Oh, for the old days when planning for retirement was simple and you knew what to expect, especially when it came to healthcare. There was Medicare. Add a good Medicare supplement to cover other costs and you were good to go. Those days are gone! For many retirees, healthcare has become Dracula and it’s sucking the blood out of their retirement savings.

Fidelity Benefits Consulting estimates that a 65-year-old couple retiring in 2017 will spend 275,000 (in today’s dollars) for healthcare. That’s up $15,000 from 2016 and does not include the cost of nursing home care or long-term care expenses.

But wait! At 65 you get Medicare. True. However, you have to pay the monthly premium for Parts B and D. Those two make up 35% of Fidelity’s estimate. The other 65% is made up of cost-sharing, co-payments, deductibles, and out-of-pocket expenses. If you’re unlucky you may have to pay for prescriptions if you fall into the donut hole, which occurs when you exceed the amount Medicare pays for your prescriptions. Then there’s dental and vision. And even if you buy a Medicare Advantage plan or Medicare supplement insurance to cover some of the costs Medicare doesn’t, you have the expense of the insurance.

In its 2017 Retirement Health Care Costs Data Report, HealthView Services estimates some staggering increases to key elements of a retiree’s healthcare plan:

  • Part B Medicare up 3.57% annually
  • Part D Medicare up 8.0% annually
  • Medicare supplement insurance up 7.12% annually
  • Healthcare costs up 5.47% annually

Those are frightening numbers, especially in light of the expanding gap between healthcare inflation and projected cost-of-living increases to Social Security of only 2.6%.

The report goes on to say, “the average 66-year-old couple will require 59% of their lifetime pre-tax Social Security benefits to cover retirement healthcare, a 55-year-old couple will need 92%, and a 45-year-old couple will need 122% of their lifetime pre-tax Social Security benefits to cover total retirement healthcare costs.

Some retirees won’t have the money to pay for it. The latest report from Employee Benefit Research Institute found that almost 25% of workers say they and their spouse combined have less than $1000 saved for retirement, and almost half said they had less than $25,000.

According to Adam Stavisky, senior vice president of Benefits Consulting at Fidelity Investments, “Rising health care expenses are forcing people to rethink important financial and health decisions now more than ever, ranging from the services they use to the age they retire.”

Retiree healthcare is no longer a simple issue. How will you handle it? Healthcare planning is an integral part of every financial plan. It can make the difference between sitting on the beach listening to ocean waves or staying at home waiting for the flutter of vampire wings.


Want help with your planning. Contact us at info@alhambrapartners.com.

Bob Williams

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