What You Don’t Know…
Sep 11, 2015
Can hurt you, particularly concerning potential retiree medical expenses. Misconceptions about the Affordable Care Act (ACA), health care costs and what Medicare will pay in terms of long-term care expenses could upset many Baby Boomers’ plans for a comfortable retirement.
How much could my retiree medical expenses be? You might be surprised. The Employee Benefit Research Institute* estimated the amounts people who turned age 65 in 2014 will need for a 50%, 75% and 90% chance of covering Medicare and Medigap health insurance premiums and out-of-pocket drug costs during retirement. Those amounts:
- For men — $64,000, $93,000 and $116,000, respectively
- For women — $83,000, $106,000 and $131,000, respectively
- For married couples — $147,000, $199,000 and $241,000, respectively
The figures are for people with median prescription drug costs. If you have higher costs, you’ll need more. Further, the estimates don’t include long-term care expenses.
Would long-term care expenses add that much more? They could. An average stay in a nursing home — 2.2 years for men and 3.7 years for women — would add about $185,000 to the amount a man might need and more than $300,000 to the amount a woman might need.**
Don’t the ACA and Medicare cover long-term care expenses? Provisions for long-term care coverage were included in the ACA, but the program wasn’t implemented. And while Medicare does cover some skilled nursing home expenses following a hospital stay, it generally doesn’t cover the costs of continuing custodial care. Medicaid can provide coverage, but you’ll have to exhaust most of your financial resources first.
What options do I have? Basically, you can pay long-term expenses out of pocket, or you can protect yourself and your loved ones by purchasing long-term care insurance. Also, consider that life insurance proceeds could replace assets used to pay medical and long-term care expenses. Talk with your financial professional about preparing for potential retiree medical expenses.
- ebri.org, Notes, Volume 35, No. 10, October 2014
** Long-Term Care: What Are the Issues?, Robert Wood Johnson Foundation, 2014, and LongTermCare.gov
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