Monday, July 28, 2014

Who will shoulder your retirement health care costs?

If you’re planning on your employer picking up the cost of your healthcare once you retire, you may want to rethink your plans. The number of employers who provide health benefits has declined from 40% to 28% between 1988 and 2013. Today, less than one in five people work for a company that offers health benefits for their retirees.

The problem boils down to cost. Healthcare costs continue to grow and retirees are living longer. We are seeing more and more companies taking steps to contain costs by capping their contributions, tightening eligibility standards and eliminating new employees from this benefit.
The picture has improved for early retirees. They are enjoying the benefits of the Affordable Care Act and the availability of insurance on the healthcare marketplace. In the past, retirees who were too young to qualify for Medicare struggled to fill the gap in coverage until they turned 65. They were often denied coverage for pre-existing conditions or had to bear the burden of expensive premiums.

For retirees over age 65, the gap in covered medical costs is widening. Medicare alone does not cover 100% of medical costs and excludes long-term healthcare and dental care. In place of employee provided retiree health benefits, Medicare beneficiaries are increasingly relying on supplemental Medicare coverage such Medigap or Medicare Advantage Plans.

As employers move away from retiree health coverage, it's important for workers today to prepare themselves for future healthcare expenses and consider supplemental insurance plans. It is estimated that a 65-year-old couple who retired in 2013 will spend $220,000 on healthcare over the course of retirement.

And more than 70% of seniors will eventually need some sort of long-term healthcare, which is not covered by Medicare. Pre-retirees might want to consider long-term care insurance before they leave the workforce. The average policy costs about $3,000 a year — not cheap but certainly less expensive than the average of more than $83,000 a year that you’d shell out for a private nursing home stay without insurance.

If you are concerned about who will shoulder your health care costs, call me and we'll work together to put together a plan for you.

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