For most people, during their working years, healthcare is an employer provided
benefit, so that means the employer's choice affects what's available to
you and how much things cost, but once you stop working,
you're in charge of a lot of those choices, at least to some
degree, so we're going to talk about what you might expect in retirement
for health care costs. We'll start out with some of the options and
the costs you might expect before age 65, and then once you reach
65, for most people, that's time to start Medicare, you might also face
long term care expenses, and that's not just after age 65,
it can happen at any age, but as we age, those types of
events tend to become more likely, so we'll talk about the potential costs
and averages and studies related to all these different things and then
get into some tips that can help you as you plan your retirement
income, you've probably seen some big scary numbers when it comes to what
healthcare will cost in retirement, and Fidelity, among others, does a study
every year that talks about how much it might cost. Now,
some people underestimate these costs, I'm not sure that people get it this
wrong as they're showing in the chart, but people might not understand exactly
how much you pay, and then when you look at the big number,
it can get pretty scary, but we're going to make that a little
bit less scary and put it into context and paint a picture of
how things might actually unfold during your retirement years. Before age
65, you're typically on your own when it comes to getting health coverage.
Now, some people get paid retiree health care after they stop working.
That's a pretty nice benefit. But not everybody gets it. So what do the
rest of you have available as far as coverage? One option is COBRA
or state continuation, depending on how big your employer is, and that's
where you can continue on your existing workplace plan basically for 18
months after you stop working. A couple of things to know about that
is number one, that you will be paying the full price,
so if your employer was paying a portion of those premiums,
you are going to have to pay the full premium plus a little
bit extra, and that might be surprisingly expensive, so you want to do
a lot of research so you figure out what that's really going to
look like if you decide to go that route. The other thing to
know is that if you're getting close to age 65, you want to be
very careful about using this type of continuation because it might not
qualify as coverage for Medicare, and that can cause problems, so if you're
anywhere near age 65, basically for anything... Start talking with your
employer or your healthcare coverage provider, and find out what you need
to do to avoid problems with Medicare, now that coverage only lasts for
18 months, so what if you need it for a longer period?
So if you're married but your spouse will continue working and they have
coverage through their employer, you can potentially get on your spouse's
plan, now there may be some change in cost, but you can get
coverage and some of it might be subsidized by the employer,
so that could potentially be a good option, there's also the option of
buying your own coverage, so you might buy that from an insurance company
potentially on the marketplace or the exchange, depending what state you're
in, and that allows you to just buy your own policy and make
some choices about levels of deductibles and out of pocket max and premium
amounts, these are the types of programs that can potentially get you a
discount if your income is below a certain level. So we'll look at
that in more detail in a second. But the thing to know is
if you don't qualify for any of those tax credits or subsidies,
it can get quite expensive, and we'll look at some numbers in a
second, and then some people look at sharing arrangements, and that might
be something that is not technically insurance, but it's a way to share
some costs with other people and get some healthcare paid for.
