{"id":3088,"date":"2013-07-02T04:00:35","date_gmt":"2013-07-02T08:00:35","guid":{"rendered":"https:\/\/kerryhannon.com\/?p=3088"},"modified":"2013-07-02T06:56:41","modified_gmt":"2013-07-02T10:56:41","slug":"women-get-real-about-retirement-health-costs","status":"publish","type":"post","link":"https:\/\/kerryhannon.com\/?p=3088","title":{"rendered":"Women: Get Real About Retirement Health Costs"},"content":{"rendered":"

\"next-ave\"<\/a>Chances are you have no idea how much your health care will cost when you retire. I don\u2019t. Trying to conjure up a reliable estimate gives me brain freeze.<\/p>\n

But if you\u2019re not including a ballpark figure in your retirement savings calculations, you could be setting yourself up for a sickening financial surprise. That\u2019s especially true for women, because we live three years longer than men on average, which puts added pressure on us to make our money last.<\/p>\n

(MORE:<\/strong>\u00a0Three Things Women Should Know About Health Reform<\/a>)<\/p>\n

\u201cIt is extremely important that health care costs are factored into retirement savings strategies today so that retirees can be prepared to pay their medical bills throughout retirement,\u201d Brad Kimler, executive vice president of Fidelity\u2019s Benefits Consulting business, noted in May, when his company issued its annual retiree health cost projections.<\/p>\n

Women Need to Face Reality<\/strong><\/p>\n

Women, it turns out, underestimate their future health care costs far more than men, according to a\u00a0recent study<\/a>\u00a0by Professor Allison Hoffman of the UCLA School of Law and Professor Howell Jackson of Harvard Law School.<\/p>\n

When the researchers asked 1,700 near-retirees and retirees how much they expect their out-of-pocket health expenses to total in the future, the projections from female participants were 50% lower than the estimates of their male counterparts. But medical experts estimate that the typical woman will actually spend 50%\u00a0more\u00a0<\/em>for health care in retirement than the typical man.<\/p>\n

Lowballing Long-Term Care Costs<\/strong><\/p>\n

Last week, Nationwide Financial found that boomers greatly underestimate the cost of long-term care, too \u2014 a potentially huge health care outlay for retirees and an expense women are more likely to incur than men.<\/p>\n

Americans 50 and older underestimate the annual costs of long-term care by more than three times the actual expense, according to the\u00a0Nationwide survey<\/a>. They expect long-term care costs to run $78,923 annually. But by 2030, the year the last boomers will retire, the cost of a nursing home will reach $265,000 a year, according to Nationwide.<\/p>\n

And the U.S. Department of Health and Human Services estimates 70 percent of Americans over 65 will need long-term care during their lifetime.<\/p>\n

(MORE:<\/strong>\u00a0Employers Penalizing Spouses for Health Insurance<\/a>)<\/p>\n

Medicare Has Big Gaps You Must Fill<\/strong><\/p>\n

If you\u2019re thinking that Medicare will foot your health care and long-term care bills, think again.<\/p>\n

Medicare pays for only about 60% of retiree health care costs \u2014 and no one knows how much it\u2019ll cover in the future. And Medicare doesn\u2019t reimburse for long-term care expenses.<\/p>\n

Yes, you can buy supplemental insurance to cover some expenses that Medicare won\u2019t, but these policies can be expensive and still leave you with gaps.<\/p>\n

Medicare beneficiaries, on average, spend about 16% of their income on out-of-pocket health care costs; some shell out as much as 33% of income. These outlays include premiums for Medicare and Medigap, doctor visits and supplies, prescriptions, dental care and hospital visits.<\/p>\n

And I\u2019m not even including long-term care costs. They make up an additional 19% of income for the average Medicare beneficiary.<\/p>\n

$220,000 in Health Costs for a Retired Couple<\/strong><\/p>\n

The bottom line? A 65-year-old couple retiring this year will need about $220,000 to cover medical expenses in retirement, according to the\u00a0latest tally by Fidelity Benefits Consulting<\/a>. (That estimate doesn\u2019t include nursing home costs and assumes the retirees have traditional Medicare, not a Medicare managed-care plan.)<\/p>\n

The only glimmer of good news is that the $220,000 figure is down 8% from last year. Fidelity attributes the drop to, among other things, retirees cutting back on medical care due to the economy and slower growth in Medicare\u2019s payments to doctors and other health providers.<\/p>\n

(MORE:<\/strong>\u00a04 Mistakes to Avoid When Enrolling in Medicare<\/a>)<\/p>\n

But don\u2019t throw up your hands and please don\u2019t skip doctor\u2019s appointments or avoid medical procedures just to keep your health care costs down.<\/p>\n

7 Ways Women Can Prepare for Future Health Costs<\/strong><\/p>\n

Instead, here are seven ways to get a grip on your health expenses in retirement:<\/p>\n

1. Be certain to budget for health costs, including long-term care.\u00a0<\/strong>Women, in particular, need to earmark savings for rising long-term care bills.<\/p>\n

