Why every penny counts in retirement
Financial insecurity is a fact of life for a majority of older Americans. As the baby-boom generation leaves the workforce in large numbers, with some 10,000 people retiring every day, research from the Insured Retirement Institute shows that many haven't saved enough money for a comfortable retirement.
The economic stress of the COVID-19 pandemic is also darkening the financial picture for many people planning for or already in retirement, bringing increased market volatility, loss or reduction in employment and earning power, and even the need to pull from retirement savings to cover current expenses.
Bottom line: For most retirees, every penny counts.
To compound the issue, health care in retirement is becoming ever more expensive. The latest estimate by Fidelity shows that the average couple needs to plan for $295,000 in health care expenses after age 65. These expenses include deductibles, co-payments, premiums, prescription drugs (which can be very costly) and other expenses that Medicare doesn’t cover, such as hearing aids, dental care and vision correction. As big as this number is, it does not include the costs of long-term care, which could add another $100,000 or more to the total.
Many retirees pay the full cost of their medical coverage, including Medicare Part B premiums and any additional gap coverage, while others have post-retirement benefits provided by their employer/plan sponsor. Those covered by group plans are seeing their premiums increase, sometimes by double digits, as plan sponsors strive to continue to afford coverage for their retirees.
Either way, health care costs are a top concern for Americans. A 2019 Harris poll conducted on behalf of the Nationwide Retirement Institute showed that current and future retirees are very worried or somewhat concerned about health care costs (61%), the impact of market volatility on retirement income (57%), planning for and potentially needing long-term care (56%) and not having enough money to cover unplanned medical expenses (48%).
One way employers can help retirees maximize the value of their health care dollars is by using a Medicare marketplace. Over the past decade, price trends have been growing more slowly than group plan premiums — and even decreasing in some cases — which means prices are often more competitive. In addition, Medicare marketplaces offer thousands of plans from hundreds of carriers, so retirees are more likely to pick the coverage that’s a perfect match instead of being forced into a plan that provides too much or too little coverage.
And finally, after enrollment, some Medicare marketplaces offer an annual insurance checkup. This service continually monitors policy prices to determine if a lower-cost plan is available that offers identical coverage. If a less costly plan exists, the retiree policyholder is contacted and given an opportunity to save money.
To determine if your retirees are getting the most value from their health care spend, answer these three questions:
Are your retirees’ total out-of-pocket costs continuing to increase year over year?
Do your retirees lack the ability to tailor their health care plans to their needs and budgets?
Are a significant number of retirees leaving your group plan for individual Medicare plans?
If you answered yes to any of these questions, your retirees may be able to find better value outside of your current program.
To learn more about our Medicare marketplace services, including how much retirees saved as a result of our 2020 annual insurance checkup, visit: https://optimizeretireebenefits.com/retiree-advocacy
