4 Ways To Plan For Rising Healthcare Costs In Retirement

4 Ways To Plan For Rising Healthcare Costs In Retirement
Free-Photos / Pixabay

What keeps you up at night? For millions of Americans, it’s the question of how they will fund their healthcare expenses in retirement.

Get The Timeless Reading eBook in PDF

Get the entire 10-part series on Timeless Reading in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q1 hedge fund letters, conference, scoops etc, Also read Lear Capital: Financial Products You Should Avoid?

A survey from Franklin Templeton Investments about retirement costs found that Americans are most concerned about how they’ll cover medical and pharmaceuticals bills. Those fears are well-founded, given the high costs of nursing homes, assisted living, hospitalization and prescription drugs.

Seth Klarman’s 2021 Letter: Baupost’s “Never-Ending” Hunt For Information

Baupost's investment process involves "never-ending" gleaning of facts to help support investment ideas Seth Klarman writes in his end-of-year letter to investors. In the letter, a copy of which ValueWalk has been able to review, the value investor describes the Baupost Group's process to identify ideas and answer the most critical questions about its potential Read More

Even a healthy retirement could have a hefty price tag; an analysis from Fidelity Investments estimated that a healthy 65-year-old couple retiring this year will need $280,000 to cover their health costs in retirement.

“Knowing your options and planning financially for them well ahead of retirement is  crucial,” says Eric Kearney , an investment advisor for Retirement Wealth.

“With proper planning, healthcare costs in retirement are within the means of average and wealthy Americans, provided they are able to afford a Medicare supplement policy.

“But you have to understand how the Medicare system works and what you can expect to pay in out-of-pocket costs throughout your retirement. You must budget for them. For retirees who have enjoyed strong employer health benefits and are unprepared for retirement, the out-of-pocket cost difference can cause an uptick in blood pressure.”

Kearney explains the costs and coverages of different parts of Medicare:

  • Medicare Part A. Part A was the original Medicare, covering hospitalization. There are no monthly premiums, although a $1,340 deductible applies as of this year. “After 60 days of hospitalization, the patient becomes responsible for a $335/day coinsurance,” Kearney says. “After 90 days, the coinsurance goes to $670/day. After 60 more days, the patient’s coverage runs out.”
  • Medicare Part B. The optional Part B covers doctor and treatment costs. “Premiums average $134 per month and patients are responsible for 20 percent coinsurance,” Kearney says. “And with a 20-percent Part B coinsurance, many seniors can expect to pay several thousand dollars or more out of pocket each year. If you have long-term conditions requiring extensive care, it is easy to see how Part A and Part B out-of-pocket costs can eat away even a large nest egg.”
  • Medicare Parts C and D. Part C, also called the Medicare Advantage plan, is run by private companies and requires a larger premium. “It provides more coverage options such as vision, dental, pharmaceutical, and wellness programs,” Kearney says. “Part D covers prescription drugs, and the older we get, the more likely we are to need them.”

5592 3880685592

  • Medicare Supplement Policy. “Without this, the assets you worked all your life to accumulate could disappear,” Kearney says. “Since a long-term hospital stay or chronic illness could send your medical bills into the five or even six figures, you stand to lose some or all of your assets if you do not protect them with a Medicare supplemental policy.” Also known as Medigap policies, these are offered by private insurance companies to supplement expenses that Medicare Parts A and B do not typically cover.

“If a stress-free, comfortable retirement is your goal,” Kearney says, “you need to prepare for healthcare expenses, and it’s never too early to start.”

About Eric Kearney

Eric Kearney (www.erickearneyadvisor.com) of Retirement Wealth, with Florida offices in Cape Coral, Punta Gorda and Bonita Springs, has been helping clients reach and maintain their financial goals for more than 16 years. Eric co-authored a book with Forbes Media Chairman/Editor-in-Chief Steve Forbes, Successonomics. His professional licenses include a Series 65, Series 7 Securities License and a Life and Health Insurance License. He teaches successful pre- and post-retirees a wealth management course titled “Rejuvenate Your Retirement” at Florida SouthWestern State College and Florida Gulf Coast University.

Updated on

No posts to display