Will you have to defer retirement due to health care, health insurance costs
Are you ready to pay the costs of healthcare in retirement?
Are you ready to be healthy in retirement?
Are you ready to develop good friendships in retirement?
Good friends and good health and an active lifestyle – that’s what retirement should be, right? Instead, for many, it is a series of doctor appointments, surgeries and a general feeling of fatigue or depression – depression that can come from physical causes, from lack of positive human contact and money worries.
Every year I see people with a million dollars in assets who can’t retire because it isn’t enough. These people have Social Security and often a small pension from some company they worked for years ago. If these three-pronged retirements (SS, Savings and Pension) don’t work then what are the younger generations going to do who don’t have the prospect of a healthy Social Security payment or any kind of pension payout?
Many near retirees wait way too long to calculate their need for retirement income. They leave things out – like the increasing cost of healthcare or the heath insurance and long-term care insurance premiums they will need to build into their budget. Then they retire, find out how expensive it all is, and choose to live on the edge – with inadequate health coverage and leaving their spouse in the path of poverty if one of them needs long-term care.
When you apply the healthcare inflation rate to medical insurance and expenses, they double every 7 years. That means during a 20 years retirement you could see costs for insurance, prescriptions and medical copays for a couple go from $1000 a month to $8000 a month – assuming you want something covering you other than Medicare – which is full of restrictions, low reasonable and customary fees and co-pays for hospital stays beyond a limited number of days.
Will your retirement budget handle that?
How to prepare financially for healthcare costs in retirement.
Many retirees are paying $1100 or more a month for health insurance – for two. Generally the higher the deductible the lower the premium – but how do you fund the deductible? Personal savings is one way – do you have a separate account set up for medical expenses?
You can use an HSA – a Health Savings Account. These are different from a healthcare spending account. In those you accumulate dollars over a year and if you don’t use it, you lose it. HSAs – heath savings accounts – are long-term savings accounts. Both are pretax but with HSAs you don’t lose the money after 1 year and you can even make withdrawals for non-health expenses after reaching Medicare age 65. HSAs are not right for everyone. Sometimes the easiest thing to do is increase your 401k savings to the max.
When you think about the demise of monthly pension plans and the possible reductions in Social Security and Medicaid and Medicare, young people best start to plan early.
Any time we work on a retirement plan for someone, we require that they set up a planned spending account that is separate from other assets. This account could be a little as $50,000 in today’s dollars or as much as $250,000 – depending on the income and lifestyle of the retirees. It will pay for unexpected repairs, cars and healthcare costs in retirement. If it also pays for travel or a home in a warm climate – it has to be a lot bigger.
The biggest mistake in the typical do-it-yourself retirement plan is missing some of the big ticket items. If you take all your assets and assume they will produce income when you retire, you are missing a big piece of the puzzle.
Staying healthy – or getting healthy - is a critical component to a successful retirement.
I am hearing comments from an increasing number of people that would indicate they believe it is normal to have arthritis, acid reflux, high cholesterol and triglicerides (fat) and any other of a number of malaises – just because they are older.
I just don’t buy that.
What is happening is that our poor food habits are finally catching up to us. And that translates into many thousands of dollars of lost income paying for prescriptions and doctor visits.
You know it’s true. Whether you are fat or thin, you know if you are eating sugar every day. You know if you are consuming trans fats through French fries or cookies and breads, margarine or oils processed at high heats.
Our poor livers are inundated with second hand smoke, alcohol, caffeine, food additives and artificial colors.
Ever wonder why they call it your liver? Liv – er. It performs over 400 functions including regulating cholesterol, burning fat, getting rid of toxins that can – and do cause cancer.
Remember the good old days when you ate dandelion greens in the Spring – and that cod liver oil – Omega 3 they call it now – those were liver detox items. What are you eating this Spring – a big mac? It’s time to do some reading about health of the liver to help you reduce medical costs in your future.
If you would like a good resource go to the web at www.planningsense.com and look at the books listed on today’s page for some ideas of what to read.
Fat Flush Plan (Gittleman)
The Diet Cure (Julia Ross)
Eat Right or Die Young (Cass Igram)
For retirement to be rich and rewarding you need more than money and good health – you need meaningful and deep relationships.
Stay active, develop friendships - how do you develop friendships? They take time – often time we did not have enough of while working. And it’s been so long, you are out of practice? Visit the bookstore or the library and look at all the books on relationships. You are not the only one who would like to make things better – your marriage, your friendships, your connection to your kids.
You can learn something from your teenager – other than how to use the computer better. Observe teenagers and their friendship patterns. They talk on the phone just about every day. They do things together every week. Their talk is often deep – about the things that concern them most. They share their dreams and defeats with their trusted buddies. They have fun together. They do things for each other. In the best relationships you care as much about the other as yourself.
We have all had disappointing relationships and sometimes we isolate because of it. Maybe you need to learn to trust people again. If so, get a copy of the book Safe People by Cloud and Townsend. It’s a short book packed with information that will help you figure out who is a safe friend and who is not, whether you are a safe person and how to become one – and how to find friends that are safe.
I have a bookcase full of great relationship books – email me if you’d like to know more. You can email me from our web site at www.planningsense.com.
It’s a good thing life is a journey and not a destination – we can always know more today than yesterday.
If you leave an employer sponsored health plan when you retire, you may go into sticker shock. You can see you premiums jump from 5 to 10 times the cost. Health care can cost more than 30% of a retirees budget.
Healthcare costs are an immovable object – no creative thinking can really reduce the costs by very much. With investment strategies and budget items, creative can be successful. The third party payer system for healthcare makes it a virtually uncapped expense item. Do you know what I mean? What did you pay for your last prescription? $3, $5, $10, $20, $40? What did the insurance company pay? $100? $250? You don’t know, do you? And therein lies the problem. Someone else is paying. I was give a prescription for an eye infection a few months ago. When I went to the drug store, they wouldn’t give me any information about it until the scrip was filled. After reading the info I decided to do some research on the internet first – and I didn’t like what I was reading about side effects. The medications cost about $150. I would have paid $20 each. If it were $5 each, I might have been tempted to buy them and research later – never having a clue what the real costs were.
We need to study financial, relational and health issues. I hear people complain that they hear one thing – and then someone says the opposite. That’s a poor excuse for throwing in the towel on eating better or taking care of yourself. Fact is, there are different food rules for different people. In my personal experience - even your blood type can make a big difference in what is healthy for you to eat compared to someone of another blood type – that’s why the info that’s out there often is so confusing. So keep reading. Check out the books listed on the web at planningsense.com in this week’s material.