Friday, 14 December 2012 10:05 admin
As people are planning for retirement, many individuals will budget for vacations and travel but, in many instances, think less about the costs of post-retirement health care. In a recent interview with Marketwatch, Mitch Reiner shared his observation that as his clients move into old age, they spend less on entertainment and travel and those funds can be redirected to health-care costs.
Reiner stress tests his clients’ portfolios to see if they can support the cost of long-term care, which he models as nest egg withdrawals of 25% to 50% more than planned. He often recommends long-term care insurance for those who can’t self-insure against the risk of those expenses; he suggests that they start doing so around age 55, since premiums tend to rise as people age.
Planning and budgeting for healthcare costs post-retirement is an extremely important consideration that more individuals approaching retirement must consider. Fidelity recently conducted a study that looked at a broad range of health expenses. Some considerations that must be made include measuring your physical condition which influences lifetime health-care costs: A 65-year-old with untreatable cancer will have to save less than someone with a manageable chronic condition. And even a very healthy person might have to budget for medical advances that we can’t even imagine now.
In Fidelity’s study, they used a $240,000 scenario to illustrate how to cover what Medicare won’t. Fidelity’s study assumes that the couple (in its illustration) doesn’t have any employer retiree health benefits—these still exist, especially among the largest companies—and that the man lives to age 82 and the woman to age 85. Here’s a breakdown of where their $240,000 goes: 32% goes to premiums for Medicare Parts B & D, which cover doctor visits and drugs, respectively; 23% goes to prescription drugs expenses not covered by Medicare Part D; and 45% goes toward Medicare cost-sharing provisions, including copayments, deductibles, other services not covered by Medicare, and any optional Medigap policies purchased.
Please follow the link to read more details:http://www.marketwatch.com/story/health-care-bill-in-retirement-240000-2012-11-15