The future cost of their healthcare is one of the major concerns that people have as they near retirement. People are uncertain as to how much they should save and what is enough to cover the potential costs of nursing homes and other possible large expense items. Their concerns are well-founded but should also be based on a realistic understanding of the various factors that impact future healthcare expenses and one’s ability to pay for them, both in the short and long-term. Key factors include insurance coverage, employment status, health condition, and financial means. Family and other close support relationships also play a role.
Understanding healthcare costs and choices is difficult enough when you are working even if you are covered by a good employer plan, private or government. As you approach retirement, it often becomes even more confusing, especially because most employers do not offer continuing retirement coverage.
For health insurance, if you are under 65 and are not covered by an employer plan, you have other coverage options including the insurance exchanges or Medicaid, if you qualify. If you are over 65, you are eligible for Medicare but even that is not so simple. There is traditional Medicare, which covers most basic services, but unless your employer carries your health insurance coverage into retirement, Medicare usually has to be supplemented by a Medigap policy for additional necessary services including vision and dental care. There is also Part C-Medicare Advantage (MA), which is offered by private insurers and can be selected instead of traditional Medicare. MA plans usually offer more services than traditional Medicare but also limit your choice of providers and charge more for out-of-network services and procedures. Another area of Medicare coverage is Part D, Prescription Drug Plans, also offered by private insurers. With both Part C and D, you have a choice of different plans and a number of coverage options but they are often confusing and not easy to determine which is best for you.
Another challenge for people as they near retirement is whether to get long-term care insurance or not. This insurance can be very expensive and number of plans has decreased over the years because many major insurance companies have decided to no longer offer it.
Making the Right Decision
So with all of the variables around healthcare coverage and costs, and uncertainty about your future health needs and finances, how can one make the right decisions about budgeting for retirement healthcare expenses, given that retirement today can last over 30 years. While everyone’s situation is different depending on the factors I have discussed in this blog, financial planning experts who have studied this area have found that in most cases people’s concerns about retirement healthcare costs are actually very overstated. At This Point Forward, we feel that helping individuals and others better understand medical costs is one of our major priorities. We recognize that most people cannot really maximize their next life stages without some good understanding about their future financial needs, especially the largest ones-housing and medical. In the coming months we will be offering several webinars that will help you better understand retirement medical expenses and how you should budget for them.
Our first medical financial webinar will be held on March 23 and our presenter is Mr. Stuart Ritter. Stuart is a senior financial planner for T. Rowe Price and has studied retirement medical costs for many years. Mr. Ritter’s presentation is entitled “Healthcare in Retirement is not a Six Figure Word.” In his talk, Stuart will help you separate the myths around retirement healthcare expenses and how you should budget for those expenses regardless of your individual health and financial situation. Mr. Ritter’s session is free to the public and registration can be accessed through this link. Please join us for this very interesting and relevant discussion.
We will also be having additional medical financing sessions in the coming months to help with your understanding of areas such as coverage decisions, hospital costs, and health equity. As always we encourage you to provide any feedback on our programs or your suggestions for future programs that would interest you.