1. Retirement Health Care
Incorporate Health Care Cost into Retirement Planning
Ted Denbow - VP Head of Sales

2. Planning healthcare costs in retirement
It is estimated that an average, healthy 65-year-old couple will need
$245,000
to pay for medical expenses for the remainder of their lives. This does not include long-term care costs*
2nd largest expense
in retirement**
Medicare only covers about half of healthcare costs in retirement***
*Fidelity Investments retiree health costs estimate, Healthcare and nursing home costs may vary by state.
** Take Control of Your 6 Biggest Retirement Expenses,” U.S. News & World Report, August 2015
*** U.S. News & World Report, Take control of your 6 biggest retirement expenses, August 2016

3. A Hospital insurance B Medical insurance C Medicare Advantage
Medicare program
A Hospital insurance
B Medical insurance
C Medicare Advantage
D Prescription drug
Many people are under the impression that Medicare will cover most of their healthcare costs during retirement. But the fact is, Medicare only covers about half of healthcare costs in retirement. [Source: U.S. News & World Report, Take control of your 6 biggest retirement expenses, August 2016]

4. Part A Deductible and Coinsurance Amounts
A Hospital insurance
Medicare part A Provides hospital coverage
Medicare part A has no out of pocket premium, but
Part A Deductible and Coinsurance Amounts
Day 1 to 60
$1,288 -Inpatient hospital deductible
Day 61 to 90
$322 per day coinsurance
Day to 90+
$644 per day coinsurance for lifetime reserve days
90-day hospital stay could cost $10,948
Source:

5. File Individual Tax Return
B Medical Insurance
Medicare part B provides non-hospital medical coverage except vision, dental
Annual deductible $166
20% coinsurance on doctor’s services and outpatient care
Monthly premium based on AGI
File Individual Tax Return
File Joint Tax Return
Monthly premium
$85,000 or less
$170,000 or less
$121.80
above $85,001 up to $107,000
above $170,001 up to $214,000
$170.50
above $107,001 up to $160,000
above $214,001 up to $320,000
$243.60
above $160,001 up to $214,000
above $320,001 up to $428,000
$316.70
above $214,000
above $428,000
$389.80
Source:

6. C Medicare Advantage
A type of Medicare health plan offered by a private company that contracts with Medicare.
Provide all Part A and Part B benefits.
Medicare Advantage plan may include Vision, Dental, Hearing coverage.
Medicare Advantage Plans include HMO, PPO, Private Fee-for-Service Plans, Special Needs Plans, and Medicare Medical Savings Account Plans.

7. Coverage Gap “Donut Hole” ($4,850 total out-of-pocket)
D Prescription Drug
Average Medicare Part D monthly premium is $41.46*
First $3,310 of Drug Costs
Annual $360 deductible
Beneficiary pays 25% of the rest or $737.50
Coverage Gap “Donut Hole”
Next $3, of Drug Costs
Beneficiary pays 100% of out-of-pocket expenses
ACA drug discounts:
Name brand 55%
Generic 42%
After $7, of Drug Costs
($4,850 total out-of-pocket)
Beneficiary pays greater of 5% of costs, or
$2.95/generic
$7.40/brand name
Medicare pays the balance of costs
Total out-of-pocket threshold is $4,850
Source:

8. Example of estimated annual health care cost
Category
Cost items
Annual Cost
Medicare Premium
Part A premium $0
Part B premium
$1,464
Part D premium
$497
MediGap plan F premium
$2,400
Out of Pocket
Out of Pocket for dental/vision/other
$1,000
Total
$5,361

9. Medicare Decisions Option 1 Option 2 Sign up Original Medicare
Part A/B
Sign up Part D if you need Prescription drug
Do you need MediGap Policy?
Option 1
Sign up Medicare Advantage
Sign up Part D if not included in Medicare Advantage(most do)
No Need for MediGap Policy
Option 2
Our next Medicare webinar helps you with considerations on choosing option for your clients.

10. Women need care longer (3.7 years) than men (2.2 years)**
Long term care cost
Someone turning age 65 today has almost a 70% chance of needing some type of Long Term Care Services and supports in their remaining years *
Women need care longer (3.7 years) than men (2.2 years)**
Average $74,820 per year for nursing home.
$39,516 per year for assist living ***
$374,000 nursing home cost w/ 2 yr for male and 3yr for female * **
***

11. Long term care cost
Almost 37% will spend more than $50,000 on long-term care
More than 25% will spend more than $100,000
More than 15% will spend $250,000 or more
Expected LTC costs from age 65 to death for those turning 65 in 2015 – 2019 (thousands)**
Sources: * National Clearinghouse for Long Term Care Information, U.S. Department of Health & Human Services
** NAIC State of the Market May 2016, citing U.S. Department of Health and Human Services

12. Case Study:
Not planning for health care in retirement can be costly

13. Case Study: Meet the Brady's Mike and Amanda: Married Current ages:
56/54
Target retirement age:
65/65
Salary:
$200,000/ $50,000
Social Security: 70
Monthly expenses in retirement:
$9,000
Invested assets:
$ 1.0mm qualified
$ 100,000 non qualified

14. The Brady's have not considered retirement health care costs
Target retirement age: 65/65
Target retirement expense of $9,000 per month
Brady has not considered any health care related expense or long term care expense.

15. Retirement health care significantly impacts their plan
Target retirement age: 65/65
Retirement expense of $9,000 per month
Annual retirement heath care: $5,328*
Two year of long term care: $41,440
Health inflation of 5% per year
Fidelity’s retirement health care study indicates an national average out of pocket annual cost of $5,328 for retirees on Medicare.
Genworth Long Term Care study indicates national average annual long term care cost for home care cost of $41,440.

16. Making proper adjustments to bring the client back on track
Delay retirement by two years to age 67
Reduce retirement expense from $9,000 to $8,500
Save $500 more per month today
Annual retirement heath care: $5,328
Two year of long term care: $41,440
Health inflation of 5% per year

17. Take Aways
Take Aways
Health care cost is the 2nd largest expense in retirement
Medicare covers about half of the cost
Very important to consider retirement health care costs
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