$500,000 Surprise: Health Care Sticker Shock Awaits You in Retirement

[Big_Hitter]

https://www.bloomberg.com/news/arti...ou-need-to-save-for-health-care-in-retirement

"For a healthy 65-year-old couple retiring this year with a future adjusted gross annual income of less than $170,000 after adding in any tax-exempt income, projected lifetime health-care premiums add up to $321,994 in today's dollars. "

 

[bradaz2488]

The good news is I have forecast $335K (today $) of total premiums from age 65 to 95.. The bad news is I assumed 7.5% inflation rate for healthcare cost and from the other ACA subsidy thread (shut down?) I should be using at lest 10%... I used 7.5% based on Fidelity's tool. I assumed they did their homework, but I guess not... IMHO, If people are using FireCalc as their main tool they better be using a high inflation rate (vs CPI) to account for increasing HC cost in their ER plan...

 

[LARS]

Yeah, but another way to look at the same exact number ($322,000) is that that works out to $1,340 per month assuming a 20 year life span (i.e. live to 85). Looks a lot less daunting, no?

 

[ivinsfan]

Yeah, but another way to look at the same exact number ($322,000) is that that works out to $1,340 per month assuming a 20 year life span (i.e. live to 85). Looks a lot less daunting, no?

Not Really...

 

[ivinsfan]

https://www.bloomberg.com/news/arti...ou-need-to-save-for-health-care-in-retirement

"For a healthy 65-year-old couple retiring this year with a future adjusted gross annual income of less than $170,000 after adding in any tax-exempt income, projected lifetime health-care premiums add up to $321,994 in today's dollars. "

I'm wondering how they got this number for a couple of 65 year olds on Medicare....321,994 in premiums alone?

 

[LARS]

Not Really...

I tried... ;-)

 

[Hermit]

Just my opinion: A lot of assumptions stacked up into a pessimistic view. I don't think I will change my outlook on saving, investing, or living based on this article.

 

[Big_Hitter]

Yeah, but another way to look at the same exact number ($322,000) is that that works out to $1,340 per month assuming a 20 year life span (i.e. live to 85). Looks a lot less daunting, no?

you have to increase the 1340 with medical inflation

 

[LARS]

you have to increase the 1340 with medical inflation

Presumably the 320,000 today, which my calc assumes you have today, will increase at inflation rate to cover so it's a wash. But yeah if you can't defease the cost you need to cover inflation.

 

[daylatedollarshort]

From the article: "A 55-year-old couple that files for Social Security benefits at their full retirement age of 67 will find 92 percent of benefit checks going to health care."

I don't see that happening, one way or another. It doesn't leave enough left over for most retirees to buy other basics like food, housing or transportation.

 

[GravitySucks]

How long can one sector increase in cost over three times the rate of general inflation? There needs to be a breaking point eventually.

 

[Alex The Great]

I feel that there will be a major revision in a way how health care operate in US during the next decade. Also, I'd expect inflation and weaker dollar. Therefore, predictions like that does not make much sense. Although I admit, the health care cost currently is very high (compared to other nations) and will stay high, just because there are enormous opportunities to earn money in this country, combined with high cost of education, drugs and equipment.

 

[MichaelB]

Fidelity has published a yearly study of health care costs in retirement, since 2002. Last year's (here) cost was estimated to be $260k. Their methodology is sound, and the cost is Medicare premiums together with all other out of pocket costs.

Given the prices charged for health care in the US and their rate of inflation, it is likely to be more, not less.

 

[bclover]

Quick question. How did you guys go about calculating retiree health care cost? this is one area that has been baffling me. right now I have mega corp retiree health care 7500 a year but I'm actually hoping that goes down as honorable son #2 hits 25 and ages off my policy, then when I hit 65 I assumed medicare would cover most of the cost. I know I'll have to get "gap" insurance.
how did you get your numbers?