What I'd say about those, I'm not going to get into detail here,
but be very careful and do a lot of research before you go
down that road, a number of different things you might want to be
aware of, one is just that it's technically not insurance. And you don't
necessarily have all of the consumer protections that you might have grown
accustomed to or that you might expect. So if you're going to buy
your own coverage on the marketplace or exchange from an insurance company,
you might want to do a lot of research sooner than later,
to take a look at what it's going to cost you,
you can start the process pretty easily by going to healthcare dot gov
and looking up insurance plans available in your area. Now, you want to
be prepared for some annual cost increases because as you get older,
the prices tend to rise and plus inflation kicks in and insurance premiums
just tend to go up, it's also important to consider what rate of
inflation you might assume as you go into retirement so you might expect
that prices are going to rise over time, but your healthcare costs might
rise at a different rate, and it's probably wise to assume that those
costs would rise at a faster rate than general inflation. So be sure
to think about that as you do your planning, so here are some
national averages for a silver plan that somebody might buy themselves,
and as you can see, the prices tend to rise over time,
and that continues throughout life, by the way, you're typically going to
pay a little bit more for health care each year, but at age
50, they've got 612 a month, is the monthly premium plus some out of pocket
cost... I will say that that looks maybe a little low to me,
depending on where you are, but we're talking national averages, so if you're
in a big city with lots of providers, the cost might be lower
if you are outside of those areas, you might expect to pay more
than that, but you could potentially pay less than this, so here's an
example of this is something that a client put together, and by the
way, most people aren't quite this organized and they don't do all this,
and it's not necessarily relevant for everybody, depending on your circumstances,
but here's somebody who was going to pay 825 per month at full
price, but they could potentially get some of the subsidies or tax credits,
so if they were able to keep their income low enough,
they would get a pretty healthy subsidy, for example, if they could be
at 40000 per year, they would get a subsidy of 655 per month,
so instead of 825 a month, they would be paying only 170 per
month. So that's a pretty healthy discount there that can really save you
a lot of money per year. Now, it's not always the right move
to try to lower your income just to get those subsidies,
you do want to look at the bigger picture out there,
what are the other things that are going to happen with your income
and your taxes, both today and in the future? So don't necessarily assume
that this is always the best thing to do, but it can often
be quite helpful to save a little bit of money on those premiums,
by the way, you can build your own chart like that if you
want, using some tools available maybe from your state or there are some
other calculators out there that can potentially help you figure out what
things might look like at different income levels, and then you can decide
what makes the most sense for you... For most people at age 65,
it's time for Medicare, and that usually means you're going to have lower
costs, especially if you've been paying full price for your own coverage,
however, your income is a factor, so if you earn a lot or
you show a high income, possibly just from taking withdrawals from a pre
tax IRA or from other sources, you might have investment income or something
else going on, you could potentially have to pay more each month,
so you want to watch your income even in retirement. Once you're on
Medicare, this is still important, and Medicare can come in a variety of
different flavors, you don't just get Medicare, but you have some options
in terms of additional types of coverage you can use, whether that's a
meta gap supplemental plan or Medicare Advantage. You might want to add
a drug plan, those are all things that are beyond the scope of
this video, but the most important thing to know for your retirement planning
is that you may have some costs during Medicare, it's not free,
and you also want to do some projections to figure out what it
might cost for you based on your health, so what I would suggest
is speaking with a healthcare broker who can help you figure out the
options available and have some really detailed conversations, so if you
just say, I want the lowest monthly premium each month, they can do
that for you, but it might not be right for you,
it might not be the best thing for you, because if you travel
or if you have certain conditions, you might be better off with a
different program, so... Have some detailed conversations about your needs,
talk to your doctors and your healthcare providers and ask them...
Do you take Medicare Advantage or what would you suggest if I want to keep
seeing you? And they can give you some pointers as well.
By the way, I'm Justin Pritchard and I help people plan for retirement
and invest for the future. So in the description, you're going to find
some resources that can help you with retirement planning, and it'll touch
on some of these healthcare related topics, in particular. This is also
time for a friendly reminder that it's just a short video and it
can't possibly cover everything, so please do a lot more research,
hit pause and read this and we'll move on with the rest of
the video, but talk with professionals and get a lot more information before
you decide to do anything. So how much do you spend on healthcare
in particular in retirement? Fidelity does a study each year and they update
the numbers, and this year it was up 5%, but depending on when
you watch this, the number might keep increasing, and it's about 315000
for a couple, or for singles, we're talking 150000 for men,
165k for women. So this is. Throughout retirement starting at age 65 and
ignoring Long Term Care. That number can seem staggering, and those are
some pretty big numbers. But if you think about it, you're not necessarily
spending all of that at once, and you typically have income coming in
each year to help you pay for those costs, so you might have
some social security income, you might have a pension, you might take withdrawals
from your retirement savings and all of that together can help you pay
for a retirement, you don't necessarily write a check for 300000 right at
the beginning of retirement. So another way to look at this is sort
of that annual cost approach, and this is fidelity S calculator.
Again, we'll have a link in the description below, but let's say we
have a woman aged 65 today, and she's going to retire today,
and we'll say she's going to live to about 93, that seems reasonable.
