Healthcare Budget

[Jerry1]

So how do you budget for healthcare? I'm using the Fidelity retirement planner and have a few questions. I'm 56 and DW is 61 so I need to figure out about 9 years for me and 4 years for her for the pre-Medicare expense and then I need to figure out the Medicare run rate. I'm lucky enough to have some employee retiree healthcare benefit, but for sake of budgeting, I am going to ignore that. The company has jerked the retirees around regularly in the past, an I see no reason to rely on them in the future. Anything I get is a bonus.

So I'm thinking about $20-$25K per year for me and DW pre-Medicare. That would be all in (premiums and out of pocket). I think we can stay under the income limits for the current ACA, but similar to the employer issue, the ACA is so unstable it think it best to plan for no subsidy. Any comments on this portion of my logic is appreciated.

On the Medicare side, how do I find out what my potential expenses are for that time period? I know we'd have to pay deductibles and I understand that I have to pay part B (not sure how much) and I'm pretty sure I'd get some for of supplemental coverage. Generally, this is an area in life where I want to be fully insured. I'll go at risk for a car, but in healthcare, I'm pretty conservative. Where do I go to figure out these costs and make a good estimate in the planner/budget? Should I just shop one of the Medicare advantage plans (using a full coverage plan) to get a good number? Do those pay for everything or does Part B still come out of your SS?

Geez - This planning for retirement is more work than I thought. Maybe I should just say I have enough unless something terrible happens, in which case I'd never have enough. Win or lose. Pass/Fail.

Anyway, thanks for any assistance.

 

[gayl]

Kaiser HMO + $200 YR. So your number seems about right if increasing for inflation

 

[FIREd]

$20-$25K per year might be a bit low as you approach Medicare? DW and I are 43. Our unsubsidized premiums for a high deductible plan is already $10K per year (of course this is highly location-dependent). And even though we have no chronic illnesses requiring frequent checkups, OOP costs (including dental and vision) are budgeted at $5K per year and we already spent over $3,500 this year.

I think it's good to budget without taking subsidies into account. At least, that's how I do it.

 

[Sarah S]

For medicare I am not sure I would count on medicare advantage. Those plans may get more expensive and/ or they may not work for you. They seem to vary a lot by location. Where I am there is a problem with limited provider networks which one could work around if one knew they would not need specialist care. People elsewhere tell me the networks are much better. However I would plan for part b part d and a generous supplement. You can window shop on medicare.gov for drug plans and I think for supplemental plans - just pretend you are 65.

Consider that one of you may acquire a need for pricey drugs. When I retired at your age my one medication cost 5.32 a year. I unfortunately acquired a second one that is 2500 a year. Many people end up taking more medications and ones that are even pricier

 

[Another Reader]

As you get older, your premiums will go up dramatically if you do not have group-priced (not age priced) pre-Medicare retiree insurance. Your number might be good for the premiums now, but your OOP and premium increases may blow that number out of the water.

Price DW on your exchange using ages from 61 to 64 to see what the cost difference is as she gets older. CoveredCA allows you to price without an application. If your exchange does not, consult an ACA insurance broker. Then do the same exercise for you.

I would skip the Advantage plans and price Medicare supplements. AARP UHC plan is a good example. Again, the broker may be your easiest way to do this.

 

[zinger1457]

The premium for basically the same HSA plan has increased during my first 7 years of ER from $2160/year to $10680/year. Luckily I've had good health during that time because if not it would have been another $6500/year to cover the deductible/OOP. To say it's difficult to budget/forecast healthcare cost is an obvious understatement.

 

[Katsmeow]

DH is on Medicare and most of his spending is just his premiums. He has Plan f so no deductibles. if getting now, would get one with the deductible which isn't much (would only do traditional Medicare, not advantage).

Things that might need to be budgeted for during Medicare years and possibly before:

1. routine eye exams and glasses
2. Hearing exam and hearing aid (DH hasn't needed)
3. Prescription - amount depends on your prescription drug plan after Medicare - DH has no regular meds
4. Supplements, OTC meds - DH has to take supplements for his macular degeneration. They are not covered by insurance.

 

[ivinsfan]

Any number for healthcare costs 9 years out is just a WAG...but ACA most likely will be around in some form or another for at least a few years. But remember when your DW goes on Medicare if you are on ACA, your premium cost wont' go down a lot if you are subsidized.The subsidy is per household not per person.

The bigger question is do you have some padding in your budget, ie travel costs, eating out and such so you can pull money to health care costs if necessary.

 

[omni550]

Forecasting Medicare costs will be tricky.

Here's a list of the premiums for 2017 Medicare Part B (based on a look-back at 2015 MAGI) so you have a place to start:

 

[rodi]

Like you - I budget without the ACA PTC... just in case. In Fidelity Planner I put an inflationary rate for healthcare of 10%... I underestimated that for 2017 as our insurance went up 25%.

As for how much that actually is - the only way to guess is to look at rates currently. And then look for if you're a year older... and another year older... because in most states insurance gets more expensive as you get older (there are some exceptions). Same with medicare supplemental/advantage policies... price them in today's dollars - then apply an inflation factor.

I can tell you that medicare supplements, in my market, are cheaper than insurance for a 64 year old.. DH just started medicare this year and that savings help offset the increases to mine, and the kids, insurance.

