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Retirees, Beware: the Surging Costs of Health Care Could Be Large Enough to “Blow Up” Your Financial Plans

We’ve written frequently here on the Blog (most recently in this article posted very recently) about the huge disruption to the financial plans of millions of retirees caused by persistent inflation. While we pointed out that the rate of inflation is down from its high point in 2022, it’s still high enough – and tenacious enough – to cause financial headaches for seniors, particularly those on fixed income.

But if you thought you had seen the worst of inflationary pressures, brace yourself. As this recent article from Barron’s warns us, medical inflation is poised to take off in the coming years, affecting everything from COBRA to Medigap to Medicare Advantage. Experts even predict that the likely rise in Medicare Part B premiums will outstrip the rate of inflation for years to come.

The Barron’s article, written by reporter Gail MarksJarvis, is sobering reading, especially on top of the skyrocketing costs of all forms of long-term care. As Rajiv Nagaich reminds us, planning for our needs late in life is essential. “Many of these rising costs will be related to end-of-life issues,” he states. “Have you developed a clear vision of what you want those days late in your life to look like?  And have you had a tough but necessary conversation with all your loved ones?  My advice is, don’t put it off. The sooner you take action, the greater your peace of mind.”

Let’s take a look at MarksJarvis’s article to see why experts are so concerned.

Medical Costs: The Next Inflationary Shock

“Inflation has been hitting retirees from the gas pump to the grocery store,” MarksJarvis writes in Barron’s. “Their next shock is expected in medical costs and health insurance – the expenses retirees can least avoid.” That’s because medical care, unlike most expenditures, is seldom optional. How bad will it be? “The projected price increases are big enough to blow up the plans of many seniors who expect their overall costs to roughly track inflation,” the article warns.

“This isn’t like inflation at Home Depot or the grocery store because you don’t have another option,” Peter Stahl of Bedrock Business Results told Barron’s. Stahl advises retirees to “plan on 10 percent to 14 percent increases for a couple of years, before dropping closer to the 5 percent historical norm as pressures ease.”  If such increases simply don’t fit the retirement budget, seniors may need to cut other spending, or keep on working a few years longer than planned.

Labor and Supply Costs to Blame for the Price Spike

“Pandemic-induced labor and medical supplies shortages are pushing up costs everywhere in healthcare—from clinics and hospitals to labs and nursing homes,” MarksJarvis explains. But why are these hikes showing up now? “Typically, there’s a two- to three-year lag before higher costs work their way into insurance premiums and copayments as state insurance commissions and Medicare evaluate costs and approve rates,” she writes. 

MarksJarvis writes that international management consulting firm McKinsey and Company is “forecasting sharp healthcare inflation through 2027. Recently, says McKinsey, health insurance companies have been asking state regulators to approve 10 percent to 20 percent increases. Experts agree that, while state regulators may not be willing to grant the carriers all that they want, sharp price increases can be expected for the next several years.

Medicare Part B Likely to Rise Significantly

For millions of seniors on Medicare Part B, higher premiums appear inevitable, says Barron’s. Currently, retirees with modified adjusted income below $97,000 for single filers and $194,000 for a joint return pay $1,979 a year per enrollee in Part B premiums. “ The national retirement planning firm HealthView projects that the premium will rise 6.3 percent in 2024 and 6.2 percent in 2025, 8 percent in 2026, 7.8 percent in 2027, and around 6 percent annually through 2031,” the article reports.

If those projections hold, that could peg the Part B premium at well above $250 per month by 2030 – 50 percent higher than it is today.

Medigap and Medicare Advantage will both be affected, according to data from HealthView. “People on traditional Medicare often buy a supplemental, or Medigap, plan to cover the roughly 20 percent of expenses that Medicare doesn’t,” says MarksJarvis. “[The] price of this insurance is also expected to rise sharply.” As an example, a 65-year-old woman who starts Medigap Plan G this year will pay the national average premium of $1,517 a year. But HealthView says she should expect increases of at least 10 percent from 2024 through 2027. That pushes her annual premium to well over $2,200 in the next 4 years.

Retirees who opt for a Medicare Advantage plan could also see higher premiums, higher costs for out-of-network care, and higher co-pays.  

Rising Costs Add Pressure to Retirees on Fixed Incomes

“Retirees on fixed annuities or pensions without inflation adjustments could be hit particularly hard by soaring medical costs,” one financial analyst told MarksJarvis. Social Security’s COLA inflation adjustments have helped in recent years, but these adjustments historically have lagged behind medical inflation, Barron’s reports.

Those taking withdrawals from retirement accounts face a particular problem, according to the article – a situation known as sequence-of-return risk. One T. Rowe Price vice president, Sudipto Banerjee, explained to MarksJarvis that the portfolios of many retirees still have not recovered from the stock market turmoil of 2022. if these investors are forced to draw larger amounts from depleted IRAs or 401(k)s than planned in order to pay for higher medical costs, it will create long-term damage from which these savings are unlikely to recover. 

You Need a Financial Dashboard

The Barron’s article ends with a warning that “unusually high inflation for the next few years requires that advisors or do-it-yourselfers do more sophisticated planning than often occurs.”  We say that’s probably a good thing – but we wonder if those doing the planning are using the right tools.

As one financial planner confessed to Marks Jarvis, “Most advisors don’t know much about Medicare and they don’t want to open a topic where their knowledge is an inch deep.” We would say that finding a planner who can speak knowledgably about this vital program is a good first step. But beyond that, we urge you to seek out a planner who will work with you to create a financial dashboard. This powerful tool can help replace your fears with confidence.

“People fear the unknown,” says Rajiv Nagaich, “and retirement is a big unknown for most people – especially with all this worry about inflation adding fuel to the fire. But,” he adds, “that fear is made worse because they haven’t done the right kind of planning. They might have various pieces in place, but there’s no underlying strategy to tie everything together. We have a ‘silo mentality’ when it comes to planning that really does everyone a disservice.”

Rajiv’s answer is a financial dashboard, which we’ve discussed many times on the radio and here on the Blog. “Look,” says Rajiv, “the reason people feel paralyzed with fear is because no one has given them the tools to be able to adjust to rising costs and inflationary pressure. With a financial dashboard in place, you can see at a glance what the outcome of today’s spending, saving and investing decisions will be. Then you can make an informed choice. The antidote to fear is good, solid, relevant information. That’s what a financial dashboard provides.”

Breaking News: Rajiv’s New Book is Here!

We have big news! The long-awaited book by Rajiv Nagaich, called Your Retirement: Dream or Disaster, has been released and is now available to the public.  As a friend of AgingOptions, we know you’ll want to get your copy and spread the word.

You’ve heard Rajiv say it repeatedly: 70 percent of retirement plans will fail. If you know someone whose retirement turned into a nightmare when they were forced into a nursing home, went broke paying for care, or became a burden to their families – and you want to make sure it doesn’t happen to you – then this book is must-read.

Through stories, examples, and personal insights, Rajiv takes us along on his journey of expanding awareness about a problem that few are willing to talk about, yet it’s one that results in millions of Americans sleepwalking their way into their worst nightmares about aging. Rajiv lays bare the shortcomings of traditional retirement planning advice, exposes the biases many professionals have about what is best for older adults, and much more.

Rajiv then offers a solution: LifePlanning, his groundbreaking approach to retirement planning. Rajiv explains the essential planning steps and, most importantly, how to develop the framework for these elements to work in concert toward your most deeply held retirement goals.

Your retirement can be the exciting and fulfilling life you’ve always wanted it to be. Start by reading and sharing Rajiv’s important new book. And remember, Age On, everyone!

(originally reported at


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