Factor in healthcare costs when planning your retirement


As we grow older, the list of potential health concerns can add up, as does the cost to treat those conditions.

According to the Employee Benefits Research Institute, a 65-year-old couple retiring today should put aside $392,000 to help cover healthcare costs.1

Katy Votava, a registered nurse and health economist, shares her insights on how retirees and those nearing retirement can better plan for those costs. Her company, Goodcare.com, trains financial advisors and their clients about health care costs. According to Votava, smart planning early on is critical because the actions you take now can make a big impact on how much you’ll pay later.

Here are Votava’s main takeaways.

Don’t focus on one big number

Future healthcare costs may seem daunting, but they’re an expense that will stretch out over a longer period of time. “You don’t need that chunk of money all on one day,” Votava says. “It’s part of your retirement cash flow because it’s part of your retirement expenses. We don’t talk about any other retirement expense that way. So think about your annual expense. That’s something you can wrap your head around more easily.”

Staying healthy cuts down on costs

Chronic health conditions will increase your health spending. For example, people with diabetes could spend twice the amount on health care each year than people who don’t have the condition.2 While chronic issues may not be avoidable, preemptive screenings and active management could help mitigate the effects.

“Being healthy can pay you back dividends many times over. First of all, you’re going to enjoy your retirement more, and that’s priceless,” Votava says. ”If you’re healthy, your overall costs will be lower year-to-year. And if you become ill, your chance of getting better is going to be better.”

Explore health savings accounts

Votava calls herself “a big fan” of health savings accounts (HSAs), which can be paired with a high-deductible health insurance plan. Employees or their company can deposit tax-free money into the account to cover any health-related out-of-pocket expenses. The money grows tax-free, and it can be withdrawn tax-free when it’s used for health care.

“Some people who are closer to retirement may pay for their health expenses from money elsewhere to let their account balances grow with the tax deferral. Then they have a tax-advantaged account for retirement health care,” Votava adds.

Some companies also offer a Flexible Spending Account (FSA), which allows employees to use pre-tax dollars for out-of-pocket expenses with any health insurance plan. Unlike an HSA, however, these contributions do not roll over and must be used within the calendar year.

Medicare is just the start

While Medicare provides some coverage for healthcare, it doesn’t cover everything. For example, only 80 percent of doctor’s visit costs are covered. Researching the various types of supplemental plans that are available will help you plan for any gaps in coverage.

Long-term care planning can help transfer your risk

“Long-term care is a classic risk question. How willing are you to take the risk that you’ll need long-term care? If you self-insure, you have to determine if that’s a good use of your money. If you decide to offload that risk, will you have another source of revenue to cover that?” Votava says

Of course, speak with a financial advisor to learn how you can factor healthcare into your retirement plan.

1Frostin, Paul et al. “Amount of Savings Needed for Health Expenses for People Eligible for Medicare: Unlike the Last Few Years, the News is Not Good.” Employee Benefit Research Institute. Vol. 36, No. 10. October 2015.https://www.ebri.org/pdf/notespdf/EBRI_Notes_10_Oct15_HlthSvgs_DB-DC.pdf 
2Zhuo, Xiaohui et al. “The Lifetime Cost of Diabetes and Its Implications for Diabetes Prevention.” American Diabetes Association. September 2014. http://care.diabetesjournals.org/content/37/9/2557 

Katy Votava and her company, Goodcare, are not affiliated with Lincoln Financial Group.

Lincoln Financial Group® affiliates, their distributors, and their respective employees, representatives and insurance agents do not provide tax, accounting or legal advice. Please consult an independent advisor as to any tax, accounting or legal statements made herein.

Posted in Uncategorized

No bump likely in Social Security checks next year

Social Security$$

By Darla Mercado, July 18, 2016, CNBC

Retirees, beware: Your Social Security retirement check might not grow at all next year.

The Board of Trustees of the Social Security Trust Funds estimates that the 2017 cost-of-living-adjustment likely will be very small to flat: from 0.7 percent down to zero. The adjustments are based on increases in the consumer price index.

