My husband and I were dreaming about what we would do if we won the recent $758 million Powerball jackpot. (We didn’t.)
I told him he should keep working his federal government job so that we could hold on to the insurance into retirement.
“I think with that much money we could afford our own policy,” he said.
I felt my heart tighten.
“Are you kidding? You know how much health care costs? I want to hang on to the insurance just in case,” I said.
The prospect of a major health-care issue is scary even for people with ample means and good coverage. And here’s why.
Fidelity Investments estimates that a 65-year-old couple retiring in the current year will need to have $275,000 to cover their health-care and medical expenses throughout retirement. Last year’s estimate was $260,000.
“With ongoing uncertainty across the health care landscape, it’s more important than ever for individuals to educate themselves on steps they can take to prepare for their health-care needs in retirement,” said Adam Stavisky, senior vice president for Fidelity Benefits Consulting. “These expenses are only expected to increase in the future, so it’s critical that people include health-care as a significant part of their retirement plan.”
What’s in the Fidelity estimate?
The calculation includes “premiums, cost-sharing provisions and out-of-pocket costs associated with Medicare parts A, B and D — but does not include other health expenses such as over-the-counter medications, dental services and long-term care,” reported Kelli B. Grant for CNBC.
Even a healthy couple can expect to spend $275K on health care in retirement: https://t.co/LtEowORyA9
— Kelli B. Grant, CFP® (@kelligrant) August 24, 2017
As Grant reports, a lot can affect what you actually have to pay.
“Fidelity’s estimate assumes you retire at 65 — coinciding with Medicare eligibility. Many workers expect to stay in the workforce beyond that, and retaining their employer-sponsored coverage could reduce costs,” she writes. “On the other hand, retiring before 65 could boost costs because you’ll need individual coverage in the marketplace to fill that gap.”
Here’s a sobering finding: Fewer Seniors Have Retiree Health Insurance
The Kaiser Family Foundation, which tracks trends in employer-sponsored health coverage, said it’s seen a “significant drop in the share of large employers (200+ workers) offering retiree health coverage, from 66 percent in 1988 to 23 percent in 2015.”
“For retirees, employer-sponsored supplemental coverage limits the costs they would otherwise incur for their medical care,” the foundation said.
Here’s some resource reading on this issue.
There’s so much to know and keep watch on when it comes to retirement planning. So every week I’ll have a home assignment for you.
This week, I want you to start thinking about how you’ll cover your retiree health-care costs. Do that by using AARP’s Health Care Costs Calculator, which can help you estimate your expenses. If you are already retired you can use this tool to figure out upcoming costs.
After you run your numbers, I want to hear how your home assignment went. What did you learn? Did the assignment make you change any of your plans? Did it save you money?
Send your comments to firstname.lastname@example.org. Put “Retirement assignment” in the subject line. I’ll also be open to suggestions on what to assign folks.
Could you live off Social Security alone?
Last week I asked: Are you living on just Social Security? If so, how do you do it?
Here’s how Jane, 72, does it: “I live on my Social Security alone. It is $1,306 per month. I live in subsidized housing. Rent is $280 per month. I am not eligible for food stamps, so I buy all my food. My car is a Toyota and is 20 years old. I live alone. I consider my SSA to be low because I spent a lot of time looking for work or unemployed. This is because I am bipolar. I have to pay car insurance plus rental insurance. I cannot afford a smartphone. I use a flip phone with a mini payment monthly. I have a cat, which I can afford if she doesn’t get sick. My medical is manageable because I have Medicare and low insurance costs. However, I pay $40 a month for psychiatric care, and I have to buy lots of medication. I also buy life insurance because my family will need help when I die. I was lucky to be able to put myself through college, but I never earned what you think I should have been paid. I lost my last job after seven years because I am bipolar. My SSA just pays my bills, but I could use more.”
