If you’re like most Americans, saving for retirement is a
top priority — or at least will be once you get some of your debt paid off. But
the HealthView Services 2016 Retirement Health Care Costs Data Report shows
that you may need to be putting more away than you are in order to cover the
rising medical bills that you will most likely face in retirement. This report
contains some eye-popping data regarding the percentage of your retirement
income that you will need to pay for healthcare expenses. And the fact is that
your healthcare expenses will rise as you get older, at a point when your
income may be decreasing.
The Alarming
Numbers
HealthView Services' report indicates that a physically
healthy 65 year old couple that retires in 2016 can expect to spend $288,400 in
today's dollars on Medicare premiums for parts B and D and Medigap insurance
over the course of their lives. And when expenses for dental, vision and
hearing are thrown into the equation, then the total rises to $377,412. That
total is a whopping $33,000 higher than for a similar couple who retired in
2015. And the numbers for younger clients are enough to keep most financial
planners up at night, with a 55 year old couple facing medical expenses of over
$466,000 and a 45 year old couple paying almost $600,000. These numbers are
based upon a couple where the man lives to age 87 and the wife dies at 89.
Even more alarming is the fact that these numbers don’t take
long-term care expenses into account, which could easily add another $100,000 —
150,000 onto these totals. The report projects that the cost of healthcare will
rise by an average of 5.1% per year for the foreseeable future, compared with
the current general rate of inflation of less than 1%. This rate of increase
will outpace the COLA adjustment that is built into Social Security. This means
that the average 66 year old couple can expect to spend just over half of their
pretax Social Security benefits on medical care. A 55 year old couple will use
up almost nine-tenths of their benefits, and the entire benefit for a 45 year
old couple will only cover about 80% of the costs.
The income thresholds for Medicare premiums are also going
to be lowered for the three highest income brackets starting in 2018. The top
brackets for single and married couples are going to be reduced to $160,000 and
$320,000 per year respectively. And these income levels are not indexed for
inflation, so a growing number of taxpayers will most likely be affected by
this change as time goes on.
The most recent Bank Of America Merrill Lynch workplace
report also shows that seven out of 10 workers have experienced a rise in healthcare
costs over the past two years, which resulted in a decrease in their retirement
savings for a large percentage of them and a significant decrease in savings
for some of them.