Squared Away Blog

October 20, 2011

Calculate Your Retirement Health Costs

Mid- and late-career professionals staring into their futures, eyes glazed, often don’t have a clue how much their health care will cost them during retirement.

Few pre-retirees know how many holes exist in Medicare coverage. One MetLife survey this year found that 42 percent of pre-retirees age 56 to 65 believe, incorrectly, that their health coverage, Medicare or disability insurance will pay for their long-term care. Such knowledge gaps make it virtually impossible for most people to take a stab at tallying their total costs, out of pocket, for Medicare, Medigap, and private premiums and copayments over years of retirement.

Retiree healthcare is “the elephant on the table,” said Dan McGrath, vice president of HealthView Services outside Boston. The omission amounts to hundreds of thousands of dollars per retiree.

Calculators that estimate retiree health expenses are scarce, according to a 2008 AARP brief. But HealthView’s calculator, recently upgraded, estimates total out-of-pocket health expenses, which are tailored to an individual’s specific medical traits – diabetes, cholesterol, blood pressure etc. – and health habits – smoking, exercise etc.

Squared Away readers can obtain a free trial by emailing McGrath at dmcgrath@hvsfinancial.com.

Input a few other key data, such as age and sex, to generate a 7-page Personal Health Care Expense Report that includes nifty – and scary – charts showing that medical costs will rise as the retiree ages. No calculator is perfect: HealthView’s excludes long-term care. But the calculator breaks down health costs by category, which clarifies where the big bills will come from – my report shows, for example, that premiums for Medicare Parts A and B will take $103,000 out of my Social Security benefits over 26 years.

Long-term care is relatively simple to calculate, and organizations that do so include AARP and mindyourfinances.com. Omyen.com offers a health cost calculator for clients only.