Longevity Alliance Retirement Risk

 The closer you get to retirement, the more you see how big a bite healthcare cost can take out of your retirement savings.  So how do you plan and what are the biggest risks in figuring out your healthcare costs from age 65?

 A new research report from the Center for Retirement Research at Boston College tackled these questions and came up with some recommendations. 

First, let’s take a look at what you can know and plan for in retiree health care:  Medicare Part B, Medicare supplement and Medicare Part D, Medicare Advantage or retiree health insurance premiums; co-payments for what insurance does not cover; and services that are not covered such as dental, eye glasses, hearing aids.

So where is the risk?  Co-payments for Medicare-covered services and payments for non-covered services, including long-term care costs.   Long-term care costs are the BIG potential risk.

So here are the facts on long-term care.

* It’s generally not covered by Medicare ( a maximum of 100 days)

* About one-third of people turning 65 in 2010 will need at least 3 months in a nursing home

* 24% of those people will need more than a year of long-term care

* 9%  will need more than five years of long-term care 

 Of course what you can’t know is which one will you be.  And there’s the risk. 

The research took data and applied various chronic diseases to the impact of health care spending after age 65.  Here’s what they found: 

At age 65, a typical married couple free of chronic diseases can expect to spend $197,000 on remaining lifetime health care costs.  There’s a 5% chance that number could exceed $311,000.  Those costs do not include long-term care.

Include long-term care costs in the calculations, the typical costs increases to $260,000 with a 5% chance that the costs will be more than $570,000.  Most of us don’t have that kind of money set aside for health care costs in retirement. 

So what do you do?   Here are three questions the report recommends you ask yourself as you ready for retirement: 

1. What risk are you prepared to accept of having your assets substantially depleted by health care costs? 

2  Given your current health and family history, are you above or below the average risk of incurring exceptionally high healthcare costs? 

3. Should you insurance against health care costs by purchasing long-term care insurance? 

If you take the step to look at long-term care insurance, Longevity Alliance recommends that you consider whether you want insurance to cover potentially all your long-term care costs or whether you are willing to share –paying some of the costs yourself and having an insurance policy that will pay a portion.  That strategy can lead to more affordable long-term care insurance rates.

Resources:

What is the distribution of lifetime health care costs from age 65? Center for REtriement Research at Boston College

Longevity Alliance – Insurance products and solutions to make a longer life better

Long-term Care Quote — online quotes for long-term care insurance