Health Costs During Retirement
From an annual report from Fidelity Investments:
For a 65-year-old couple retiring this year, the cost of health care in retirement will be $240,000, 6 percent more than that same couple retiring in 2011 would pay. The report assumes that the man will live 17 years and the woman 20…The $240,000 number captures the Part B premium for physician services, Part D for prescription drugs.
Another study, this one from Nationwide Financial, found that people who were near retirement routinely and wildly overestimated the percentage of health care costs covered by Medicare. It covers only 51 percent of health care services, according to the Employee Benefit Research Institute.
More from Paul Sullivan on retirement planning in the NYT.
It is always better to overestimate retirement savings than underestimate and not have enough to make it until the end.
This seems to fit retirement planning in general. Seniors these days are saving less and relying more on programs. Sad commentary.
How can they expect anybody, soon-to-retire or not-so-soon-to-retire, to have any money saved by the time of their retirement to cover medical costs? The rate at which our investments grow compared to the rate at which health care plans grow are not proportionate. They need to set a limit to health premium increases, otherwise seniors are going to spend all their savings (if any) on skyrocketing medical costs, leaving nothing (or very little) left for any other expense.
But don’t worry, Obamacare fixes all of this… Oh, wait…
My father never actually retired. He merely cut back his work load down to 40 hours per week. Thus, he never had to worry about the cost of health care during retirement!
Problem 1: Rising healthcare costs
Solution: Complex and difficult reform of government rules and programs coupled with big changes in the private sector
Problem 2: Poor planning by individuals
Solution: Who knows?
Interestingly I calculate that total average life time per person spending is only about $600,000.
so a couple is expected to spend nearly $120,000 out of pocket for health care costs in retirement??
I shudder to think of what costs will be like by the time I retire…
The figure of $120,000 per person in retirement probably includes long term care.
Otherwise it seems way too high.
Here are the real numbers, from where I sit.
A sixty five year old will live about 15 more years on average.
Medicare Part A is free.
Medicare Part B is $100 a month for most lncome levels.
Assuming no inflation, that is $1200 a year times 15 years or $18,000 total.
I have a modest Medicare Advantage plan. The premium comes to $700 a year and includes my part D.
$700 a year times 15 is $10,500.
I will have maybe $2000 in deductibles and coinsurance in a bad year.
$2000 times 15 is $30,000.
These numbers do not add up to $120,000.
Maybe there is a big inflation assumption in the stats, or they are assuming people will live to age 90.