How are you feeling today? At DWM, we hope you are feeling your best and enjoy robust good health every day. As financial advisors, we certainly pay attention to your financial health and look for ways to maintain and improve your overall financial well-being. And with the cost of health care these days, the state of your physical health has become inextricably linked with your financial well-being. A recent WSJ article about health expenses in retirement noted that excellent health can actually raise an individual’s lifetime health spending needs because of the likelihood that they will live longer. So good health may actually cost you more! At DWM, we want to make sure we help you plan for these costs and analyze ways to save.
There are many changes occurring in the healthcare industry. Aging populations and longer life-spans will strain the existing resources. The industry is evolving to invent strategies and plans for preventive medicine and new technology to make healthcare more efficient. As consumers, we are able to be pro-active in managing our own health care. We can now download health apps, consult a medical practitioner by email and use strap on devices to monitor our own vitals. Technological health advances in diagnostic tools and treatment options are ever-changing and, when we have medical questions, we will likely hit the internet and educate ourselves before calling the doctor. As consumers in the marketplace, we can select from a vast menu of insurance options and many health care providers are offering innovative ways to finance even traditional medical services. Welcome to the new health economy!
There is also a cost to new medicines, better technology and a shift from traditional strategies. According to reports by the Centers for Medicare and Medicaid Services, which published its projections last August in the policy journal Health Affairs, spending on healthcare is expected to grow at an average annual rate of 5.8 % over the next decade. Another report from the Pricewaterhouse Coopers (PwC) Health Research Institute estimates those costs growing at 6.5% per year. Some estimates for Medicare Part B and Part D are over 7%! WSJ quoted a report by HealthView Services Inc that says a healthy 65-year old couple can expect to pay, on average, $266,589 for insurance premiums and $128,365 for related expenses (dental, vision, copays and out-of-pocket bills) over their lifetime. These figures show that healthcare costs are far outpacing cost-of-living increases of 1-3% and have made us take notice of how these increasing healthcare costs will affect your future financial health.
With these rising health care costs, mandatory Medicare premiums can account for a larger share of retirement spending than even recreation or housing. And few people realize that your annual Medicare premiums are based on your retirement income, according to Mary Beth Franklin of Investment News. It makes good financial sense, therefore, to understand your modified adjusted gross income (MAGI) and plan withdrawal strategies with income targets in mind. Even moving one tax bracket can result in significant savings in Medicare costs. You really need to put the ‘microscope’ on your health care expenses and make sure you are doing everything you can to minimize their impact on your financial plan.
Recently, we discussed the upgraded, newly released version of MoneyGuidePro – MGP4- and highlighted some of the new features in our blog (http://www.dwmgmt.com/mgp-4-). MGP4 has added a new healthcare spending goal, a tool which allows us to isolate the rising health care spending needs in your financial plan results and make sure that your plan can successfully accommodate this spending. There is a worksheet for including your actual expenses or estimates for Medicare Part B, Part D for prescriptions, supplemental or Medigap policies and out-of-pocket spending. This will be a great tool for us to use to make sure our clients are prepared.
At DWM, we can help you manage and budget for a changing health care environment and the costs you will face in the future. So get enough sleep, eat right and exercise…we want you to stay healthy and enjoy your life. Your health matters!