Long-Term Approaches to Managing Retirement Healthcare Costs

Armes, David
December 2009
Journal of Financial Planning;Dec2009, Vol. 22 Issue 12, p48
Academic Journal
Retirement healthcare costs are a long-term financial liability Financial planners can serve as an important resource in helping their retired clients manage these costs wisely Typically, individuals incur almost two-thirds of their retirement healthcare costs during the last half of their retirement. In early retirement, many healthy people seek to reduce costs by enrolling in certain types of lower-premium coverage. In later retirement, as they may need more medical services, some retirees plan to switch to more comprehensive coverage. This tactic of postponing enrollment in more expensive coverage can often save money but it comes with risks, many of them manageable, of which retirees should be aware. Financial planners can help retired clients assess their various coverage options by using a process that includes (1) estimating the price of excellent insurance, and (2) identifying the client's selection criteria, including good catastrophic protection. Using these two types of information, financial planners can assist clients in evaluating any option. At the end of the evaluation process, clients will know that the coverage that they select meets their selection criteria and will understand the tradeoffs when selecting among the options under consideration. Once retirees have chosen healthcare coverage, they should monitor it in subsequent years. How closely it needs to be monitored depends on the type of coverage they have: subsidized employer plans usually require the least attention and Medicare Advantage plans the most.


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