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Sunday, January 12, 2014

Two surprising healthcare costs during retirement

By Jenni Wiltz

Senior in a nursing home
Healthcare expenses are among the highest during retirement
Healthcare is likely to be your biggest expense during retirement, yet many Baby Boomers and other near-retirees haven't planned for it at all. A 2012 Nationwide survey found that 4 out of 5 people can't even estimate their post-retirement healthcare costs.

As the old saying goes, "Failing to plan is planning to fail." In many seniors' case, what they don't know will hurt them, or at least go a long way toward draining their retirement accounts. Knowing how much senior healthcare costs is vital for anyone in their 40s, 50s, or 60s looking ahead for retirement.

Medicare costs

Many people assume Medicare is free. They've paid into the system their whole life, and they don't know that they're expected to pay even more when it comes time to enroll. For example, things like co-pays, co-insurance, and deductibles don't go away just because you aren't enrolled in private health insurance any longer.

According to the 2014 Medicare Handbook, most people who paid into Medicare through their taxes won't have to pay for Medicare Part A (hospital costs). If you didn't pay into the system, you can still enroll...but it will cost you more than $400 per month. As for Part B, most people will pay the standard monthly premium. In 2013, that totaled $104.90 per month. That adds up to more than $1,200 per year.  That's not counting co-pays, co-insurance, or your Medicare deductible.

Additional out-of-pocket costs

Medicare.gov provides a list of the additional out-of-pocket costs you'll face on Medicare. While you probably won't pay a monthly premium for your Part A, you will have a yearly $1,216 deductible. If your hospital stay is longer than 60 days, you'll also pay $304 / day each day (during that benefit period, usually a calendar year). Your Part B deductible is small, only $147 per year, but all these costs taken together can add up fast.

All of the numbers listed here are for a single enrollee. If your spouse is enrolling, too, your household can expect to double these costs. That's $209.80 for both of your Part B premiums every single month, along with a combined deductible of  $2,432. Many seniors don't have that kind of money, and certainly didn't plan on spending so much of their retirement accounts on things like Medicare deductibles.

Long-term care costs

The surprise doesn't end there. Many retirees are also shocked to learn that Medicare does not cover long-term care unless it's part of a recovery from a specific illness or surgery. If you need help dressing, eating, bathing, or performing other activities of daily life (ADLs) just because you're getting old, there's no help coming from Medicare. Medicaid will cover costs for those who have a very low income level, but what happens if you're not poor and not wealthy? You're left to fend for yourself.

Most folks will need long-term care at some point in life. LongTermCare.gov put this percentage at 70% of Americans over 65. But what kind of costs do you need to plan for? Here are the average yearly costs associated with the following kinds of long-term care, according to the 2012 MetLife Mature Market Institute:
  • Home health care: $21,840 ($21/hour for 3-4 hours of care per day)
  • Adult day care: $18,200 ($70/day)
  • Assisted living: $42,600 ($3,550/month)
  • Nursing home, semi-private room: $81,030 ($222/day)
  • Nursing home, private room: $90,520 ($248/day)
It doesn't take an accountant to see that there's a huge chunk of money being spent on health care for seniors. It's unrealistic to think these costs won't affect you, too, as comfortable a thought as that may be. The best way to prepare for the future is to work with your financial advisor to create a plan to pay for healthcare. This might include cashing out underperforming assets like a CD to pay for care, or buying insurance policies to help shoulder the cost. 

About the author: Jenni Wiltz writes about health, aging, and retirement planning for www.TrustedQuote.com.
Image license: Ulrich Joho, Creative Commons

1 comment:

  1. Knowing how much senior healthcare costs is vital for anyone in their 40s, 50s, or 60s looking ahead for retirement planning Retirement planning is much more healthier for the future. Plan for tomorrow help for today.