American Retirees prepare to purchase Health Care Coverage as rates rise

The health care costs have been on a steady rise for quite some time now. Studies indicate that over a period of the last 50 years, the cost of health care has recorded an annual growth rate of nearly 6 percent. In other words, if you compare with the market situation back in the year 1966, the cost of health care today is north of 18 times more expensive.

How much should an average American retiree invest to obtain health care coverage?

Recent studies indicate that in order to obtain adequate health care coverage through the retirement period, an average American couple retiring in the year 2016 would require a minimum of $260,000 as seed money. When comparing the current figures with those of the previous year, there is nearly 6 percent recorded rise. This sizeable rise in the health coverage requirement can be attributed to a number of factors such as costlier prescription drugs and provisions, higher life expectancies and more expensive medical services in the health care institutions. However, this figure is not inclusive of the long term care insurance that would cost another hefty $130,000 to the 65 years retirees of the current year. This implies that a retiring couple who is in a fairly good medical condition would need to invest in health care plan that would offer them a monthly benefit of $8000 dollars for the next year along with an adjustment of 3 percent for annual inflation.

The situation could be worse for individuals retiring in the future

As per a study conducted by the Centers for Medicare and Medicaid Services, the inflation in the health care costs is likely to witness a steady rise of 6 percent every year for a period of next ten years at least. This would imply a heightened pressure on the future retirees with regard to obtaining adequate health care coverage for themselves and their spouses. For example, a couple that is 55 year old in 2016 and is expected to retire in the next ten years, would require a minimum of $463,849 for a lifetime tab in today’s economy. The figure not only exhibits a 17.4 percent increase in the heath care requirements by today’s standards, but also is exclusive of an extra inflation that is likely to happen in the next ten years. The bottom-line is that the cost of health care has shown a percentage rise that is relatively larger as compared to annual inflation and is likely to stay the same way for the next couple of decades.

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