Budgeting for health care costs in retirement...

[scfr]

Some of those things are covered by insurance (not heating pads or hearing aids). And you ought to check on the incontinence supplies. If doctor-ordered, those may be covered also.

Re incontinence supplies: Medicare = No. Medicaid = Yes (might vary by state?)
Wheelchair: Yes, they might be covered. But they might not be. For example, if you need a chair when you go out but can get around in your house with a walker, then no. The point is, as you get older you may need more special equipment that might not be covered.

[disneysteve]

And then there are the one-off purchases like heating pads, canes, walkers, wheelchairs, hearing aids, etc.

Some of those things are covered by insurance (not heating pads or hearing aids). And you ought to check on the incontinence supplies. If doctor-ordered, those may be covered also.

[scfr]

I think your plan sounds reasonable and props for the advance planning. I'll add: Let that home-rolled HSA keep growing. Eventually your costs may start to rise. My elderly mother pays over $100/month on OTC meds, doctor-recommended nutritional supplements, and incontinence supplies. (An argument can be made that these are hygiene or personal care items and not medical, but either way they have to be paid for.) And then there are the one-off purchases like heating pads, canes, walkers, wheelchairs, hearing aids, etc. And eventually in-home assistance.

[TexasHusker]

I'm semi-retired. Insurance and utilization combined, we probably pay $2000-3000 a month pretty easy. Just the cost of doing business.

[Nutria]

Nutria,
7.45 years from now for 1 person with no danger of IRMAA, I think 1k/month would probably cover you pretty well. I think between your medicare part A and B with Medigap plan G should cover you 100% as long as the provider accepts medicare and it is a medicare covered service (with the exception of an annual part B deductible--which is $203 for 2021).

The part D prescription drug coverage is the wild card. That one bears some study if you already take some prescriptions.
You may have already done this, but you can see how much you would expect to pay (for prescriptions that you might already be taking).

You can go to this link:
https://www.medicare.gov/drug-covera...ug-plans-cover

Yes, when I was researching this a couple of months ago, I used "Aetna Medicare SilverScript Choice (PDP) Plan ID:S5601-042-0" for Part D and AARP Humana for Medigap plan G. (These were just hypotheticals used for pricing, since I'm nowhere near ready to buy them.)

[Like2Plan]

Nutria,
7.45 years from now for 1 person with no danger of IRMAA, I think 1k/month would probably cover you pretty well. I think between your medicare part A and B with Medigap plan G should cover you 100% as long as the provider accepts medicare and it is a medicare covered service (with the exception of an annual part B deductible--which is $203 for 2021).

The part D prescription drug coverage is the wild card. That one bears some study if you already take some prescriptions.
You may have already done this, but you can see how much you would expect to pay (for prescriptions that you might already be taking).

You can go to this link:
https://www.medicare.gov/drug-covera...ug-plans-cover

[Nutria]

The other question is how long until medicare?

7.45 years. And $330 * 1.09^7.45 = $627. (Off by one because 1/12 isn't a rational number.)

[Like2Plan]

I took that into account. (Am single, and am below the IRMAA range.)

The other question is how long until medicare?

[Nutria]

Nutria,
Are you single? Medicare prices are per person (so, X2 if you are married).
Also, if you fall into IRMAA range, your medicare premiums are higher.

I took that into account. (Am single, and am below the IRMAA range.)

[Like2Plan]

Nutria,
Are you single? Medicare prices are per person (so, X2 if you are married).
Also, if you fall into IRMAA range, your medicare premiums are higher. And, they apply IRMAA to your income 2 years prior. (There is a form that you can file if you retire within 2 years of going on Medicare if you will in a lower bracket after you retire so you don't have to pay IRMAA in that case).
https://www.medicare.gov/your-medica...s/part-b-costs
https://www.ssa.gov/forms/ssa-44-ext.pdf

Interesting to note that IRMAA applies to modified adjusted gross income as reported on your IRS tax return plus some additions such as tax-exempt interest interest income. (That is before your standard or itemized deductions)
Some other events that might possibly trigger IRMAA: If you sold your home. If you did a big conversion to Roth. If your RMDs are large enough.

https://www.fiphysician.com/magi-cal...a-tax-credits/

[Fishindude77]

I think your plan sounds reasonable.

[disneysteve]

I actually posted a question on the Early Retirement forum recently asking what retirees pay for health care.

https://www.early-retirement.org/for...it-109286.html

I think your figures are on target. I don't know what the inflation rate on Medicare premiums has been so I'm not sure if the 9% is a good figure but better to overestimate cost than underestimate. Of course, the closer you get to 65, the more accurately you'll be able to forecast the actual numbers.

[Nutria]

How do you do it?

I looked at the current prices for Medicare Part B, D and Medigap plan G and exponentially grew them at 9% APR (roughly 3x inflation) for the number of years until I'm 65. Is that a valid strategy? (The number turns out to be $626/month.)

Based on that, I picked the nice round number $1000 with the idea of using $1000 - $626 = $374/month for deductibles, co-pays, etc. Any amount of that which I don't spend (which should be most of it) goes in an home-rolled HSA.

This way, I can have a constant monthly budget (given that I do bill leveling on utilities, and roll unspent food and "miscellaneous" money to the next month) and should only need to dip into my retirement money for health costs after my home-rolled HSA (and my real HSA) gets to zero.

Is that a valid plan, or am I missing something?