How much will healthcare cost me during retirement?  This is the million dollar question for many people contemplating retirement. 

Nationwide Financial recently conducted a survey of 1,250 high-net-worth individuals aged 55 or older. This survey revealed many interesting things, including:

  • Pre-retirees worry a lot about health care costs and the effect these costs will have on their financial plans
  • When they try to put a number on their future health care expenses, most of them under-estimate their expenses and over-estimate the percentage of these expenses that Medicare will pay (a dangerous combination)

Despite their concerns and uncertainty, most pre-retirees don’t discuss these worries with their advisors
Why not?  Some of them are “unsure as to whether their adviser is knowledgeable about the issue.”1  The truth of the matter is: Most financial planners should have a good working knowledge of these issues, and if you come up with something we don’t know, we’re not afraid to say, “We’ll look into that and get back to you.”  We’d much rather know what is bothering you, help you find a solution, and put your mind at ease.  You haven’t been saving all these years for retirement so you can spend your time worrying.  Please, don’t be afraid to ask questions.

There are some tools out there that can help too.  Fidelity has a nice (and free) calculator available here. Is it perfect?  No.  It does not factor in information about any medical conditions you may have, it assumes everyone pays the lowest premiums for Medicare Parts B and D, and it uses national averages rather than information specific to the state in which you live.

But it does allow you to vary the life expectancy, change the medical inflation rate, and include or exclude long-term care.  Fidelity also does an excellent job of itemizing the assumptions they used, so you have some idea how they came up with the number they give you.

Healthview Services Inc. has a calculator too.  Actually, they have two:  a free version and a subscription version.  You need to create an account to use it (providing your name and email address).  The free version is available here, but it is less flexible than the Fidelity version.  [The subscription version allowed you to put in an impressive number of variables (state, income level, a few select health conditions and lifestyle questions, choose which types of insurance you planned to have, etc), but it did not have the same clarity behind the assumptions used that Fidelity had, and I was left with some questions about the numbers it gave me.]

None of these calculators can give you a number that will be the definitive amount you will pay for healthcare over the remainder of your life.  There are too many questions we can’t answer, not the least of which are:

What changes will the government make to the Medicare program in future years?
And how long can the annual Medical Inflation Rate remain in the double-digits?
We can help you to approach these issues armed with more knowledge, and hopefully, more piece of mind.  The Nationwide Financial survey also found that, “Clients who have discussed retirement health care costs with an adviser have a better handle on actual expenses.”  So if healthcare is on your mind, talk to your advisor.  Let him or her help you to be better prepared and alleviate your worries.

From the article, “Health Becoming New Focus of Wealth,” by Mary Beth Franklin, available online from Investment News at: