Planning for later life - after retirement, health care costs are very important for a secure retirement but it is difficult to sort out and plant the expenses. Out of pocket medical expenses cannot be predicted nor controlled.
"Less than one out of six pre-retirees has ever attempted to estimate how much money they might need for health care and long-term care in retirement," according to a report by Merrill Lynch and Age Wave, a consulting firm. The survey found that very few had any knowledge about Medicare even among those enrolled in the program.
AdvertisementFirstly have a plan as it is a good way to build confidence, try to evaluate your health - judge as to how healthy a life you will live and for how much longer.
"A 65-year-old male in excellent health can expect to live to age 87, while the same male in poor health has a life expectancy at age 65 of approximately 81 years," said a recent study from the Insured Retirement Institute, a trade group that pushes annuity investments. A 65-year-old female in excellent health has a life expectancy of 89, or 84 in poor health. An average couple age 65 has a 40% chance that one or both will live to age 95.
As a person approaches old age health expenses tend to multiply along with many chronic ailments, especially Alzheimer's. Average out-of-pocket health care expenses for that 65-year-old male will be an estimated $246,000 for the rest of his life if he is in poor health and dies at 81, the IRI study said. The lifetime bill rises to $345,000 for the healthy man who survives to an average age of 87.
Living a healthy lifestyle will bring down medical expenses to a large extent. The Merrill Lynch-Age Wave study recommends these proactive planning steps- Plan your future out of pocket expenses along with Medicare premiums and co-pays. Make it a point to study the working of Medicare and long term insurance plans. Make contingency plans in case illness in the family should cause loss of income.
The IRI report supports using annuities to provide guaranteed lifetime streams of income to deal with long-running health care expenses. Many financial advisers prefer other investments, though the annuity options can be looked into as long term investment.
When you are worried about healthcare costs in your 80's there are deferred annuities which are also called longevity insurance as the payouts can begin only for old age. When you buy one of these products in your 60's the insurance providers offer attractive payment terms as they can use the money for 20-30 years without having to pay you anything.
Long term insurance is a good option and it is linked to annuities to give you a choice. The long term aim is to basically provide you and your family with health covers and save you from the shock of huge medical bills. Social Security is the best annuity - it offers life time payments, protection from annual inflation and government payment guarantees. You are eligible for Social Security till you are 70 years of age and you must make the most of it.
Philip Moeller, Oct 2014
Hannah Punitha (IRDA Licence Number: 2710062)