Will You Be Able to Afford Health Care During Retirement?
Fidelity Investments just put out a report showing that a 65-year old couple retiring in 2007, with no employer sponsored coverage and a life expectancy of 85 years (women) and 82 years (men), will need $215,000 to cover health care expenses over the rest of their lives. That’s up 7 percent from last year.
The primary reasons cited for the cost increase are familiar ones:
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Demographics - more older people living longer
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Greater use of expensive medical technologies and drugs
The breakdown of the $215,000 estimate is:
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32% for Medicare coverage premiums for expenses from doctors’ visits, outpatient hospital care and prescription drugs
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35% for cost-sharing provisions of Medicare, including co-payments and deductibles
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33% for out-of-pocket prescription drug costs
And, the estimate doesn’t even include:
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Over-the-counter (OTC) drugs
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Dental services
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And most importantly, long-term care
Fidelity forecasts that 50% of pre-tax Social Security benefits will be consumed by health care costs within the next 16 to 18 years.
Not Retiring Anytime Soon?
Remember, that $215,000 estimate for health care costs in retirement is for a couple retiring in 2007. At a 7% annual rate of increase, that estimate will double to over $425,000 ten years from now.
If you haven’t yet seen the 60 Minutes piece linked in this post discussing Medicare and the financial future of this country:
Why Everyone - Both Young and Old - Should Care Now About the Big Changes Coming to Medicare
it’s definitely worth checking out. There is no bigger domestic issue facing us (and most industrialized countries).
Good nutrition is the key to staying healthy and avoiding the expensive chronic conditions that account for the vast majority of health care costs. Fortunately, it’s a factor you can control. Those people who take preventive action now will definitely be in better shape, both physically and financially, as the changes in the health care system unfold.
(Image: Sheffield Estate Planning)
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