How to Break Down Health Care Costs in Retirement - TRowePrice Study

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A recent survey from T. Rowe Price finds that health care costs are the top spending concern of retirees. This comes as no surprise as some studies predict that a 65-year-old couple may need up to $400,000 to cover health care costs in retirement. But these estimates don’t provide an accurate picture of what most retirees will encounter.

Such daunting numbers give an impression that it will be difficult for most retirees to afford health care in retirement. We believe that planning for health care costs in retirement can be made simpler by using the available assets and income retirees have. But we need to approach calculating health care costs differently.

When trying to plan for future health care expenses in retirement, consider these three things:

TRPrice Study:
https://troweprice.com/breaking-down-health-care-expenses-in-retirement

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How to Be Proactive With Your Medicare Options:
planning-for-medicare

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Retirement Planning (starting in your 20's):
planning/retirement

msf

bee said:

How to Be Proactive With Your Medicare Options:
planning-for-medicare

A very good piece that mentions many of the gotchas often omitted. For example, articles often note that HSA account money can be used to pay for Medicare premiums, but they don't clarify that one cannot use HSA money for Medigap premiums. This piece got it right.

This leads to a (weak) argument in favor of Medicare Advantage plans. MA plans can provide coverage (e.g. an out of pocket cap) similar to Medigap plans. And you can pay for their premiums with HSA money, unlike Medigap premiums.

There is a related gotcha that was omitted. You can only use money from your HSA to pay for Medicare premiums if you are over age 65. That may sound like a nobrainer, but you could have Medicare at an earlier age, or you might be paying your spouse's Medicare premiums while you yourself are still under age 65.

One detail that it got wrong is:

Unlike tax brackets, the [IRMAA] thresholds don’t automatically change with inflation.

But they do automatically change:

Starting on January 1, 2020, the threshold amounts will resume adjustment for inflation

20 CFR § 418.1105(c)
That comes from the ACA (which also suspended inflation adjustments for several years before 2020).

bee

Thanks @msf for chiming in. Not only do articles get things wrong, but rules change.

I like to visit Ed Slott's website for accurate information and updates on changes. Here is a link to a HSA search on his site for HSA topics (128 articles) that usually get it right.

https://irahelp.com/search/ft/hsa

One that hit me was the advantage passing an HSA on to a spouse verses the disadvantage of it being inherited by a non- spouse:

Why Your Kids Don’t Want Your HSA
why-your-kids-don%E2%80%99t-want-your-hsa