Mo Vidwans
Many of us are not thinking of healthcare issues likely to arise during our retirement at this time. Probably because we are too busy with our lives and family and work pressures while retirement is so far out in the future it is not something we wish to fathom now. I can sympathize with that; it is not certainly a squeaky wheel today and why oil something that is not squeaking. Point well taken.
We will, however, inevitably reach that point sooner or later, probably sooner than we would like to think. So why not prepare for it now or at least give it a serious thought and have a plan in mind. In our community many young parents have their parent(s) living with them or are taking care of them indirectly and these young caretakers are getting a glimpse of reality already as to what is looming in their future. I applaud them for doing so.
So the million-dollar question is how much will our health-care expenses be in retirement? Indeed, an important and vexing question and it does depend to a great extent on the individual. Let us try to explore the solutions together.
Medicare
US residents over 65 should take advantage of this healthcare plan made available by the Government (initiated by President Johnson in 1965). It is a medical insurance plan and it is mandatory that over 65 population register for it or get an exemption from it. If not done at the right time there are penalties involved. Those who are enrolled pay a reasonable monthly premium for part B (part A is free); but the law requires some to pay higher premiums, based on their income, for their Medicare part B and prescription drug coverage.
Medicare mostly works well and it is getting better and more efficient. But the key thing to understand is that Medicare does not cover many expenses. This is a complex and vast area and I would not delve into any details here but the information is widely available. One prominent area which is not covered by Medicare is any form of long-term care.
Private Healthcare Insurance
Majority of us (but not all), who work, have their corporate healthcare insurance and these insurances operate, more or less, the same way as Medicare does. You buy the health insurance for a premium, generally subsidized by the workplace, and then there is a deductible and a co-pay (about 20%) for the expenses above the deductible amount. Even though the premiums are getting fatter, deductible is getting bigger, this system works well while we are working but things change when we retire. Many corporations today are not supporting their retirees for health, some give a fixed dollar amount for healthcare to the retirees every year; however, there are still some who support their retirees for healthcare but at a much higher price. If I have to guess the trend of healthcare for retirees, I would say that this amenity would disappear in the future, say 25 years, or they would charge a very high premium.
My suggestion would be to still have the supplemental coverage, nonetheless, only because Medicare alone is not sufficient.
If you thought that I painted a dire picture that healthcare is expensive, you have surmised it right; it will continue to get more expensive every year (8% per year is a good number to keep in mind for medical cost inflation). The new ACA law does help but the premiums are, at times, high for the middle to upper class families because the law is aimed at indigent, low-income citizens.
Retirement Picture
Now let us try to imagine what happens for most of us in retirement. For majority of us, we are on a fixed income and that income changes very little after retirement.
Our life expectancy is going up; today, by IRS estimation, the median age for men is 84 and for women 87. Most of us will live longer.
Unfortunately, our healthcare needs are growing, too, as we get older. According to HealthView Services Inc., a provider of healthcare planning tools in Danvers, Mass., a healthy 65-year-old couple can expect to pay, on average, $266,589 for insurance premiums and $128,365 for related expenses (for dental, vision, copays and out of pocket bills) over their lifetime. And this is barring any special situations or conditions that may develop later.
Deep in the dark depths of our mind we all feel certain that we will keep good health and that nothing unusual is going to happen to us (NIMBY syndrome), and I hope that turns out to be true. But let me just say that we need to be prepared and plan for the worst or, at the least, for above average medical expenses.
So What to Do?
There are no short cuts or any miracle tricks, just wise long-term planning. Start planning as early as you can. Much of the retirement income today comes from sources that won’t be available to count on in the future, which means we are left to fend for ourselves for many expenses.
Keeping good health sounds like a good bet. Only solution we have for that is proper diet, weight maintenance and regular exercise. Mundane and oft-mentioned no doubt, but the cost effectiveness and simplicity of this statement is remarkable and should be taken seriously.
We can certainly come close to estimating our life span (there are websites available). We can estimate and project what the future expenses and incomes are going to be. There are many tools at our disposal if we get started early.
Long-term care is available and it helps but it is expensive and still not the complete answer.
Our own savings is probably the only promising answer. If you have heard the cliché that “defining the problem well, is half the solution” then you already have a head start. Let us not procrastinate now.
