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Prestige Wealth Management Group - Flemington, NJ


Factors that Could Influence How Much You Spend on Healthcare in Retirement

| July 06, 2016
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How much should you plan on saving for healthcare? This is such a loaded question as there are so many variables involved that go way beyond your individual health. For example, according to a new study published in JAMA Internal Medicine, overall healthcare spending went up 2.9% from 2009-2013. In that time, patients were asked to pay more out-of-pocket for their healthcare, and rising deductibles were the chief reason for this increase.  If healthcare costs continue to rise, will you be able to pay for them and still enjoy a comfortable standard of living?


What Healthcare Legislation Will Be in Effect When You Retire?


One of the mysteries that make determining the level of savings you'll need difficult is that we really don't know what kind of legislation will be available when you retire. In the past one hundred years, we have certainly seen many different changes in healthcare legislation. From FDR's New Deal that created the Social Security Administration, to LBJ's Greater Society initiative that created Medicare and Medicaid, and now Obama's Affordable Care Act, there have been countless pieces of legislation that aimed to reduce overall out-of-pocket costs and provide Americans with a basic level of care, especially in their later years.


However, anyone who has watched coverage of the election cycle this year knows that there are very different viewpoints on what healthcare should be like in this country.  This includes everything from increased privatization and more individual choice to expansion of the ACA and even a universal single payer system. Future economic and geopolitical issues could impact healthcare coverage legislation as well.  

Will You Be Healthy When You Retire?


Unfortunately, nobody can truly know what their health will be like in the future. Obviously, you can do things to decrease your chances of suffering from a debilitating chronic disease. Smoking cessation, exercise, a good diet, and active socialization can all certainly improve health. However, future events could still occur that will impact your healthcare spending. And even if you are healthy throughout your retirement years, you may live to be 90 or older so your healthcare expenses may go up as you age.


What Kind of Coverage Should You Have?


When deciding whether to buy a Medigap policy to cover “gaps” in traditional Medicare or enroll in a Medicare Advantage plan, it's important to look at the details of each plan available to you in order to find the one that best suits your healthcare needs and budget. In New Jersey, estimated average total annual health & drug cost (including premiums) for a Medicare Advantage or Medigap plan can range from $4,400- $8,500 based on quotes obtained through There are many online tools at to help you make comparisons between the available plans. In addition to that, you might want to research whether or not you could qualify for Medicaid benefits if your medical costs are extraordinarily high, and what you can expect Medicare to cover and what you will have to cover on you own – whether through private insurance or your own savings. 


Fewer children of the elderly are taking care of their parents than in previous generations. If you are counting on a child to take care of you in your older years, you should have a backup plan too. Individuals in their fifties or early sixties may want to take a look at long-term care coverage to potentially offset the high costs of assisted living and other forms of long-term care that typically aren't covered by Medicare. Although the premiums can be high, it might be an option for those who can afford it as the U.S. Department of Health & Human Services estimates that 70% of Americans will require some form of long-term care.  Just as a reference point, the yearly rate of a private room in a nursing home is over $90,000.

Prepare for the Unexpected; Speak with a Financial Advisor to Reassess Your Retirement Planning


In truth, the question that was asked in the beginning of this article is unanswerable. The future is unknown – both on individual and society levels – so there is no magic number. The key is to prepare for the unexpected and minimize your risk as much as possible, so you can enjoy a certain standard of living while being able to cover your medical costs. The best way to optimize long-term retirement planning is to consult with a reputable financial planner. Together, you can assess your current planning, review potential healthcare costs, and determine a course of action going forward.

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