old couple who retired in 2016 can expect lifetime healthcare costs to top $ 260,000 over their remaining lifetimes. And that doesn’t include long-term care (nursing home or assisted-living) costs.
Four Things to Consider About Healthcare in Retirement
- It’s not solely Medicare. If you haven’t checked into it yet and you believe that Medicare could be your only insurance in retirement, you’re in for a surprise. With the co-payments, “holes” in coverage, and coinsurance payments, it’s almost a requirement that you have a supplemental healthcare policy to help out. Industry averages for a couple, aged 65 and in good health, start around $ 7,000 per year and go up from there.
- Retiring early increases the costs. If you’re planning to retire early (and therefore lose employer-provided health coverage) you’ve got to replace it somehow. These policies are even more expensive than the Medicare supplement policies discussed above – and much more variable due to the complexities of coverage. This portion of your early retirement deserves (requires!) quite a bit of planning ahead, as healthcare costs could be a significant portion of your monthly expenses in retirement.
- It doesn’t help to wait. Are you just starting to consider your options and are close to retirement? If so, you’re quite a bit behind the curve – there are several things that could be done in the five to ten years prior to retirement that might help you with the costs. For example, if you’re a little overweight, or a smoker, rectifying these things five or ten years before retirement can have a significant impact on your costs. Participating in a health savings account (HSA) coupled with a high-deductible health plan (HDHP) can position you well for a transition into retirement as well.
- Knowledge is helpful. Health insurers use a special report, called a Medical Information Bureau (MIB) report to help determine your eligibility for coverage. Think of it like a credit report on your health. You can order your own MIB report, in order to look things over to see if there are any red flags (much the same as reviewing your credit report). If you have a denial of coverage on your report or any issues that could adversely impact your ability to get coverage, it’s best to know that up front and work with an agent or broker who specializes in your issues.
Although these things may seem like a lot of work, they’re excellent considerations to take into account as you plan for your healthcare in retirement. And – most financial planners these days, myself included, can help you work through the decision-making process. It’s not simple, and mistakes can be quite costly.
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