She might be spending 5800 in her first year of retirement here,
and over time may show her at 195000, so it isn't like you're
again, paying that whole cost upfront and you need a lump sum available,
you can pay for it as you go. And another way to look
at it is this vanguard Mercer study where they look at a 65
year old woman, and they go by risk factors here, so maybe you
have one or two chronic conditions or smoke or something like that,
the more of those you have... You'd fall into this high risk profile
here versus a medium risk, so let's just look at the high risk
per year total out of pocket cost, so that includes some premiums plus
shows out of pockets dental envisioned by the way, you're not covered by
traditional Medicare. What might you expect to spend... And it's in that
6000 ballpark for the typical person with not too much going on health
wise, again, you would expect those costs to rise over time as you
get older and potentially develop more health issues,
next comes Long Term Care because those previous estimates excluded Long
Term Care. And so this might be if you need help doing things
or you're in a nursing home, something like that, this is the big
unknown when it comes to retirement planning, we just don't know if it's
going to happen or how long it's going to happen or what the
severity might be... I mean, on one end of the spectrum,
you need somebody who just come in for a couple hours and clean
up around the house, on the other end of the spectrum,
you could be in memory care and you need 24 hour supervision,
bed alarms in a camera room or something like that, so that you
don't wander and hurt yourself, we can't really say for certain what kind
of care you will need, but we can look at some probabilities and
maybe make some guesses, so the odds that you might need any type
of care or reasonably high... And then it depends on the type of
care. And as you might imagine, the costs are much different,
so unpaid care, obviously from family and friends doesn't necessarily have
a direct cost to you, although there are some cost to everybody,
including your family and friends by the way,
then you've got paid home care. Again, somebody could come in and clean
up, maybe cook meals and do other things, and then we can continue
on the spectrum from there, as you make some assumptions about what retirement
might look like in your care, you can look at how long it
might last the good news is, maybe good news is that typically less
than half of the time does it go on for five plus years,
but there's still a decent chance that it could go on for five
plus years. And again, there are some different ways pay for this,
so you've got family members, friends or you're paying out of your own
assets, for example, you might use insurance products, a variety of different
options there, you might plan for ENT, indenture, Long Term Care,
starting along a continuum of different communities that you live in that
might let you move on to higher levels,
you might use your home equity, that could be a nice safety net
for people if they do end up needing care, you typically have a
lot of assets in the home and you might not necessarily expect to
use those and maybe the kids don't want the house,
if there are kids, so that can be a resource for you to
use. Now, if you end up not having enough resources to pay for
the care you need, the Medicaid is the eventual safety net,
so that means spending down your assets and you typically don't have a
lot of resources to live on and have fun with, but you would
be able to get a lot of care, and that can be very
expensive, so that's where Medicaid becomes very handy as a safety net,
so how can you improve the chances of affording healthcare and staying comfortable
during retirement and not having to make sacrifices... Well, planning ahead
is always helpful, it just helps to run some numbers and do some
what ifs, and might make sense to use some tax strategies,
for example, that can help you either qualify for subsidies or to help
you avoid extra costs when it comes to Medicare. So if you can
manage your income and keep it low enough, that could help,
that might be Roth conversions or just saving with Roth or withdrawing from
pre tax accounts during years when you have low income. There are a
lot of different ways to look at this. If you are eligible to
save in a health savings account or an HSA, that's probably a good
idea. And other thing that a lot of people don't know is that
you don't need to spend that money every year. It's not use it
or lose it, so you can put the money into an HSA if
you're eligible, and then leave it in there to grow over the long
term, that might be several years or decades, and that way you have
a nice pot of resources to draw from when you eventually have higher
healthcare costs, staying healthy is also important, so to the extent you
have control over your health and those costs...
That's really a good thing to do. Now, luck and genetics and different
events can all come into play here that you don't have any control
over, but if you can stay active both mentally and physically,
that can help you keep your mental and physical health in decent shape,
and because of that, that may improve the chances of keeping your health
care costs as low as they can be for your body or for
your luck or your circumstances, so always good to do that as well,
to. Whatever extent you can. So I hope you found this helpful.
If you did, please leave a quick thumbs up... Thanks and Take Care.