Health + Wellness

June 20th, 2008 at 09:29am Brian Knabe

  Brian J. Knabe, MD

Why include a series about health and wellness in a financial publication?  With close examination of any retirement plan, the connection is apparent.  Healthcare expenses consume an increasing portion of a retiree’s savings.  One reason is the double-digit yearly rise in the overall cost of healthcare in the
US.  Additionally, longer life expectancies increase the length of time that an individual will need to pay for the care.

An examination of healthcare for retirees often begins with Medicare.  Dire warnings about the impending insolvency of the system continue to be an annual occurrence on Capital Hill.  Currently it is estimated that Medicare will be broke as of 2018 or 2019 if the current system is kept in place.  Medicare continues to act as a “safety net” for those over 65 years old.  But the cost to the individual beneficiary continues to rise as well.  Yearly premium increases charged to retirees has been in the double digits as of late.  Medicare expenses for the government are rising just as large numbers of Baby Boomers are poised to retire over the next couple of decades when they will stop contributing to the system.

Should an investor planning for retirement count on Medicare being available and providing for healthcare needs?  The answer is yes and no.  There are only a couple options the government has to rectify the shortfall – decrease benefits or increase premiums and co-pays.  The solution will probably be a combination of these.  Premiums will undoubtedly continue to rise, and benefits for the individual will decrease, either in the form of less treatment options or the exclusion of wealthier individuals from the system altogether.  One good option to help make up for this shortfall is a Health Savings Account, or HSA.  The contribution limit for 2008 is $2,900 for an individual and $5,800 for families.  Those over 55 can also make a catch-up contribution.  Making the maximum contribution each year will help you build a medical retirement fund that can be used to pay future medical expenses, tax-free.  Ask your financial advisor if an HSA is a good option for your individual situation.  Whether through the use of an HSA or another savings vehicle, it is prudent to include healthcare expenditures in the retirement planning process.

Entry Filed under: Medicine, Financial Planning