Jill On Money: Health care in retirement
In the category of “we like good news too,” the 2024 Medicare Trustees Report showed improvement.
Yes, there are still long-term structural problems, caused by the combination of an aging population and rising health costs, but the deficit of the Hospital Insurance (HI) program has is declining and “the year of the decline in investment funds has been pushed back by five years. to 2036,” according to the Center for Retirement Research at Boston College.
Medicare provides medical care and health insurance to people age 65 or older (if married, each spouse must apply individually) and who are eligible to receive benefits of federal disability insurance. It has four parts: Medicare Part A (insurance for hospitalization, home or skilled nursing and hospice care), Medicare Part B (medical insurance), Medicare Part C (“Medicare Advantage Plans,” e which are private options that combine Part A, Part B, and often Part D into one plan), and Medicare Part D (prescription drugs).
This year, Medicare Part B costs start at $174.70 per month, with an annual premium of $240. However, if your adjusted gross income (MAGI) exceeds a certain amount ($103,000 for singles, $206,000 for married filing jointly), you may be subject to additional fees. The extra amount is called the Income Related Monthly Adjustment Amount (“IRMAA”) and it’s important that these fees apply to your entire annual bill, even if you go over by just one dollar.
While most Americans pay as little as $174.70 a month, when you calculate ALL health care costs in retirement, the numbers rise. According to Fidelity Investments’ annual Retiree Health Care Cost Estimate, “a 65-year-old retiring this year can expect to spend $165,000 on health care and medical expenses over the course of retirement .”
This large number breaks down as follows: Medicare-related costs, Parts A and B (43 percent), prescription drug costs (10%), and all other health care costs, such as premiums, co-insurance and deductibles (47). %).
These numbers do not include the costs that the other person would have to pay for long-term care, which Medicare does not cover even if you are married—the $165,000 number is DOUBLE!
How can employees plan for these future health care and medical expenses?
Ryan Viktorin, CFP at Fidelity Investments suggests that “everyone should be concerned about these costs today – and plan to increase the annual 5% in the future.” Basically, that means you need to add $600 per month, per person (in today’s dollars) to your future expenses, to cover 25 years of retirement.
Another way to do that, says Viktorin, is to use a Savings Account (HSA), if available at your workplace. “The beauty of an HSA is that not only can it be used to pay for health care expenses down the road, but it also provides a triple tax savings,” meaning the money goes into the account before taxes. , income grows tax-free. , and when you withdraw money later for qualified medical or health care expenses, no tax is payable! If you retire, you can take your HSA with you — even using it decades into the future.
If you don’t have access to an HSA, consider setting up a special account set aside for health care. This is a form of “bucketing,” where you support different accounts for specific purposes.
Regardless of any method you choose and even if you are already registered in Medicare, Viktorin says that the health care plan does not “set it and forget” the event.
Retirement plans and Medicare options need to account for financial and health changes.
Jill Schlesinger, CFP, is a business analyst for CBS News. A former options trader and CIO of an investment advisory firm, he welcomes comments and questions at [email protected]. Check out his website at www.jillonmoney.com.
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