Why is health care so expensive for retirees? – The crazy fool

Many people think that their cost of living will drop significantly in retirement. But many older people are realizing that their living expenses remain largely unchanged or even rising. Although there are different reasons for this trend, the ever-increasing cost of health care is contributing greatly.

65-year-old average healthy couple retiring this year should spend a whopping $ 387,644 on retirement health care, according to new estimates from HealthView Services, a provider of cost-projection software . It may seem like a ridiculous amount of money, but when you look at the medical expenses that most seniors face, coupled with seniors living longer, it starts to make sense.

Here are some reasons pensioners are forced to spend so much money on health care.

1. Medicare is not free

Some people apply for Medicare thinking that it is free, only to be shocked to learn that they are responsible for premium costs. To be clear, Part A of Medicare, which covers hospital visits, is free for most registrants, but Parts B and D, which cover doctor visits and prescriptions, charge a premium. . The standard Medicare Part B premium this year is $ 135.50 and is paid monthly. Part D premiums vary depending on the plan chosen.

In addition to premium costs for Medicare, you also need to worry about deductibles, co-insurance and copays. For example, seniors who join Medicare often end up with more bills than they originally negotiated.

2. Medicare does not cover everything

Although Medicare covers a wide range of health care services, there are several key areas for which it will not pay. For example, Medicare does not cover dental services, hearing aids, or vision services (although will pay to screen for and treat certain eye diseases, such as glaucoma).

3. Supplemental insurance also costs money

Many seniors who join Medicare end up buying additional insurance, also called Medigap, to pay a portion of the costs of their health care that is not covered by Medicare. The cost of Medigap varies depending on the extent of coverage, but the higher the premiums, the better the benefits, and vice versa. In addition, although Medigap helps to pay costs such as copayments and deductibles, it habit pick up the tab for dental services, vision and hearing routine.

Saving for health care in retirement

Since retirees pay a fee for health care costs, it is essential to save these expenses well in advance, and a good way to do this is to use a health savings account. An HSA is a hybrid savings and investment account.

Those with a high deductible health insurance plan (defined as a deductible of $ 1,350 for individual coverage or $ 2,700 for family coverage) can contribute funds that are then invested for additional growth. HSA withdrawals can be taken at any time to cover eligible medical expenses, but the goal of an HSA is actually to transfer funds from year to year to benefit from the growth of this investment.

HSA participants today can contribute up to $ 3,500 a year as individuals, or up to $ 7,000 a year at the family level. People aged 55 and over can earn an additional $ 1,000 as a catch-up and employers can contribute to HSAs on behalf of their employees. Best of all, HSA's contributions are made with tax-free dollars, and these funds are then generated net of taxes and withdrawn net of taxes, provided they are used for eligible medical expenses.

Of course, not everyone has a high deductible health insurance plan, so funding an HSA is not always on the table. But since health care in retirement is extremely expensive, those who make having the option would be wise to consider.