How to Start Planning for Healthcare in Retirement

Plan for the worst and hope for the best. That’s what a friend of mine used to tell me she always did. That’s how she ran her life. I’m a planner – I plan just about everything. But I do not plan for the worst and I always hope for the best. However, when it comes to feeling good about what our future holds as far as health care and retirement looks like, this would be a time to plan for the worst and hope for the best.

Health care is and will continue to be one of the biggest expenses in retirement. Yet many people nearing retirement don’t understand the risks these costs pose to their financial plan – and aren’t preparing for them. According to the 4th Annual Nationwide Retirement Institute survey, America’s workers are “terrified” of health care costs in retirement, but few are doing anything about their concerns.

Here’s just a few statistics and things to ponder:

Remember when everyone used to work at the same… department store, firm or manufacturing company for 35+ years. Back then, you were promised a pension and allowed to also keep your health care plan after leaving their employ – even for the whole family! Back in 1997, this was true for 1 of 4 in and in 2011 this number was down to 10% employer coverage.

Today, 26% of the American people don’t know what the annual health care costs in retirement will cost after stepping away from employment. The blazing question is: Did you or are you budgeting enough for this healthcare expense?

If you haven’t yet thought about it, and in order to plan for this, you’ll need to know what portion of your income or savings you’ll need for Medigap or medicare supplement premiums, Medicare Part B Premiums, Medicare Part D Premiums (Rx) and Out-of-Pocket Drug expenses.

Just released is the new Part B Deductible that all Medicare participants have to come out-of-pocket with. It went from $166 to $183.

To help you plan:

• Have a very good idea of what income you’ll have in the 65+ years of your life. Typically, that would be pensions, IRA’s or other retirement accounts and Social Security.
• Write out a budget. Know what your set-in-stone living expenses will be. Will you have an auto or home payment? What will groceries cost, special events/occasions such as birthdays, utilities. Be ver conservative here and allow for inflation.
• Get a very good picture of what your out-of-pocket healthcare expenses look like. This should start with a conversation with your financial advisor.

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