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What will you pay for health care in retirement?

In Part One of this series, I shared that Fidelity research suggests that a 65-year old couple retiring in 2016 will need an estimated $260,000 to cover their retirement health care costs.  Please reference the entire blog dated Nov. 2nd.

In addition to your own genetics and health history, five factors will have a significant influence on your overall costs for care.

In this blog, I cover the first two factors:

Where You Live:

While Medigap and Medicare Advantage plans are offered in each state, the premiums can vary by as much as 30%.  (Source: HealthView Services.)

Here is their research on the 10 states with the highest cost for Part B, Part D and supplemental insurance for a 65 year-old person.

State First Year Total Over 20 Years
1. Florida  $3,710  $152,184
2. Michigan  $3,707  $152,175
3. Maryland  $3,695  $151,438
4. Massachusetts  $3,686  $151,110
5. Nevada  $3,682  $151,014
6. Louisiana  $3,651  $149,661
7. New Jersey  $3,683  $148,865
8. Illinois  $3,595  $147,203
9. Texas  $3,592  $146,969
10. Indiana  $3,549  $145,235

Source: FA Magazine

If you want to check out rates for where you live, go to the Medicare Plan Finder and enter your information.

Here is the next factor that will influence your retirement health care expenses:

Your Income:

You pay a premium each month for Medicare Part B.  If you get Social Security, Railroad Retirement Board, or Office of Personnel Management benefits, your Part B premium will be automatically deducted from your benefit payment.  If you don’t get these benefit payments, you’ll get a bill.

Most people will pay the standard premium amount. However, if your modified adjusted gross income as reported on your IRS tax return from 2 years ago is above a certain amount, you may pay an Income Related Monthly Adjustment Amount (IRMAA). IRMAA is an extra charge added to your premium.

The standard Part B premium amount is $121.80 (or higher depending on your income).  You’ll pay a different premium amount if:

  • You enroll in Part B for the first time in 2016.
  • You don’t get Social Security benefits.
  • You’re directly billed for your Part B premiums.
  • You have Medicare and Medicaid, and Medicaid pays your premiums. (Your state will pay the standard premium amount of $121.80.)
  • Your modified adjusted gross income as reported on your IRS tax return from 2 years ago is above a certain amount.

If you’re in 1 of these 5 groups, here’s what you’ll pay:

If your yearly income in 2014 (for what you pay in 2016) was You pay each month (in 2016)
File individual tax return File joint tax return File married & separate tax return
$85,000 or less $170,000 or less $85,000 or less $121.80
above $85,000 up to $107,000 above $170,000 up to $214,000 Not applicable $170.50
above $107,000 up to $160,000 above $214,000 up to $320,000 Not applicable $243.60
above $160,000 up to $214,000 above $320,000 up to $428,000 above $85,000 and up to $129,000 $316.70
above $214,000 above $428,000 above $129,000 $389.80

Click Here to get more information about your Part B premium from Social Security [PDF, 341 KB].

Part B deductible & coinsurance

You pay $166 per year for your Part B deductible.  After your deductible is met, you typically pay 20% of the Medicare-approved amount for most doctor services (including most doctor services while you’re a hospital inpatient), outpatient therapy, and durable medical equipment.

(Source: Medicare.gov)

As you can see, we are only part way through the 5 factors that influence you retirement health care costs and the complexity increases.

Contact us, and we’ll guide you through the maze.

Barbara A. Culver
CFP®, ChFC®, CLU, AEP®
Resonate, Inc.

(513) 605-2500