Paying for Skyrocketing Healthcare Costs in RetirementSubmitted by Reby Advisors | Certified Financial Planners | Danbury, CT on March 20th, 2019
Presented by Doug Kuring, March 22, 2019
A married couple can expect to spend $300,000 or more on healthcare in retirement. Medical expenses and long-term care services cause many people to run out of money and burden loved ones with their care.
In the video above, Financial Planner Doug Kuring discusses how to use Medicare, private insurance and long-term care insurance to protect your retirement assets from these skyrocketing costs.
To learn more about Managing Healthcare Expenses in Retirement, sign up for our March 26th evening workshop or March 28th "lunch and learn" at at www.RebyAdvisors.com/Medicare2019 or call (203) 790-4949.
The workshops are complimentary but reservations are required. You may also contact us for a private complimentary consultation.
True of false, a retiring couple can expect to spend roughly $245,000 on healthcare throughout a 25 to 30 year period? It's true and actually fidelity .... fidelity just came out with the study that was released the other day.
It's closer to 300 because medical cost are just increasing more and more at this point. I would expect closer to 300. I broke this section up into three phases of one's life. If you retire prior to age 65, you have certain options, retiring at 65, you go on Medicare and then age 85 and I chose age 85 for a reason. Of all the clients that we have in our office upstairs, right, who own long-term care insurance, 70% of those clients are on claim.
Meaning that's seven out of 10 of them ... seven out of 10 of those clients that own long-term care insurance, are using that long-term care insurance to pay for long-term care expenses, which in my world, when I'm developing a plan for somebody, and they're age 65 or younger, that's a near certainty. That's something that I need to incorporate in somebody's financial plan because there's a pretty good probability you're either going to need long-term care insurance or you're going to need to figure out how you're going to pay for it on your own. Let's start with before age 65.
COBRA is one option. If you're not still working, COBRA is an option. It's just continuation of workplace benefits for the most part. Now, when you work for an employer, your healthcare insurance is typically subsidized quite a bit. They cover about 70 to 80% of the full premium. You cover the delta. When you are on Cobra, you are in charge of that full amount plus another 2% so they like to just kick you while you're down and tuck on a service and administration fee for supply in the COBRA insurance. So 102% of the entire premium is on you. These numbers up here are for a couple and we just assumed that $150 per paycheck is coming out of that individual's paycheck for healthcare insurance.
These are just the numbers there. It comes out to be about $13,000 which is well within the range of what we've experienced, which would be that to a 20,000, depending on what you need and the insurance that you're comfortable with. The other option that you have is I think the access healthcare Connecticut network which would be privatized healthcare, typically what we recommend for people is going forward with a high deductible low premium plan and then funding an HSA or you can take the tax deduction on your tax return for funding the HSA and going forward with that plan. Now, age 65, Medicare, right? Medicare is wonderful healthcare insurance. Original Medicare is wonderful healthcare insurance.
Original medicare consist of part A, which is your hospital coverage. Part B which is going to be your doctor visits, check ups and that sort of thing. Something called Supplemental Medigap which is insurance that basically catches anything that falls between the cracks of part A and part B, any cost that come through and then part D, which is your prescription drug coverage. Now, part B, right, currently is a standard $134 per person per month. Part A is free for anyone that is a US citizen and has paid Medicare taxes out of their paycheck. Supplemental, the most robust plans are F, G and N currently.
Pricing range is quite a bit for your supplemental insurance. I've seen it as low as like 64 or something like that. All the way upwards of 400, it's expensive. It can be expensive. Part D is prescription drug coverage. The reason why I say here it must be reviewed annually, as we age, chances are that when we go to the doctor and he prescribes us new medication, if we have a certain plan that doesn't cover that medication, those cost are coming out of our pocket, right? You got prescribed a new drug, you're going to want to review it annually to make sure that your plan covers that drugs and you're not paying for it out of pocket, full out of pocket.
Now, under the Medicare umbrella, you've got original Medicare which is what I've just talked about and then Medicare advantage. Medicare advantage is also known as part C, all right. It's privatized Medicare for the most part. It acts very similarly to an HMO where you have in-network providers that you can go to. If you got out of network, the cost are on you. I typically don't recommend the part C because original Medicare is such a wonderful coverage and then in the event that you need to go see a specialist that's not within the network, that's not really something that somebody wants to deal within retirement.
They want to go see the doctor, that's the best and that can help them. Now, if you go to age 85, again, this is where the long-term care picture kind of steps in. Just to give you guys an idea of what an assisted living facility cost, okay, which on the spectrum of long-term care. You have home healthcare which is kind of your basic assisted living, like a middle of the road service and then you've got the private nursing, skilled nursing facilities, which would the most expensive. Now, the average Connecticut Assisted Living Facility cost for a person is about $5,000 per month and that's currently, that's today.
We go to a couple, $10,000 a month. Like I said, 70% of the retirees that we have, that own long-term care insurance are on claim. What long-term care cost does Medicare cover? The answer is very little. Medicare has a stipulation in their skilled nursing facility section within part A. They will cover days one through 20 in the skilled nursing facility. Days 20 through 100. It goes to like a co-insurance model, where you share the cost and then after day 100 it's on you. Just to give you a feel, the average long-term care need is about one to three years. If you're only getting 100 days from medicare you better know where the money is coming from.
If you don't own long-term care insurance, it's coming out of your savings. It's coming out of your portfolio and retirement. It's the only way it can be paid for. That's why I say, as far as somebody's ability to sustain their lifestyle and retirement over 30 year period. If you haven't figured out, exactly what pool of money you're tapping into if you choose to self-insure, you need to do that because it's going to drain your assets. That's where it's coming from. Any questions? Bottom line is healthcare is going to be expensive.