How to figure out health care expenses in retirement?

[heathpack]

Is there some rule of thumb to figure out health care expenses in retirement? I asked my excellent financial planner and his answer was kind of vague. Long term care insurance like my Mom has (he is also my Mom's FP) is no longer a viable option and he's not discussing annuities with me. He kind of said its a wild card and the best thing you can do is have as much money as possible and hope for the best.

I am 59 and since moving to Alabama realize it may now be possible for me to retire at 62. Mr H will be 67 then.

I am clueless about medicare but just tried to look it up today and it seems like 2 people might be $600/month. I know from age 62 to 65, I would need to pay for private insurance which I figure would cost me around $15,000/year. I have way more than that in an HSA so I should be ok.

When I run retirement numbers, I am figuring we'd spend 50% more per month in retirement than we do now just to be safe and I figure 4% annual increase in our expenses. Paying Medicare at $600/mo would be around 15% of our current monthly expenses so my 50% increase should cover fixed medical expenses.

What about the worst case scenarios- like one or both of us need long term care of some kind? Do you just figure some random amount like $500,000 each just to be safe? I will inherit at least that dollar amount as the "deposit" from my Mom's assisted living (its not really mathematically possible for her to burn through her remaining cash, so I should get that lump sum one day at a minimum) and our house is paid for- so these two things seem to me to cover two long term care "disaster" scenarios, one for each of us.

Is that it- have an idea of your fixed medical expenses through Medicare, then some resources to throw at long term care expenses if you need them? Is $500,000 a reasonable dollar amount for these types of expenses. Obviously I know that true expenses are unknown but I am just trying to assume something semi-reasonable so that I don't work an extra 10 years for fear of magnitude of an expense that has only a 3% likelihood of happening.

Is there a way to get details of Medicare expenses like you can get with SS income?

 

[billymach4]

I am also interested in this topic and answers. One exception. Long term care insurance is something that I personally would avoid. Many companies have left the long term care business as well. Also this may be a good question for an AI platform.

 

[billymach4]

Also annuities are also a questionable product. Like timeshares annuities carry a high commission. So these products have to be marketed and sold typically by insurance companies. Personally I am not looking at annuities either.

 

[Janann]

I know from age 62 to 65, I would need to pay for private insurance which I figure would cost me around $15,000/year. I have way more than that in an HSA so I should be ok.

If you are currently insured through your employer, you should be able to get a COBRA policy with your employer for the first 18 months after you quit your job. It would most likely be cheaper than buying a policy on your own. Also, you wouldn't have the hassle of switching policies and/or insurance companies until later.

 

[WaikikiFirst]

his answer was kind of vague

I'd bet. I'd guess that is all over the place depending on the health of the individual. Aside from std insurance & LTC, there are many extra-ordinary expenses that could occur, both surgical and for drugs. I haven't had anything major in my entire life so I won't start naming things.
The other wildcard is whether you buy PAY EVERYTHING, LOW DEDUCTIBLE insurance or do you shoulder more risk yourself.
I was just wondering the other day how hip, knee, etc replacements do under insurance. (I own some stock in Stryker) Those must be expensive. What type of medicare plan must you have to get those totally covered?

 

[rapmarks]

Don’t forget IRMAA. Medicare will cost extra if your combined income is above a threshold. And with an inheritance and savings for possible nursing home, you may hit the threshold
You will need a Medicare supplement
You will need part D supplement for prescriptions
Dental expenses and perhaps eyeware .
You may or may not have a medical yearly deductible.

Back in 1999, a friend told us to plan on $10000 each for medical, at that time we were not yet on Medicare, I was 55.
I do spend that a year between all the things listed above, Medicare, supplemental, part D, dental, vision, prescriptions, IRMAA. Out of pocket expenses.

 

[rapmarks]

I'd bet. I'd guess that is all over the place depending on the health of the individual. Aside from std insurance & LTC, there are many extra-ordinary expenses that could occur, both surgical and for drugs. I haven't had anything major in my entire life so I won't start naming things.
The other wildcard is whether you buy PAY EVERYTHING, LOW DEDUCTIBLE insurance or do you shoulder more risk yourself.
I was just wondering the other day how hip, knee, etc replacements do under insurance. (I own some stock in Stryker) Those must be expensive. What type of medicare plan must you have to get those totally covered?

I have had knee replacement while under Medicare, 15 surgeries, chemo, radiation,
don’t worry, you are covered, but need a supplement

 

[billymach4]

If you are currently insured through your employer, you should be able to get a COBRA policy with your employer for the first 18 months after you quit your job. It would most likely be cheaper than buying a policy on your own. Also, you wouldn't have the hassle of switching policies and/or insurance companies until later.

