Financial Check-Up: Revisit Your Health Care Costs

Financial Check-Up: Revisit Your Health Care Costs

Many people diligently schedule regular doctor appointments for wellness check-ups. Your doctor reviews your health to detect any new ailments and provide treatment, or identify potential areas of concern and work with you on a prevention plan. Managing your finances should be the same through routine check-ins with your financial advisor and letting them know when something changes that may affect your long-term goals.

That correlation is especially important as the cost of health care coverage is concerning to many pre and current retirees. Estimating coverage costs is a necessary part of initial retirement planning, but revisiting this topic is equally important to factor in any changes in health or review current industry figures to base your savings plans from.

For example: Fidelity Investments reported a couple, both 65, retiring in 2013 would probably need $220,000 to cover health-care expenses if the husband lives to 82 and the wife to 85, the average life expectancies. Take note that does not include any nursing home care. It just applies to retirees with traditional Medicare insurance coverage.

That is a starting point, an average to work from. New diagnoses can greatly impact original estimates. Alerting us to changes can help protect your long term financial health. Even if there are no changes, a simple review is still important to have. That initial estimate may fluctuate due to rising health care costs.

A Bureau of Labor Statistics report suggests spending on health care increases by 25 percent during the first decade after age 65. Checking in and refiguring costs can help account for the changes.

In addition to regularly scheduled reviews, set a reminder to check in with your financial advisor if anything changes. If it has been a while since you evaluated how health care costs play a role in your retirement savings, or if your situation has changed, contact your financial advisor to schedule a time they can meet to help you stay on track with your long term goals.

FINANCIAL FACTS

Give It Away – The gift tax annual exclusion per donee (i.e., recipient) remains at $14,000 in 2014. The $14,000 annual exclusion is in addition to the $5.34 million lifetime exemption from gift taxes (source: IRS, BTN Research).     

Big Slice – The combined federal expenses for Social Security, Medicare and Medicaid have risen from 31 percent of total federal outlays during fiscal year 1990 to 48 percent in the recently completed fiscal year 2013 (source: Congressional Budget Office, BTN Research).  

Concerned? – As of Jan. 1, 2014, the S&P 500 was up 10 percent per year (total return) on a trailing 50-year basis (i.e., 1964-2013) but was up 17.9 percent per year on a trailing 5-year basis (i.e., 2009-13) (source: BTN Research).