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Jim Lentini: Health care: The high cost of retirement

Posted: May 11, 2009 10:24 p.m.
Updated: May 11, 2009 10:21 p.m.
The forecast for the cost of a retiree's health care may rise again. A 65-year-old couple retiring in 2008 may need about $240,000 to cover medical costs in retirement.

This is latest information in a survey by Fidelity Investments quoted in one of our latest industry magazines. Since Fidelity first calculated the cost in 2002, the figure has risen a total of 50 percent. This estimate does not include the cost of over-the-counter medications, most dental services or long term care.

The estimate assumes individuals do not have employer-sponsored retiree health coverage. But it does include the expenses associated with Medicare Part B and D premiums, Medicare cost-sharing provisions and prescription drug out-of-pocket expenses.

The rise in costs between 2008 and 2009 is due in part to increases in the cost of services such as diagnostic tests, the cost of using new medical technology and general price inflation.

Expectations often exceed reality when it comes to being able to afford health care after retiring. Retirees face higher out-of-pocket expenses due to rising medical costs, increased longevity and the declining availability of employer-provided health benefits.

The vast majority of those planning to take early retirement expect to be covered by employer or union health insurance until they become eligible for Medicare.

In reality, employers are expected to pay less than 10 percent of total retiree medical costs by 2031 (study by Watson Wyatt Worldwide, 2004).

What does all this mean to retirees and future retirees? It means, don't count on anyone, or the government, to pay your medical expenses. And don't count on the government coming up with a free medical plan.

If you think the stimulus package is costing a lot of your taxpayer money and mortgaging your future, as well as that of your children and grandchildren, wait until you see or hear about what a government medical plan would cost the taxpayers.

Work with a financial professional who specializes in benefits and retirement planning who knows how to put a plan together that fits your needs and goals. If you do that, a plan can be structured that you can afford, and budget for, until it is needed.

Remember, pay yourself first, before you pay everyone else.

Jim Lentini, CLU, ChFC, IAR is President of Lentini Insurance & Investments, Inc. He can be reached at (661) 254-7633. His column reflects his own views and not necessarily those of The Signal.


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