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Advisors' Advice: How to Plan for Health Care Costs in Retirement

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How much should retirees expect to spend on health care throughout the rest of their lives? Estimates vary, ranging from about $250,000 a couple to $500,000, depending on longevity, health status and location.

Some are even higher after including nursing home costs, but those costs will depend in part on a couple’s long-term care insurance — whether either or both members have it and exactly what their policies cover.

Other factors that impact retirees’ health care costs include Medicare Part B and Part D premiums, which tend to increase annually and vary based on income, medication costs and the costs, coverage and deductibles for Medicare Supplement or Medicare Advantage plans.

In 2019, couples with an annual income above $170,000 — and singles with income above $85,000 — are subject to surcharges added to their premiums for Medicare Parts B and D. Starting in 2020, however, those surcharges will be linked to inflation for the first time in 10 years, which could slow the number of retirees subject to the surcharges.

(Related: Medicare Surcharge Changes: What Advisors Should Know)

But even those retirees, like most others, will have to contend with rising health care costs unless major policy changes are enacted.

Between 1960 and 2017, spending on health care in the U.S. exploded from 5% of GDP to 18%, according to the Centers for Medicare and Medicaid Services, and there’s no letup in sight. Annual spending is expected to increase an average 7.4% over the following 10 years, according to CMS.

With these dramatic cost increases in mind, ThinkAdvisor asked financial advisors how they budget for clients’ health care costs in retirement, what factors and variables they include in their estimates and what recommendations they present to clients to cover those costs. The respondents to our query were all CFPs and one is also a medical doctor.

Check out the slideshow above to see how advisors plan for clients’ health care costs in retirement. Please note we did not include all the comments received from each advisor due to space constraints and we have instead highlighted comments that, when combined, provide the range of issues advisors address and the solutions they provide.

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