Data and Research July 2, 2019

Even Healthy Couples Will Face Extreme Health Care Costs in Retirement

Couples retiring in the future could face costs of up to $551,000.

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A healthy 65-year-old couple retiring this year will spend $369,000 in today’s dollars on health care over their lifetime, according to Milliman. In future dollars, that increases to $551,000. By age 85, their health care expenses are 250% higher than at age 65.

These projections are based on several assumptions, not least of which is that the health statuses of the couple remain steady throughout their entire life spans, with the man living to age 87 and the women, 89. Nationwide average premiums and out-of-pocket expenses for a Medicare Supplement Plan G and a standard Medicare Part D are used. Medical costs are assumed to rise by 4.9% a year.

In 2019, a healthy 67-year-old couple will spend 39% of their pre-tax Social Security monthly benefit of $1,388.38 for retirees and $817.99 for spouses. Social Security cost-of-living adjustments of 2% in 2018 and 2.8% in 2019 are used.

Using the same assumptions applied to a healthy 65-year-old couple retiring in 2019, a healthy 45-year-old couple that retires at age 65 is projected to spend $532,000 on health care in 2019 dollars, and $1.4 million over their retirement years.

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The estimated 2019 annual premium plus out-of-pocket cost for a healthy 65-year-old is $5,000, assuming that the health status of the retiree is average.

Milliman’s report can be downloaded here.

Ask the Experts July 2, 2019

(b)lines Ask the Experts – Must a Nonelecting Church Plan Require Spousal Consent?

Experts from Groom Law Group and Cammack Retirement Group answer questions concerning 403(b) plans and regulations.
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“Our retirement plan is a nonelecting church 403(b) plan (has not elected to be covered under ERISA). Neither our plan document nor our policies require a spousal consent for a plan loan or any distribution. Would community property laws require us to get spousal consent for loans or a distribution?”

 

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Stacey Bradford, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer:

 

Not likely. Though your plan is potentially subject to the state laws of all states where the plan operates and which your participants (including retirees) reside, no states require that 403(b) or other defined contribution (DC) retirement plans include language mandating spousal consent in their retirement plans.

 

Having said that, there is nothing that would prevent the plan from requiring spousal consent in its plan document for plan loans and distributions, just as there is nothing that would prevent the plan from stating that one’s spouse is the primary beneficiary for plan benefits unless he/she waives that right in writing. In addition, non-electing church plans can divide retirement plan assets under a domestic relations order if one is provided to the plan. And finally, as this prior Ask the Experts column pointed out, state laws can be quite complicated with respect to beneficiary designations, so in the event of any disputes, outside counsel with specific expertise in such matters should be consulted.

 

 

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

 

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Rebecca.Moore@strategic-i.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future Ask the Experts column.

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