A couple walks arm in arm while visiting Capilano Park as Lions Gate Mountain is seen through the clouds on November 20, 2010 in North Vancouver, British Columbia. REUTERS / Andy Clark
May 18, 2021
By Mark Miller
CHICAGO (Reuters) – How Much Does Health Care Cost You in Retirement? Your mileage will vary – but one thing is clear: the forecast will be more intimidating.
A new report from Fidelity Investments estimates that the health care cost of a 65-year-old married couple retiring this year will be $ 300,000 during retirement, 30% more than a decade ago. The report relies on longevity projections by the Society of Actuaries, which currently predicts men will live to be 87 years old and women will live to be 89.
Such a dollar number can freeze you in your tracks. It’s so big that you might prefer not even to think about it. “It can create a response to ostriches in the sand,” said Hope Manion, senior vice president of Fidelity Workplace Consulting, adding that it might make people think: “I’ll never be able to save that much so I won. ” don’t even try ”
However, retirees don’t need all of the money at the start of retirement as they actually spend it on retirement for 20 years or more. And, to a large extent, these expenses can be very well managed because they are predictable and a good deal is covered by Medicare.
Eighty percent of the dollar in Fidelity’s forecast is spent on Medicare Part B and D premiums and the program’s cost-sharing provisions, including co-payments, co-insurance, and deductibles. These expenses can be financed with savings or income from social security or pensions. The Part B premium is deducted from social security benefits in most cases.
Your Medicare enrollment options determine the balance between premiums and other expenses. When registering, the big decision is between Original Medicare and Medicare Advantage, the commercially available managed care alternative to Original Medicare.
Everyone pays the Part B Reward ($ 148.50 this year). Original Medicare beneficiaries with no additional coverage are subject to a deductible of $ 1,484 for inpatient hospital stays and daily co-payments for extended stays in hospitals and qualified care facilities. There is also a separate deductible of $ 203 plus 20% coverage for most doctors and other outpatient benefits, including medications given by doctors for cancer and other serious medical conditions.
Most Original Medicare participants typically have some form of out-of-pocket protection – either a Medigap plan, former employer or union coverage, or Medicaid. However, a recent report from the Kaiser Family Foundation (https://bit.ly/3tDzFtB) found that 10% of original Medicare participants did not have additional coverage, which is a worrying finding (https://bit.ly / 3tDzFtB).
Medicare Advantage participants pay less upfront premiums. Many plans come with prescription drug insurance that is taken out at no additional cost aside from the Part B premium, and all come with a built-in cap – so Medigap plans are not used alongside them.
However, the cost can increase if you get sick and use many health services in a given year. In 2020, the average cap for the benefit plan https://bit.ly/3eDTfBw was $ 4,925 for intra-network services, according to Kaiser, while the cap for off-network services is much higher at $ 8,828 (https: //) bit .ly / 3eDTfBw). In Original Medicare, the average out-of-pocket spending among traditional Medicare beneficiaries in 2018 was $ 6,150, according to unpublished Kaiser data. This figure includes premiums and expenses for services that are not covered (e.g. dental care).
And Original Medicare participants have far more choices – they can, and most do, visit any healthcare provider who is in the program. Advantage participants face the usual managed care restrictions and issues with prior approval requirements and denial of care.
WILD CARDS: EARLY RETIREMENT, LONG LIFE
Aside from choosing Medicare, a few other variables affect your lifetime cost. Right now, early retirement due to COVID-19 is an important factor. Current research https://crr.bc.edu/wp-content/uploads/2021/03/IB_21-7.pdf from the Center for Retirement Research at Boston College (https://bit.ly/3o8iGOC) indicate a Rise in retirement over the past year among workers aged 62 and over, especially among lower-income households – showing that the wave of early retirement is slightly larger than after the great recession of 2009.
These early retirees lose benefit from employer-sponsored health insurance before they qualify for Medicare, increasing their lifelong health care costs.
The other big variable is your longevity – and not what you might think. Women tend to live longer, so they actually have higher lifelong health care costs than people who die younger. This is reflected in the Fidelity data – for single retirees, the estimated health care cost for 2021 is $ 157,000 for women and $ 143,000 for men.
However, the big lesson from these lifetime spending projections is that health care will be one of the fundamentals that you need to cover in retirement.
Health Savings Accounts (HSAs) offer an opportunity to build up a savings reserve for these costs. These tax-privileged accounts are available to individuals enrolled in high-deductible health insurance plans and can be used to cover current deductible and other medical care costs (details on how these plans work can be found here https://bit.co/bit). ly / 3o5iLTe (https://bit.ly/3o5iLTe).
Most employers have offset the high deductible with an annual cash contribution to the account. For example, at Fidelity, 78% of HSA employer customers contribute to employee accounts, averaging $ 935 per year.
However, if you have the resources to cover some or all of these expenses with other funds, the HSA can be a means of slipping away money for retirement health care.
“You just want to make sure there’s something in the budget for that,” Fidelity’s Manion told.
(Writing by Mark Miller; Editing by Matthew Lewis)
This article originally appeared on www.oann.com