Save for Health Care, It is Far More Expensive than You Think

Written by: Alan Edwards

Although your planned retirement may be luxurious, at some point, you must come to understand that you are aging and will need health care.

A study published in a recent edition of the American Journal of Law and Medicine revealed that after interviewing 1,700 retirees or near to retirement Americans, the average person calculates their share of health care expenses to be less than 50 percent of the actual costs.

What Retirees Should Expect for Health Care Costs

These estimates were only for out-of-pocket costs and excluded long-term care including home health care or nursing home care that experts estimate more than one-half of all folks over 65 will need later in life.

Financial advisers discussing the survey reported that most of their clients “are in denial” when planning for future health care expenses.
Allison Hoffman and Howell Jackson are the study authors. According to them, folks should expect that Medicare would only cover 80 percent of outpatient costs with the patient responsible for the remaining 20 percent. They also say that the patient’s portion will increase by an average of 7 percent per year. Further, that increase is compounded – and here the magic of compounding is actually a curse.

Of course, no one wants to think about himself or herself being residents in a nursing home, but not understanding that the likelihood of it happening is a gross financial planning error. The best time to purchase long-term coverage is between the ages of 45 and 65. It is also the time that most people do not even think about it.

Kimberly Foss is the president of Empyrion Wealth Management. Her firm manages 80 clients. When asked about the failure of people to plan for late life health care costs she was amazed to find that only 17 clients had long-term care insurance. The youngest of that group is 68.

Ross said that wealthy clients are reluctant to purchase an expensive insurance product that they might never use.

According to the Urban Institute, a retiree can expect health care costs that are out-of-pocket to be between $5 thousand and $14 thousand per year. They claim that of these amounts, 75 percent is allocated to copays for doctors’ office visits and medication with the balance going towards dentistry.

What to Do

There are diverse policies known as Medigap insurance. Letters A – J classify the policies. If you elect standard Part B coverage select a policy level and then shop for it by price – the coverage for each level is the same for each company that issues the policy as a matter of law. The premium for the supplemental insurance is in nearly all cases less than the 20 percent co-pay that Medicare beneficiaries are responsible to pay.

If you are adverse to paying a premium for a long-term care policy as you may never use it consider a new form of coverage known as hybrid long-term care. These policies combine life insurance with long-term care insurance, which makes better financial sense for most people.

Dental Discount Plans help defray dental expenses and are inexpensive.

Take Away

Make sure your retirement remains comfortable by anticipating your portion of routine health care costs and the potential costs of long-term care. Purchasing a hybrid long-term policy at a younger age will keep your premiums down and provide life insurance for your loved ones.

When buying a Medigap policy choose a level and then pay for the cheapest policy you find at that benefit level.


Save for Health Care, It is Far More Expensive...

Share Tweet Pin It