Yes to cobra if needed

 

[WaikikiFirst]

Right, "supplement". Medicare has Pts A, B, C, D, right? heath, does the medicare website require you to prove you are approaching 65 before they will show you quotes for the most expensive versions of B & C & D?

 

[Greg G]

You can access medicare.gov, as well as countless videos. Currently Medicare Part B (medical insurance) Premiums are $185/month (Part A which is hospital insurance has no premiums but has a deductible of $1,676 for each inpatient hospital benefit period ). Medicare pays 80% of the medical charges (Medicare also negotiates rates for any medical procedures so it is less than what you would pay if you did not have Medicare) after a $257 dedutible/year. You typically then get either Medicare supplement insurance that covers the remaining 20%, or a Medicare Advantage Plan that covers 100% (replaces Medicare essentially) or self fund that . My Medicare supplement (Plan N) is around $100/month . Medicare supplements pay the remaining 20% and cover anything Medicare covers. Also the main advantage with Medicare supplements is you don't need pre-authorizations for medical procedures like you do with a Medicare Advantage plan, nor are you limited to a select network of providers (although some states are testing that with a small list of medical procedures). With Medicare supplements you can go anywhere in the US to a doctor that accepts Medicare, while with a Medicare Advantage plan you are limited to a select network of doctors or hospitals and require pre-authorizations. The advantage of a Medicare Advantage Plan is there is usually (edited to add usually) no premium other than the part B premium. You also then get a Medicare Part D drug plan (unless you have a Medicare Advantage plan which combines that ). Currently mine has a $0 premium and I pay very little for any drugs I need, however I have very generic common drugs. However this is dependent on what drugs you need and what provider you choose.
Supplement rates are also increasing, so factor in some % for that. Not sure if medicare.gov can give you average out of pocket medical cost statistics with just Medicare but you can probably find that on the internet if you go the self funding route.

Then you have Long term care (LTC) considerations later on, and LTC is expensive. Just in Iowa , the rates are around $330 per day for just an average quality LTC/Nursing home facility (had to look them up for a relative of mine). The length of stay per google AI summary: "The average stay for long-term care is highly variable, but on average, women may require care for around 3.7 years, and men for about 2.2 years. An average nursing home stay is roughly 485 days (1.3 years), while an average assisted living stay is about 22 months. However, some people may never need care, while others will need it for longer than five years, making the average a guideline rather than a rule." So from that you can figure self funding, or get LTC insurance if you can, as billymach4 indicated, many insurance companies are getting out of the LTC insurance business due to rapidly rising costs. Also my premium for LTC insurance has increased just recently (that premium would cover $375/day LTC). My relative currently spends over $120K/year in an average quality long term care facility (nursing home).

 

[WaikikiFirst]

I found notes I took when I was thinking of this. I guarantee these #s even less than AI guarantees, but this is what I wrote
Part A = “Hospital Insurance”: in 2024, Premium = $0 for most people (who paid Medicare taxes for at least 10 years).
You MUST sign up for Part B to get Part A, but “theoretically” Pt A is free.
Part A Deductible = $1,632 for each time you’re admitted to the hospital / period, before Medicare starts to pay.
Inpatient Copayments = Days 1-60: $0 after you pay your Part A deductible
Days 61-90: $408 each day
Days 91-150: $816 each day while using your 60 lifetime reserve days
After day 150: You pay all costs
Part B = “Medical Insurance”: in 2024, Premium = $185/mo. MUST BE WITH PRIVATE INSURANCE
Part B Deductible = $240/yr, before Medicare starts to pay.
Coinsurance: usually 20% of the cost for each Medicare-covered service or item, after deductible.
Pay for Part B quarterly til getting Social Security, then SS deducts to automatically

 

[WaikikiFirst]

Part C = “Advantage” (supplementals, etc). There are Free Advantage plans and there are Cadillacs
Part D = “Drug Coverage” … Monthly premiums vary based on plan. You may also pay more if Married-Filing-Jointly Income > $206 K. As with A & B you pay a penalty if you don’t join a Medicare drug plan when you first get Medicare
Drug deductible varies based on plan. Total costs vary greatly depending on the medicines you take. Different plans cover a different list of drugs,
Medicare Supplement Insurance (Medigap): OPTIONAL Monthly premiums vary based on plan. You also pay your Part B premium to keep your supplement insurance. Helps lower std Medicare’s share of Part A and Part B costs. Some Medigap policies include extra benefits to lower your costs, like coverage when you travel out of the country.

