It’s no surprise that health care costs are rising, but a recent article from Bloomberg News reports that rising costs are not expected to level off anytime soon. There are contributing factors such as technology advancement expenses, medical malpractice insurance, professional education expenses and more government regulations, to name few.
Fidelity Investments most recent projection of retiree medical expenses is up an eye-opening 6% increase from last year. A 65-year-old couple will need $275,000 over their lifetimes to cover medical cost alone. The projection does not even include dental or costs of long-term care.
Medicare Part B and Medicare Part D (drug coverage) are expected to make up 35% of the cost, but 65% will be cost sharing for out-of-pocket expenses, co-pays, and drug expenses not covered under Part D. If you are thinking your Medigap (Medicare Supplemental Insurance) will cover the costs, Healthview Services a company that makes software health care cost projections, expects annual premium increases of 7.2% for Medigap policies and 8% for Medicare Part D premiums. These increases will lead right back to the same total lifetime costs as if you needed to pay all out of pocket (excluding catastrophic illness).
Annual out-of-pocket inflation or rising expense estimates from the report are dental, vision and hearing at a 5% increase, prescription drugs up 3.7%, hospital costs up 3% and doctor visits up 3.4%. How can you plan to cover the increasing costs? Follow all your doctor’s recommendations to avoid future medical problems as much as possible, eat well and exercise routinely, save more for retirement, and make sure your investments are allocated in a way to keep pace with inflation.
Here is a link to the full article.
Health-Care Costs Could Eat Up Your Retirement Savings
The estimates may convince you to work forever—if you can!
Bill Mayer CFP®
BMayer@AddisHill.com
