Healthcare Costs Can Shock Retirees

Healthcare Costs Can Shock Retirees

A 2015 study of potential retirees funded by Fidelity Investments found that they were retiring four years before they planned. Most of them had not qualified for Medicare because of age.  A study by the Kaiser Foundation reported fewer government and fewer private employers provide retiree health care coverage than in the past.

What are boomers going to do? Panic? Take part time work? Apply for government benefits like Medicaid? Spend a huge amount of their savings on healthcare premiums and deductible/co-pay payments?  It’s showing up as the top concern in current political polling.

As financial planners, we encourage our clients and readers to plan ahead. Latest estimates for retiree healthcare expenses exceed $197,000 over a retiree couples’ lifetime. Several studies put this at $285,000 and beyond. That exceeds the budget ability of most baby boomers. Younger generations may be even more at risk as government and other employers cannot keep up with benefits that inflate at a much higher rate than other expenses.

What are the strategies that potential retirees (and some current retirees) can employ?

  1. Delay retirement and continue to use government or private employer benefits as long as they can
  2. Make an effort to understand COBRA coverage costs in place of private insurance or health exchange coverage as it currently exists
  3. Open and fund a Health Savings Account during open enrollment this year, if offered
  4. Explore dental insurance since this can be one of the most expensive emergencies anyone can experience employed or retired
  5. Look into Medicare Advantage Program benefits, costs and coverage including limitations on providers and re-enrolling in regular Medicare
  6. Understand what types of Reverse Mortgages are available to fund healthcare expenses
  7. Look at the Medicare Open Enrollment options for 2020 that go from Oct. 15th to December 7th this year. See how flexible Medicare can be, or how inflexible it might be for you.

For the younger generations:

  1. Stay healthy
  2. Save more for healthcare out of pocket costs
  3. Appreciate that benefits can change and will most likely be less than currently offered
  4. Open enrollment offers you opportunities too. Now is the time to understand and budget for them.
Jim Ludwick
Jim Ludwick

Jim Ludwick is the founder of MainStreet Financial Planning. His varied education and life experiences have enabled him to apply his knowledge and experience into useful solutions for personal financial problems. His writing and broadcasting activities allow him to help many more than just individual clients. He loves a microphone.

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