Healthcare costs are among the top concerns for baby boomers transitioning into retirement. Even with supplemental insurance and Medicare, out-of-pocket healthcare costs in retirement can be expensive. Together, we can work on understanding these costs and, more importantly, account for them within your retirement income plan. Using this worksheet, we’ll estimate your healthcare costs in retirement – using current 2012 figures – and identify any issues that might require more consideration, such as the need for long-term care insurance, and discuss steps to adjust your plan accordingly. Actively addressing this issue can help you plan for a more secure and comfortable retirement.
To estimate your healthcare expenses in retirement, we’ll first need to learn more about you.
ESTIMATING YOUR HEALTHCARE COSTS IN RETIREMENT
Accounting for healthcare costs in your retirement income plancan help create a more secure and comfortable retirement.
Name: ____________________________________________________ __________________________________________
Date of birth: ______________________________________________ __________________________________________
Desired retirement age: _____________________________________ __________________________________________ Expected annual income
at retirement: ______________________________________________ __________________________________________ Will you have retiree health benefits
from a previous employer? Yes No Yes No
CLIENT 1 CLIENT 2
2
CLIENT 1 CLIENT 2
$ $
STEP 1:
Start with a baseline cost based on age and quality of health If you plan to retire after 65 and are covered by Medicare,use the chart below on the left to determine a baseline annual expense.
If you plan to retire before age 65 and are not covered by a healthcare plan through your previous employer, use the chart below on the right to determine a baseline annual expense.
Medicare only pays about 60% of current retirees’ medical costs, according to the Employee Benefit Research Institute. For instance, you’ll still have copays, premiums and deductibles, and Medicare doesn’t cover hearing, dental, vision or long-term care costs. Due to variability and un-predictability, healthcare expenses are best accounted for on an annual basis. To estimate how much your annual out-of-pocket expenses might be in retirement, follow these steps.
PART II
ESTIMATE HEALTHCARE EXPENSESEnter the baseline amount from step 1 here
Average annual healthcare costs by age,
no employer subsidy, 2012
Includes vision, dental and hearing. Poor, Moderate and Excellent health sta-tus based on self-reported data using these specific categories. Estimates provided by HealthView based on historical insurance data and actuarial projections, June 2011.
Average annual healthcare costs by age,
for individuals on Medicare, 2012
$10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000
$7,600
$8,105
$6,775
$8,220
$8,735
$7,185
$8,760
$9,425
$8,105
Excellent Health Moderate Health Poor HealthAge 54
Age 59
Age 64
$4,660
$4,760
Excellent Health Moderate Health Poor Health$4,450
$5,100
$5,200
$4,860
$5,535
$5,635
$5,220
$6,000 $5,500 $5,000 $4,500 $4,000 $3,500 $3,000Age 65
Age 70
Age 75
Assumes Medigap Plan C. Includes vision, dental and hearing. Poor, Moderate and Excellent health status based on self-reported data using these specific cat-egories. Estimates provided by HealthView based on historical insurance data and actuarial projections, June 2011 and updated with 2012 Medicare premiums.
STEP 3:
Adjust for higher incomes, if applicable If you have an adjusted gross income above $85,000 ($170,000 for married couples filing jointly), you must pay higher Medicare Part B and D premiums. The chart below can help you determine the incremental Part B and D premiums you’ll be required to pay.2012 annual income
(single filers) (married filing jointly)2012 annual income Part B and D premiumsIncremental annual
$85,001-$107,000
$170,001-$214,000
$619
$107,001-$160,000
$214,001-$320,000
$1,558
$160,001-$214,000
$320,001-$428,000
$2,495
$214,000+
$428,000+
$3,434
Many state and local government employees, as well assome private sector employees, have access to retiree health benefits. If you know that you are eligible for retiree health benefits from your employer, you can estimate that your annual healthcare costs will be reduced by $1,800 if 65 or older and $3,600 if under age 65.* For a more accurate estimate, contact your employer’s benefits administrator.
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Enter estimated savings from employer coverage here
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$ $
Enter incremental Part B and D premiums here
STEP 2:
Adjust for employer-provided coverage, if applicable*Derived from 2010 Healthcare Cost Survey, 21st Annual U.S. Results Report, Towers Watson
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Enter amount from Step 1 $ $
Subtract amount from Step 2 (if applicable) – $ – $
Add amount from Step 3 (if applicable) +$ +$
Add amount from Step 4 (if applicable) +$ +$
Estimated annual out-of-pocket expenses $ $
STEP 5:
Calculate estimated annual costsKeep in mind these are annual estimates for your healthcare costs based on today’s numbers. Healthcare costs are projected to grow 6.3% annually through 2019, according to a Health Affairs study. So each year, we’ll adjust the totals below to account for cost inflation and then incorporate the new estimate into your retirement income plan.
STEP 4:
Estimate long-term care costs, if desired Another important factor to consider when planning for healthcare in retirement is the potential need for long-term care. Long-long-term care insurance is not covered by Medicare, but studies suggest one-third of people who turned 65 in 2010 will need at least three months of nurs-ing home care, 24% for more than a year, and 9% for more than five years. Nursing home care averaged $80,000 a year in 2009, according to the U.S. Department of Health and Human Services. A home health aide is expensive as well; in fact, hiring one can cost more than $230 a day.CLIENT 1 CLIENT 2
$ $
Enter estimated long-term care insurance premiums
ACTION ITEM:
Research long-term care insurance options with the help of your advisor and include the annual premiums when calculating your overall healthcare costs.
INTERNATIONAL HEADQUARTERS: THE RAYMOND JAMES FINANCIAL CENTER
880 CARILLON PARKWAY // ST. PETERSBURG, FL 33716 // TOLL-FREE: 800.248.8863 // LIFEWELLPLANNED.COM Each year, we’ll set aside time to review your coverage.
Even if you’re happy with what you have, benefits and premiums may change over the year. Together, we’ll review your healthcare options to ensure you have the coverage that suits your needs. We’ll also plan to make any changes during the annual Medicare enrollment windows, if applicable. This review period could also serve as a reminder to visit your primary care physician to review medications.
Now we have a clear understanding of how healthcare expenses fit into your total financial picture. Together, we’ll create a personalized retirement plan that ac-counts for this essential cost.
This is an estimate only based on information you have supplied. It is for financial planning purposes only, and your actual healthcare costs in retirement will vary.
NEXT STEPS
Consider a health savings account (HSA) Consider a cash reserve for emergencies Maintain your health with preventive care,
diet and exercise
Review coverage annually
Compare costs of your plan choices each year Incorporate changes into your overall
retirement income plan
PART IV
TAKE ACTIONYour estimated annual health expense is considered an es-sential “need” (a basic, non-discretionary annual expense) when it comes to retirement income planning. We’ll incorpo-rate this information into your overall plan and determine if your reliable income sources and retirement assets will cov-er your essential needs in retirement. A cash rescov-erve will be beneficial to cover any emergency or unplanned expenses. Future planning will adjust your plan for inflation as well.
Within your retirement income plan, healthcare coverage should be considered an essential need, paid for by your reliable in-come, such as Social Security or pension payouts. If your reli-able income isn’t enough to cover basic needs, you may have to tap your retirement assets.
WANTS NEEDS RETIREMENT ASSETS FILL GA P IN I NCOM E FOR PAYS FOR
REMAINING WILL SUPPORT
RELIABLE INCOME
HEALTHCARE EXPENSES
PLANNING TIP
Costs for Medicare Advantage and Medigap plans vary by provider, even for similar coverage,
so it’s important to shop around.
