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Cost of Future Health Care

J.P. Morgan Asset Management’s “Guide to Retirement: 2016 Edition” details a range of financial challenges people should expect in retirement, including Medicare, long-term care and other aspects of health care for retirees.

Anne Lester, Global Head of Retirement Solutions, said “A lot of the numbers we cover are going to be discouraging for a lot of people to read.” This will especially be the case for those people who are not already knowledgeable about these challenges.

The median of health care costs for a 65-year-old in 2016 is upwards of $4,660, which includes $400 for vision, hearing and dental care, between $900 and $4,000 for Medicare, and $1,900 for Medicare Plan F (Medigap). Medicare Part B adds another $1,460, plus there are costs for Part D premiums and out-of-pocket prescriptions.

Lester warns, “And these are just the predictable costs. There will be additional premiums per person for families with modified adjusted gross income above approximately the $85,000 threshold. And then there are the true uncertainties of things such as health care inflation, Medicare solvency issues, long-term-care needs, etc.”

Katherine Roy, Chief Retirement Strategist, forecasts that health care costs will inflate up to 7% per year through the next 20 years should current demographic and pricing trends hold. “Projecting the current numbers forward, that would mean the individual turning 65 today would be paying $18,000 per year for health care by age 85.”

To quote “Derailed: More than three-quarters of Americans – 75% -- fear that poor health could be their largest barrier to retirement savings, followed by illness in a partner, cited by 61%”.

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