Author Topic: Healthcare Costs During Retirement-Fidelity Estimate too high/low??  (Read 2440 times)

GoCubsGo

  • Bristles
  • ***
  • Posts: 385
Whilst flipping through a Money Magazine there was a "Test Your Requirement IQ" section.  One of the questions was as follows:

"How much should a couple retiring this year expect to pay for health carre during their entire retirement?"
A. $100,000
B. $245,000
C. Medicare has that covered.

They didn't specify how long the retirement would be but here was the answer:

B: Medicare leaves you with substantial out of pocket costs, to the tune of almost a quarter-million bucks, according to a 2015 Fidelity Estimate

I guess I never really considered how much the  out of pocket costs would be for healthcare over and above Medicare. Assuming a standard retirement length of 17 years (retire at 65, die at 82), that would be around $14K a year.  I'm curious if that includes long term care costs as I know that can be extremely expensive (and one thing I don't see built into too many retirement budgets).  I'm not sure if that estimate seems high or low.  Thoughts?

eudaimonia

  • 5 O'Clock Shadow
  • *
  • Posts: 74
  • Age: 46
  • Location: Sacramento, CA
Re: Healthcare Costs During Retirement-Fidelity Estimate too high/low??
« Reply #1 on: March 15, 2016, 03:57:36 PM »
I was just speaking with my mom about that (she's 71). Medicare coverage is determined by income. The $250,000 estimate is accurate if you are at the higher income bracket (over $85k as a couple). You can expect to pay about $10k a year all in (B-D) & supplemental insurance (there are a lot of gaps) for a couple. So $250k isn't too far off the mark.

Long-term care is not included in Medicare. This typically runs about $6k/month per person for a full care nursing facility. It's not uncommon to need this for a couple of years. 

If you wanted to have money for all of this yourself I'd say that 3 years long term care for both of you ($450,000), plus another $250k to cover your Medicare costs is a reasonable budget. So about $700,000 all in. Most people won't have the money for that.

The typical American will draw down all their assets if they get into a long-term care situation. At that point Medicaid will kick in.

To qualify for Medicaid (financial requirements) you must be making less than $2,000 a month (individual) and they will draw down all your liquid assets to $2,000 (individual) except for your house (exempt up to $536,000). A lot of people will use a trust mechanism to put assets in their children's names to qualify for Medicaid without drawing down all their assets.

Cassie

  • Walrus Stache
  • *******
  • Posts: 7946
Re: Healthcare Costs During Retirement-Fidelity Estimate too high/low??
« Reply #2 on: March 15, 2016, 04:19:31 PM »
Medicaid now has a 5 year look back period because of parents giving it to their kids. it will make it much harder to do.

eudaimonia

  • 5 O'Clock Shadow
  • *
  • Posts: 74
  • Age: 46
  • Location: Sacramento, CA
Re: Healthcare Costs During Retirement-Fidelity Estimate too high/low??
« Reply #3 on: March 15, 2016, 04:26:12 PM »
Medicaid now has a 5 year look back period because of parents giving it to their kids. it will make it much harder to do.

Correct. You would have to trust your adult children and setup the trust well ahead of time to avoid the clawbacks.

Matumba

  • 5 O'Clock Shadow
  • *
  • Posts: 81
Re: Healthcare Costs During Retirement-Fidelity Estimate too high/low??
« Reply #4 on: March 23, 2016, 03:06:57 PM »
Following

Cassie

  • Walrus Stache
  • *******
  • Posts: 7946
Re: Healthcare Costs During Retirement-Fidelity Estimate too high/low??
« Reply #5 on: March 23, 2016, 03:33:27 PM »
I have known people to sign over their house or assets and it has gone very badly even with beloved kids.

 

Wow, a phone plan for fifteen bucks!