Health care is a constant area of stress for people as they
\napproach retirement. In fact, according to the Voya Retire Ready Index, 91
\npercent of workers are concerned about their ability to cover health care
\nexpenses in retirement. <\/p>\n
This comes as no surprise when you consider how health costs
\nhave risen over the past few years, especially compared to relatively slow
\ngrowth around workers’ wages and Social Security benefits. A recent study from HealthView
\nServices found that estimated health care costs for a retired couple have grown
\n6.5 percent since just last year. And costs are likely to continue to rise,
\nwith expected health care inflation of 5 percent to 7 percent over the next
\neight years, according to the year-end 2014 summary from the Centers for
\nMedicare and Medicaid.<\/p>\n
Many preretirees assume that when they turn 65, Medicare
\nwill take care of retirement health decisions, but often that is not enough.
\nHaving a strategic plan for health care and saving diligently while working are
\njust as important as figuring out where you’re going to live and how you will
\nspend your time.<\/p>\n
Factoring in health care is an important part of a holistic
\nretirement plan. For many, the cost of health care is their biggest retirement
\nX factor; the same Voya study found that workers rank health care as their No. 1
\ngreatest challenge to retirement security. Most of us don’t know how our health
\nwill play out in retirement. Given this, health care should be factored into your
\nretirement savings strategy early. <\/p>\n
One way to help figure out how much you may need is to
\ntranslate savings into monthly income in retirement. That way, you can estimate
\npotential monthly health care expenses, factoring in increasing costs due to
\ninflation and aging. To counteract increased health costs due to aging,
\nremember that other expenses, such as travel and leisure activities, will
\nlikely decrease as you age. <\/p>\n
Getting to a monthly income needs figure is much easier to
\nwrap your head around than figuring out a total amount over the course of a 25-
\nto 30-year retirement. There are online tools available to help you run these
\ncalculations. Check to see if your retirement plan provider offers tools and
\nresources that translate savings into monthly income and factor in health care costs.
\nIn addition, a financial advisor can help assess your personal situation and
\nwalk you through possible retirement scenarios.<\/p>\n
Once retirement is upon you, it’s time to get into the weeds
\nof health care. About three months before turning 65, evaluate your health care
\noptions, namely reviewing the various Medicare offerings. <\/p>\n
Medicare has a few different parts (A, B, C and D) that
\noffer different types of coverage. Part A covers
\nhospital or nursing facility stays; Part B covers doctor visits, outpatient
\nservices and preventive care for a premium; and Part D is a prescription drug
\nplan. Part C is the Medical Advantage Program, an alternative to
\ntraditional Medicare offered through private plans with potentially more
\nbenefits and\/or lower copays for a premium. Part C can often be a good choice
\nfor individuals who might have more complicated health situations. What is
\noften referred to as “original Medicare” – parts A and B – should cover about
\n80 percent of your health care costs. Individuals are then responsible for
\nanything that falls in the remaining 20 percent. <\/p>\n
To determine what you need and which program might be the
\nbest option for you, assess your current health care needs. Do you have any
\nregular prescriptions or treatments you’ll need to pay for throughout
\nretirement? Are there medical specialists you need to see besides your general
\npractitioner who might fall outside of Medicare coverage? Also be sure to take
\ninto account your family’s medical history to try to anticipate any needs that
\nmay come up later in life. <\/p>\n
By saving, planning and thinking through all of the nuts and
\nbolts of your health care expenses and options, you can have more confidence
\ngoing into retirement and focus on enjoying your days of newfound freedom.<\/p>\n