 

[Jerry1]

The bigger question is do you have some padding in your budget, ie travel costs, eating out and such so you can pull money to health care costs if necessary.

Yes. I do have employer sponsored healthcare in retirement. Even if they mess with it, I should get some type of benefit from that for at least a couple years. I also have a small HSA that I don't count in my planning (all for healthcare obviously) and yes, I have other cushion. Still, it's scary and a little aggravating how expensive healthcare can be but very frustrating how unpredictable it is.

My biggest cushion is that I'm using my pre-Medicare expense throughout my retirement. Hopefully there will be something there for Medicare as DW and I get there.

 

[W2R]

I am on Medicare, and have great retiree insurance to supplement it. Also I have a pretty hefty "cushion" for unexpected big expenses.

Still, medical/dental bills can sometimes be a real punch in the gut even though they are probably my number one priority. If they get too high, I cut back on other spending for a while.

 

[Scuba]

We used the Fidelity RIP to estimate it for us, and one year in we are significantly under budget. We just do the best we can to manage our costs by staying as healthy as possible. About 45% of our budgeted spending is discretionary so if our healthcare costs exceed our budget, we can reduce in other areas. This would probably happen by default since if one of us gets a major illness, we'd cut down on travel and entertainment.

 

[tmm99]

I moved to Canada 2 years ago. I pay a whole lot more in taxes to Canada (Their taxes are higher.) As a Canadian resident, Canada taxes my dividends earned in Canada from US companies as ordinary income, and I cannot do Roth IRA conversions in the US, or buy US mutual funds in after-tax accounts anywhere, or open an TFSA account in Canada (Canada equivalent of Roth IRA., but US will tax it fully).

Despite all these negatives and restrictions, I believe I still come ahead because I don't have to pay for the US healthcare cost.

 

[Danmar]

I moved to Canada 2 years ago. I pay a whole lot more in taxes to Canada (Their taxes are higher.) As a Canadian resident, Canada taxes my dividends earned in Canada from US companies as ordinary income, and I cannot do Roth IRA conversions in the US, or buy US mutual funds in after-tax accounts anywhere, or open an TFSA account in Canada (Canada equivalent of Roth IRA., but US will tax it fully).

Despite all these negatives and restrictions, I believe I still come ahead because I don't have to pay for the US healthcare cost.

I guess it depends on your income level. I am sure I would be ahead if I paid US tax rates but had to pay my own health care expenses. As it is, even with retiree medical (mostly for out of country emergency medical) and govt sponsored drug plan (I am over 65), we budget about $18k per year which covers dental, comprehensive medical, and other stuff.

Funny how a lot (most?) of the discussion on this forum (Health and Early Retirement) actually revolves around the cost of health care rather than actual health issues?

 

[tmm99]

I guess it depends on your income level. I am sure I would be ahead if I paid US tax rates but had to pay my own health care expenses. As it is, even with retiree medical (mostly for out of country emergency medical) and govt sponsored drug plan (I am over 65), we budget about $18k per year which covers dental, comprehensive medical, and other stuff.

Funny how a lot (most?) of the discussion on this forum (Health and Early Retirement) actually revolves around the cost of health care rather than actual health issues?

I think we talk a lot about the cost because we don't know how fast or how high the cost may go up. Some folks here are considering un-retirement so yeah.


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[Danmar]

I think we talk a lot about the cost because we don't know how fast or how high the cost may go up. Some folks here are considering un-retirement so yeah.


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Yes, I understand. I was making a slightly “veiled” comment about the US health care system as it seems to cause more concern than actual health issues.

 

[Danmar]

In fact, looking at the current threads it seems only one of the last 20 threads (blood pressure) actually deals with health issues? Maybe we should split this forum into two? Actual health issues in retirement and the financial aspects of the US healthcare system?

 

[Meadbh]

In fact, looking at the current threads it seems only one of the last 20 threads (blood pressure) actually deals with health issues? Maybe we should split this forum into two? Actual health issues in retirement and the financial aspects of the US healthcare system?

All that worry about healthcare costs must lead to a great deal of stress, which can’t be healthy!

 

[REWahoo]

All that worry about healthcare costs must lead to a great deal of stress, which can’t be healthy!

+1, and thus the logic in keeping the topics linked.

Health and Early Retirement :

Topics dealing with health, wellness, and fitness, and how to pay for health care in retirement.

 

[Danmar]

+1, and thus the logic in keeping the topics linked.

Ok. But it’s just the overwhelming proportion of the topics that deal with “paying for it” I’m much more interested in the actual health issues. Maybe I’m a small minority?

 

[audreyh1]

Forecasting Medicare costs will be tricky.

Here's a list of the premiums for 2017 Medicare Part B (based on a look-back at 2015 MAGI) so you have a place to start:

Be aware that in 2018 the three top thresholds drop significantly, but if you have income under $200K it won't matter to you.

 

[Danmar]

All that worry about healthcare costs must lead to a great deal of stress, which can’t be healthy!

 

[audreyh1]

Ok. But it’s just the overwhelming proportion of the topics that deal with “paying for it” I’m much more interested in the actual health issues. Maybe I’m a small minority?

It's also that time of year. Many of us are going through insurance renewal.

 

[Danmar]

It's also that time of year. Many of us are going through insurance renewal.

Good point. Could be.