As we all know, overall healthcare costs are increasing year by year. But tell that to older Americans.Fidelity’s Annual Survey of Estimated Retirement Health Care Expenditure Surprisingly Stuck From last year.
This means that retirees who leave the workplace this year are likely to pay the same amount in health care costs during their retirement as someone who retires in 2022. The after-tax cost of medical care during retirement for her 65-year-old retiree who is single Stabilized at $157,500 ($315,000 for the average retiree couple of the same age), according to the new 2023 retiree medical costs doing. estimatewhich tracks retiree medical expenses annually.
“This is the first time in nearly a decade that estimates have been flat,” Fidelity senior vice president and chief accountant Hope Mannion told Yahoo Finance. The reason, she said, is “the impact of recent policy changes on Medicare coverage on our estimates.”
While the survey is certainly good news, few retirees budget for such expenses, and finding ways to deal with it is non-negotiable. Young Americans would also be wise to plan now to focus on what could be their biggest cost of living when they quit their jobs. The bottom line? There are a few things you can do now to address future costs in the future.
With Medicare starting at age 65, it’s far from a free ride. Costs are kept down mainly by Major Changes in Medicare This was made possible by the Inflation Control Act signed last year.
Example: Benefits for 3.3 million Medicare Part D beneficiaries with diabetes who currently have a $35 monthly insulin limit. Beginning July 1, Part B eligible insulin recipients will also be eligible for this cap. Another notable change this year is the elimination of out-of-pocket costs and deductibles for vaccines such as expensive shingles drugs covered by Part D.
Most of the provisions for the 59 million Medicare beneficiaries, such as lower prescription drug prices and copayments, won’t intervene in the next few years, but are factored into this year’s estimates.
Beginning in 2025, there will be an annual Medicare Part D prescription drug copayment cap that will prevent registrants from paying more than $2,000 annually. This restriction will affect her 50 million Americans and directly help her 1.4 million Medicare patients who spend more than $2,000 on medicine each year. According to the Kaiser Family Foundation (KFF), that includes people who need expensive cancer drugs. analysis.
Indeed, Fidelity’s estimate has nearly doubled since 2002, when we first performed this calculation. At the time, the estimated salary per retiree was $80,000 for him. And there are a lot of caveats to consider when tallying numbers. The cost of medical care after retirement depends on where you live, your overall health, and how many years you expect to live after retirement.
Fidelity’s estimates assume that retirees have traditional Medicare coverage. Medicare Parts A and B cover hospitalization, doctor visits and services, physical therapy, laboratory tests, and Medicare Part D covers prescription drugs.
‘Big concern about retirement security’
Fidelity forecasts have flattened out this year, but the overall trend in healthcare spending in the country has not. Patient care costs are expected to rise by an estimated 7% in 2024, which is not welcome news for premiums. according to a new report From PwC. This significant increase comes on top of growth of more than 6% this year and more than 5.5% in 2022 compared to 2022.
“Rising out-of-pocket health care costs, including the high risk of long-term care costs, are a major concern for retirement protection,” said Richard Johnson, director of the association. Retirement Policy Program told Yahoo Finance at the Urban Research Institute.
Fidelity estimates may not be met for many Americans.
“Last year, working with our team, we found that the average out-of-pocket medical expenses for retired couples is nearly $450,000,” said CEO Ken Dichtwald. age wave, Think tank and consulting firm. “It’s an astronomical number and one that rarely shows up in retirement discussions.”
How to plan for medical expenses for retirement
About 15% of the average retiree’s annual spending is related to health, according to Fidelity. And one study found that nearly four in 10 retirees report higher medical bills than they expected when they first retired. investigation By Employee Benefit Research Institute (EBRI) and Greenwald Research.
“Our overall message to clients is that uncontrolled health care costs can derail even the strongest financial plans,” says Jacob, Certified Financial Planner and Senior Advisor. Mr Sadler said. Bay Point Wells “Each year, it’s important to understand your insurance options, choose the coverage that best fits your circumstances, and plan for costs that increase over time.”
One way to prepare is through a Health Savings Account (HSA). This allows investors to contribute, invest and withdraw funds tax-free when used for eligible medical expenses. However, HSA is not an option for everyone. Some workers may not have access to this type of account at work, and others may not be able to access HSA because they are tied up with expensive deductible medical insurance.
New Annual Limit for 2024 announced According to the IRS on HSA contribution The premium for individuals will be $4,150, an increase of $300 or 7.8% from the 2023 limit of $3,850. For family insurance, the HSA contribution limit will be $8,300, an increase of $550 or 7.1% from $7,750 this year. Additional catch-up contributions for account holders over the age of 55 are fixed at his $1,000.
“The bottom line here is that retirees need to have a significant amount of change in savings to pay for medical bills,” said Jake Spiegel, a health and wealth researcher at EBRI.
And perhaps it will be much more than you can imagine. Fidelity co-founder and CEO Christine Simon said Fidelity’s estimates “are a good starting point, but they don’t reflect personalization at all.” caribouA Miami-based fintech company that provides medical planning software to financial advisors told Yahoo Finance.
“In general, estimates do not capture the complexity of a person’s unique situation and can be misleading,” she added.
Kelly Hannon is a senior reporter and columnist at Yahoo Finance. She’s a workplace futurist, a strategist for her career and her retirement, and the author of her 14 books, including:Control Over 50: How to Succeed at Your New Job” And “Don’t be too old to get rich”. follow her on her twitter @Kelly Hannon.
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