Judy Keim of Westchester, Ohio, wrote: “I’m living on just Social Security and getting by primarily by having a paid off home. I worry when I hear that advisers are discouraging homeownership for many young people. They may be getting bad advice.”
Maria, 56, is disabled and gets Social Security of $593 a month. “I can’t believe they only give me this amount. If it weren’t for Section 8, I would be living in the streets. I worked hard for so many years to retire and get peanuts. If it wasn’t for food stamps of $106 a month, I couldn’t manage to survive.”
Patricia Webb of Fernandina Beach, Fla., is also living just on Social Security. She retired three years ago after a stroke at 62.
“I live entirely on Social Security of slightly over $900 per month,” she wrote. “During the time I had no health insurance, I turned to a charity clinic that charges $10 to see the doctor and pays for all bloodwork and tests through donations and grants. They also have a food pantry and crisis center. I recently turned 65 so now I have Medicare. I applied through the Florida Department of Family and Children Services for the Medicare Buy In program, and they pay my premiums and give me extra help with prescription drugs. I receive $39 monthly in food stamps. If you live in Florida and fall under a certain income range, it would be well worth the time to apply for these programs. AT&T has a new program called Access that offers internet service for a flat fee of $10 a month if you receive food stamps. For me tithing is essential and I do tithe on my Social Security, and I have seen the Lord move in mighty ways to provide for me. I am very fortunate to have a landlord that works with me on an affordable rent.”
Retirement rants and raves
I’m interested in your experiences or concerns about retirement or aging. This space is yours. It’s a chance for you to express what’s on your mind. This week’s comment isn’t a rant or rave but an illustration of someone who saw a need and acted.
“Some time ago, you mentioned that one of the reasons you like saving money is because you can then use your savings for charitable purposes to help others,” Michele B. of Gettysburg, Pa., wrote. “Something happened that triggered that comment of yours. I was at a Dollar Tree store for some inexpensive kid’s party supplies and there was a man in front of me in line. He looked to be in his late 60s-early 70s. A young boy (about 11 or 12) was in line with him. I wondered if the elderly man was the grandfather/caretaker of the boy. The man was only buying two cans of spaghetti sauce, so his total was $2 (Pennsylvania doesn’t tax food purchases). He was trying to use a food stamp card, but it kept getting declined. The clerk said he should put in his 4-digit number, but he said he couldn’t remember it. She suggested holding his transaction, while he tried to remember the number.”
What would you have done?
Here’s what Michele did: “So he stood off to the side, with his head down, and the child by his side. I paid for my purchase and then, noticing the man still not moving, I told the clerk I would cover his purchase and gave her $2. I told her to tell him after I left the store. Now $2 is a very small sum of money. However, anyone who knows me knows I will go to great lengths to cut out a $2 coupon or save a couple of bucks at the grocery store. It surprised even me that it was so easy and felt so good to extend this small courtesy to the elderly man and grandson. I thought to myself, if saving money here and there in my daily life enables me to help a fellow human being with no qualms or reservations, that’s the best part of being frugal with one’s own money.”
The lesson in this story for me is to pay attention and look for opportunities to help.
Your sharing might help others. So send your comments to email@example.com. Please include your name, city and state. In the subject line put “Retirement Rants and Raves.”
Newsletter comments policy
Please note it is my personal policy to identify readers who respond to questions I ask in my newsletters. I find it encourages thoughtful and civil conversation. I want my newsletters to be a safe place to express your opinion. On sensitive matters or upon request, I’m happy to include just your first name and/or last initial. But I prefer not to post anonymous comments (I do make exceptions when I’m asking questions that might reveal sensitive information or cause conflict.)
Have a question about your finances? Michelle Singletary has a weekly live chat every Thursday at noon in which she discusses financial dilemmas with readers. You can also write to Michelle directly by sending an email to firstname.lastname@example.org. Personal responses may not be possible, and comments or questions may be used in a future column, with the writer’s name, unless otherwise requested. To read more Color of Money columns, go here.
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