 

[pb4uski]

https://www.bloomberg.com/news/arti...ou-need-to-save-for-health-care-in-retirement

"For a healthy 65-year-old couple retiring this year with a future adjusted gross annual income of less than $170,000 after adding in any tax-exempt income, projected lifetime health-care premiums add up to $321,994 in today's dollars. "

Mom's costs are ~$350/month.... $200 medigap, $100 part B and $50 part D... $350*12*(100-65)*2 people is $294,000 and that is if the couple live to be 100... in reality it might more likely be 85 whcih would reduce the cost to $168,000. The $500,000 headline number sounds way out of line to me.

 

[ivinsfan]

Quick question. How did you guys go about calculating retiree health care cost? this is one area that has been baffling me. right now I have mega corp retiree health care 7500 a year but I'm actually hoping that goes down as honorable son #2 hits 25 and ages off my policy, then when I hit 65 I assumed medicare would cover most of the cost. I know I'll have to get "gap" insurance.
how did you get your numbers?

Don't assume it will go down when your DS leaves the policy as your costs will likely increase as you age until 65 and medicare.

 

[pb4uski]

No, costs don't increase much as you age... most everything is taken care of between Medicare and Medigap. Most seniors that I know go to the hospital and the net bill ends up being a big, fat goose egg.

 

[GravitySucks]

Thanks pb4uski. And thanks BCLover for bringing this up.
Does anyone have similar numbers to pb4uskis?

 

[ivinsfan]

No, costs don't increase much as you age... most everything is taken care of between Medicare and Medigap. Most seniors that I know go to the hospital and the net bill ends up being a big, fat goose egg.

I edited my post as I meant "until you hit 65"....

 

[Fedup]

Don't assume it will go down when your DS leaves the policy as your costs will likely increase as you age until 65 and medicare.

Not for company's retiree heath insurance. I think it will increase with inflation but not related to age. It's the individual market you are referring to where it may increase with age.

 

[audreyh1]

I'm wondering how they got this number for a couple of 65 year olds on Medicare....321,994 in premiums alone?

From 65, a couple, Medicare part B, D, and medigap - day they are paying $500 in premiums together. That gets you to $6000 a year, and $120,000 over 20 years in current dollars. So I guess the remaining $200,000 was for scary stuff and/or long term care.

You need to add this $16,100 to your annual retirement budget.

 

[Breedlove]

My son is in the Medical Industry , the business side with a very large Mega Corp. He says things are being talked about and changes are coming as we speak . Faster more affordable medical care , maybe not what we are used to but something we all will have to accept.

 

[aja8888]

Quick question. How did you guys go about calculating retiree health care cost? this is one area that has been baffling me. right now I have mega corp retiree health care 7500 a year but I'm actually hoping that goes down as honorable son #2 hits 25 and ages off my policy, then when I hit 65 I assumed medicare would cover most of the cost. I know I'll have to get "gap" insurance.
how did you get your numbers?

Pretty easy: For me @ 73 years old (DW is more due to high drug costs)

Medicare premium - $1320 annual

Medigap Plan F premium (best one) - $3000 annual

Part D premium - $360 annual

Drug costs beyond Part D payment - $350 annual

So, roughly $5000 annual for me

Now DW pays the same premiums but her drug cost OOP (over Part D coverage) is going to be ~$5,000. (it may be more than this estimate)

So we are looking at $15,000 this year OOP.

 

[Rustic23]

I am 74 and DW 73. So far in retirement our out of pocket medical cost. minus medicare premiums, is $0. Wait, that is not right. I had to pay $180 for my shingles shot! Not sure why it was not covered, but it had to do with the way TriCare and Medicare treat it. It had to be done at a Pharmacy for Medicare, and at the Doctors for Tricare. That may have changed.

 

[aja8888]

I am 74 and DW 73. So far in retirement our out of pocket medical cost. minus medicare premiums, is $0. Wait, that is not right. I had to pay $180 for my shingles shot! Not sure why it was not covered, but it had to do with the way TriCare and Medicare treat it. It had to be done at a Pharmacy for Medicare, and at the Doctors for Tricare. That may have changed.

We know you like to boast about Tricare and how wonderful it is, but is there any way for us that don't have Tricare to get on that gravy train at our ages?