 

[heathpack]

I am also interested in this topic and answers. One exception. Long term care insurance is something that I personally would avoid. Many companies have left the long term care business as well. Also this may be a good question for an AI platform.

My Mom has killer LTC policy which was sold to her “back in the day” by her/my financial planner’s predecessor. Her policy has proved very lucrative but financial planner says “back in the day” LTC insurance was a good product that his firm used to reccomend. He brought it up not to suggest it to me, but to explain why it was not an option for me, given my familiarity with my Moms LTC insurance. Which is currently paying off handsomely.

 

[WaikikiFirst]

interesting tidbits / ranges about Pt C aka Advantage
In 2023, 51% of people eligible for Medicare opted for Medicare Advantage plans. The average monthly plan premium for Medicare Advantage plans in 2024 is $18.50, but this includes all the people who pay $0 monthly but potentially have high OUT-OF-POCKET Costs.

Medicare Advantage, also known as Medicare Part C, is a bundled alternative to std Medicare that's offered by private insurance companies. It includes Medicare Part A and Part B, usually prescription drug coverage (Medicare Part D) and often additional benefits, which may include some coverage for dental and hearing.

Premiums: Many Medicare Advantage plans have no premiums, 66% of them in 2024. For those in plans that charge a premium, the average cost is about $65 per month. Monthly premiums range from $5 to $327. In addition to monthly premium, beneficiaries are responsible for their Medicare Part B premium, which is $185/mo in 2024. Some Medicare Advantage plans cover some or all of your Part B premium.

so, idk, if you take that $327 & add the $185, you get about $6100/yr in premiums for very good coverage, but here is where the experienced people can say what that $6100/yr misses.
obviously misses things b/c I have heard people complain that there "Medigap" could cost close to $1000/mo

 

[VacationForever]

Get a plan G if you want everything covered.

 

[heathpack]

Don’t forget IRMAA. Medicare will cost extra if your combined income is above a threshold. And with an inheritance and savings for possible nursing home, you may hit the threshold
You will need a Medicare supplement
You will need part D supplement for prescriptions
Dental expenses and perhaps eyeware .
You may or may not have a medical yearly deductible.

Back in 1999, a friend told us to plan on $10000 each for medical, at that time we were not yet on Medicare, I was 55.
I do spend that a year between all the things listed above, Medicare, supplemental, part D, dental, vision, prescriptions, IRMAA. Out of pocket expenses.

What is IRMAA?

 

[VacationForever]

What is IRMAA?

Medicare penalty for high income. This year is $212K for married filing jointly.

 

[heathpack]

Medicare penalty for high income.

I don’t understand. I’ll be retired and have no income

 

[rapmarks]

I don’t understand. I’ll be retired and have no income

No pension, no social security, no interest on your investments, no capital gain distributions, no annuities, no withdrawal from IRA (non Roth)?

 

[VacationForever]

Don't forget when you have to take RMD from your IRA, and those are treated as income.

But yes, you can retire and not worry about LTCI if you have backup $500K funds.

 

[DrQ]

I don’t understand. I’ll be retired and have no income

They look back 2 years. If you do ROTH conversions, you can get caught in the IRMAA swamp too. I our case we inherited some annuities which were over 50% taxable. We cashed them out the year before I was laid off and IRMAA bit us.

 

[rapmarks]

I don’t understand. I’ll be retired and have no income

Don't forget when you have to take RMD from your IRA, and those are treated as income.

But yes, you can retire and not worry about LTCI if you have backup $500K funds.

If she truly will have no income, that 500000 will not last long enough

 

[VacationForever]

If she truly will have no income, that 500000 will not last long enough

That $500K is her backup funds from her mother's funds which she will ultimately inherit. She said with a broad stroke when she said she has no income. I think she was thinking no earned income,

 

[heathpack]

No pension, no social security, no interest on your investments, no capital gain distributions, no annuities, no withdrawal from IRA (non Roth)?

No pension, no interest on investments (they’re all in retirement accounts), no capital gains, no annuity, some $ in Roth IRA and 100% of our current turbo savings is Roth.

Yes to SS.

I think until I’m 73, I get to decide how much I take out of my retirement accounts?

Weirdly since we moved, my age 62 SS amount + Mr H’s will cover like 65-70% of our monthly expenses. I don’t think we’re going to be in the high income category for at least a decade. The basic point is our expenses are so low, not that we’re so rich that I can retire early.

 

[heathpack]

If she truly will have no income, that 500000 will not last long enough

Don’t be snarky. Especially if you haven’t read my posts carefully