As Reuters\u2019 Linda Stern\u00a0recently noted,<\/a>\u00a0Genworth \u2013 the leading long-term care insurer \u2013 has begun charging women more than men for new policies it sells in 31 states. Other insurers are expected to follow.<\/p>\n

Stern says that under what\u2019s known as \u201cdifferential pricing,\u201d single women can expect to pay 25 to 40% more than single men for the same policy.<\/p>\n

2. Find a financial pro to help you estimate health costs in retirement and beef up your savings.\u00a0<\/strong>In an\u00a0earlier\u00a0Next Avenue\u00a0blog<\/a>\u00a0post, I noted that many\u00a0women have rocky relationships with financial advisers because they often find the money pros disrespectful and condescending. But that just means you need to locate one who speaks your language.<\/p>\n

In my opinion, an adviser should have the Certified Financial Planner designation awarded by the nonprofit Certified Financial Planner Board of Standards. Three national groups of planners offer searchable databases: the\u00a0National Association of Personal Financial Advisors<\/a>, the\u00a0Financial Planning Association<\/a>\u00a0and the\u00a0Certified Financial Planner Board of Standards<\/a>.<\/p>\n

3. Build a good-sized emergency fund \u2014 and don\u2019t let it dissipate.<\/strong>\u00a0This is the basic building block of any financial plan. When it comes to future medical costs, an emergency fund is imperative. If possible, I recommend that women in their 50s and 60s salt away an amount equal to at least a year\u2019s worth of expenses.<\/p>\n

Yet only 43% of women \u2013 and just 58%of women age 55 to 64 \u2013 have any kind of emergency fund, according to a\u00a0study by Financial Finesse<\/a>, a financial education firm in El Segundo, Calif.<\/p>\n

Steve Vernon<\/a>, a consulting research scholar at the Stanford Center on Longevity who frequently writes for Next Avenue, recently recommended in his\u00a0CBS MoneyWatch blog<\/a>\u00a0that you \u201cmaintain an emergency cash cushion to cover deductibles, copayments and lost wages.\u201d For a serious medical condition, Vernon said, the amount you\u2019ll need can run into thousands of dollars.<\/p>\n

4. Open a\u00a0health savings account<\/a>.<\/strong>\u00a0This nifty, tax-advantaged financial tool, which works in conjunction with a health insurance policy, can help you put money away toward future health costs and keep those expenses down.<\/p>\n

With a health savings account, you contribute pretax earnings to a tax-deferred investment account then make tax-free withdrawals for medical expenses. You\u2019ll pay a small annual fee of about $40 for a health savings account from a no-load mutual fund company, like Vanguard or Fidelity.<\/p>\n

You can contribute up to $3,250 to a health savings account for individual coverage in 2013 (a maximum of $4,250 if you\u2019re 55 or older). For families, the limit on contributions is $6,450; $7,450 if you\u2019re 55 or older.<\/p>\n

You can find a list of insurers offering these plans at\u00a0HSAInside.com<\/a>.<\/p>\n

5. Work part-time in retirement, if you can.<\/strong>\u00a0I wrote in my book\u00a0Great Jobs for Everyone 50+: Finding Work That Keeps You Happy and Healthy \u2026 and Pays the Bills<\/em><\/a>, that continuing to bring in a paycheck will be good for your health and your wealth.<\/p>\n

Now there\u2019s more evidence backing this up.<\/p>\n

The Institute of Economic Affairs, a think tank in London, just published a\u00a0study<\/a>\u00a0saying that full-time retirement results in a \u201cdrastic decline in health\u201d (mental and physical). According to the report, when you don\u2019t work in retirement, you increase the chances of suffering from clinical depression by 40 percent and suffering from a physical condition by 60%.<\/p>\n

6. Bone up on the<\/strong>\u00a0Affordable Care Act (aka Obamacare).\u00a0<\/strong>The new law will prevent insurers from charging women higher health insurance premiums than men starting in 2014. And it\u2019s likely to help uninsured women\u00a0buy affordable insurance through health care exchanges.<\/p>\n

The Obama administration\u2019s new website,\u00a0Healthcare.gov<\/a>, lays out how the new law will work. But it won\u2019t have specific insurance plans or their costs until later this summer.<\/p>\n

7. Get healthy and stay that way.<\/strong>\u00a0The best way to keep your future medical bills at bay is to remain physically fit throughout your retirement years.<\/p>\n

You don\u2019t have to be able to run a superfast mile or bench-press your weight. But you do need to stay in shape and eat healthy.<\/p>\n

Developing and sustaining good physical habits will pay dividends in your later years. They\u2019ll allow you to spend more time in retirement with friends and family, not physicians.<\/p>\n

K<\/em>erry Hannon has spent more than 25 years covering personal finance for Forbes, Money, U.S. News & World Report and USA Today. Her website is\u00a0kerryhannon.com<\/a>. Follow her on Twitter@kerryhannon<\/a>.<\/em><\/p>\n

Like this article?\u00a0Sign up for Next Avenue\u2019s weekly newsletter<\/a>\u00a0to get more fascinating articles and blogs about work, finance and lifestyle issues geared to a 50+ audience.<\/strong><\/em><\/p>\n

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