“It’s scary for seniors on fixed income,” said Paul Auslander, director of financial planning at ProVise Management Group. “People are resigned to it being what it is: They’re not getting an increase and they’re cutting expenses in other places.”
The average monthly retirement benefit as of May was about $1,300.
“It’s scary for seniors on fixed income,” said Paul Auslander, director of financial planning at ProVise Management Group. “People are resigned to it being what it is: They’re not getting an increase and they’re cutting expenses in other places.” The average monthly retirement benefit as of May was about $1,300.

In 2014, the most recent data available, 61 percent of beneficiaries aged 65 and over said Social Security accounted for at least half of their income. And for 33 percent, Social Security was more than 90 percent of their earnings. Read the rest of it here.

Dr. Katy is quoted in this article.


Posted in Social Security

Make Medicare easier by using auto pay

July 22, 2016, By Katy Votava for InvestmentNews

Easy Button


Auto payment can help limit the chance of coverage lapses and reinstatement penalties down the road

Summertime is the time to kick back, relax and take it easy. Whether you are on Medicare yourself or are a caregiver for someone, who is, one thing you can do to make things easier is to set up auto payment of premiums. Using auto payment for premiums will make Medicare simpler and limit the chance of coverage lapses and reinstatement penalties down the road.

Medicare Part A has no premium for most people. The other parts of Medicare — including Medicare Parts B, C, and D — do require premiums. Medigap coverage requires premiums as well. Circumstances such as extensive travel, relocation, forgetfulness or severe illness can interrupt premium payment disbursements.

People often are unaware of overdue payment notices for the same reasons. If payments lapse beyond the grace period, coverage is lost. When that happens, the person has put themselves in a tough position. Lack of coverage often becomes apparent when medical bills and prescription drugs are not covered, resulting in costs becoming the personal responsibility of the beneficiary.

It is relatively easy to prevent these problems by setting up premium auto payments. Some Medicare premiums can be automatically deducted from Social Security if the person receives benefits. Others cannot. Additionally, some folks are not receiving benefits yet or prefer not to have premiums deducted from their benefits. Here are some auto payment options:

Medicare B premiums are automatically deducted from Social Security retirement benefits if a person is receiving them. Given that it is more and more common for individuals to delay taking Social Security retirement benefits, it is increasingly typical that people receive Medicare B premium bills. Those bills can be paid by setting up an auto payment method:

• Medicare Easy Pay is an auto payment offering by Medicare. It is a free, electronic payment option that allows people to have their Medicare premium payments automatically deducted from a savings or checking account each month. Year over year premium payment amounts are automatically adjusted by the Medicare Easy Pay system, eliminating the need for the beneficiary or a caregiver to make this adjustment manually.

• Premiums can be set up for auto payment through an online banking debit system. Make sure to update the Medicare B premium payment amount in the online system whenever there is a change, e.g., in January each year if rates increase.

• People who pay Medicare Part A premiums can also use these auto payment options.

Medicare Parts D and C, also known as Medicare Advantage Plans, can be set up for automatic deduction from Social Security benefit payments.

• Timing can be tricky if people change their Medicare Part D or C plan late in the annual enrollment period. If that is the case, double check with the insurer to determine if the January payment needs to be made before the auto deduction plan goes into effect.

• Payments can also be made via automatic bank debit through an online bill payment system. Make sure to update the new premium payment amount if there is a year over year increase, which is often the case. Medicare Parts D and C premium notices are sent out by the insurer near the end of September each year and are effective January 1 of the following year.

Medigap premiums cannot be deducted automatically from Social Security benefits. They can be set up as automatic bank drafts. When annual premium notices are sent out in the fall each year, the premium amount needs to be adjusted for January 1 of the following year.

Some people are worried about auto payment systems because of the potential for identity theft. While that is understandable, the risks of nonpayment may have bigger costs than using proper online security and banking procedures. For some, it is a matter of pride and independence to pay their bills on a monthly basis as they always have. Yet they remain at risk for missing a payment.

A helpful safety net in these circumstances is to authorize for the insurer to notify a third-party, such as a caregiver if coverage goes unpaid and is in danger of lapse. Some companies offer these notices via email and text in addition to traditional mail.

Setting up auto payments and nonpayment notifications takes a little effort up front, yet it pays off by cutting down the time required to attend to these matters. It also limits exposure to costly coverage gaps and penalties. When you and your clients use these tips to avoid the pitfalls of premium nonpayment, managing Medicare and having coverage work when it’s needed will be easier than ever!

Posted in Medicare payment
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