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Ep 4 – Healthcare Costs in Retirement 

Marie-Anne Hobeika

Regional Vice President at Fidelity Investments

Welcome to Season 1, Episode 4 of Meet the Expert® with Elliot Kallen! 

In this episode, Elliot is bringing on Marie-Anne Hobeika to discuss market updates, how to plan for retirement income, and how to help your children develop financial awareness.

Marie-Anne Hobeika, Regional Vice President at Fidelity Investments, walks us through how to estimate healthcare costs in retirement.

It’s no secret that healthcare costs are astronomical—and that they keep on rising year after year. In 1960, healthcare costs were just $27.2 billion, or 5 percent of GDP. Today, healthcare costs for drugs and medical services were $3.5 trillion—17.9% of our current GDP.

But what does that mean on the individual level? In 1960, annual healthcare costs would’ve amounted to $146 per person. Today, that cost has risen to an astounding $10,739 per person! Of course, it goes without saying that healthcare costs have risen faster than average annual income.

About half of Fidelity survey participants have underestimated their healthcare costs in retirement by at least 50 percent. 48 percent of pre-retirees estimate that they’ll spend less than $100,000. 

The actual number? Fidelity estimates that, from 65 to 85, you and your spouse will pay about $285,000 in out-of-pocket costs for copays, coinsurances, Part B and Part D premiums, and prescription drugs.

There are some variables that influence your out-of-pocket costs, like:

  • Personal factors. Your age at retirement, years in retirement, and general health.

  • Your risk comfort level. How much coverage will you plan for?

It’s also worth getting to know all your Medicare options.

Part A

Hospital insurance

Part B

Medical insurance

Part C

Medicare Advantage plans

Part D

Prescription drug coverage

Medigap

Medicare supplemental insurance

Step 1: Medicare Part A (Hospital Insurance)

In-hospital stay in 2020 (per benefit period)

Days 1-60

$1,408 deductible

Days 61-90

$352 per-day copayment

Days 91-150

$704 per “lifetime reserve day”

Days 150+

All costs

Step 2: Medicare Part B (Medical Insurance)

Individuals Can Expect to Pay in 2020:

  • $198 deductible

  • 20% coinsurance for doctors’ services and outpatient care

Individual Filer

AGI

Joint Filer

AGI

Standard Monthly Premium

2020

$87,000 or less

$174,000 or less

$144.60

$87,001 up to $109,000

$174,001 up to $218,000

$202.40

$109,001 up to $136,000

$218,001 up to $272,000

$289.20

$136,001 up to $163,000

$272,001 up to $326,000

$376.00

$163,001 up to $499,999

$326,000 to $749,999

$462.70

$500,000 or above

$750,000 or above

$491.60

Step 3: Medicare Part C (Medicare Advantage Plans)

  • HMOs, PPOs, private fee-for-service plans, Medicare specialty plans

  • Address Part A and Part B expenses, and often others, such as prescription drugs

  • Costs may increase if you use out-of-network doctors

  • Hearing, dental, and vision (not covered under Medicare) may be covered

Step 4: Medicare Part D (Prescription Drug Coverage)

Higher-Income Beneficiaries Pay Higher Medicare Part B and Part D Premiums

Individual Filer

AGI

Joint Filer

AGI

Standard Monthly Premium

2020

$87,000 or less

$174,000 or less

Average Plan Premium = $32.74

$87,001 up to $109,000

$174,001 up to $218,000

Plan Premium + $12.20

$109,001 up to $136,000

$218,001 up to $272,000

Plan Premium + $31.50

$136,001 up to $163,000

$272,001 up to $326,000

Plan Premium + $50.70

$163,001 up to $499,999

$326,000 to $749,999

Plan Premium + $70.00

$500,000 or above

$750,000 or above

Plan Premium + $76.40

The Donut Hole graphic (page 13)

Step 5: Medigap (Supplemental Medicare Insurance)

  • 10 standard plans offering different levels of coverage

  • Premium cost for same coverage varies by insurance company and state where purchased

  • Flexibility to see any doctor who accepts Medicare

  • No coverage for dental, hearing, or vision

  • No prescription drug coverage

Supplemental Medicare Insurance graphic (page 14)

Here are some questions to weigh when considering plan options.

  • Do you have coverage for dental, hearing, and vision care—services not covered by Medicare? Keep in mind that dental in retirement can get very expensive!

  • Is it important for you to continue seeing your current physicians?

  • Have you estimated the total out-of-pocket costs for prescription drugs?

  • Do you want flexibility to choose providers—particularly specialists? Bear in mind that not every physician’s office is able to take on new patients.

  • Do you have protection from catastrophic illness?

Here’s a breakdown for how to create a personalized healthcare coverage plan. For a 65-year-old couple that’s making less than $174,000 per year, let’s break down their healthcare costs:

Medicare Part A

$0—deductible and copayments covered by Medigap Plan G

Medicare Part B

$1,933.20 for premium—coinsurance covered by Medigap Plan G

Medicare Part D

$2,899.25 for premium and deductible

Medigap Plan G

$1,786 for premium

Annual total

$6,618.45 per person or $13,236.90 per couple

If you need help creating a comprehensive, well-thought out retirement plan, make an appointment to speak with Elliot Kallen. Our job is to help you make your major life decisions easier for you

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Prosperity Financial Group and Meet the Expert® with Elliot Kallen do not make specific investment recommendations on Meet the Expert® with Elliot Kallen or in any public media. Any specific mentions of funds or investments are strictly for illustrative purposes only and should not be taken as investment advice or acted upon by individual investors. The opinions expressed in this episode are those of the Meet the Expert® with Elliot Kallen guests, and not necessarily of Elliot Kallen or Prosperity Financial Group.

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