In a survey, AARP found that only one third of older Americans have taken any steps to save for out-of-pocket health care expenses, though studies show that such costs often reach more than $200,000 for a retired couple. The new tool is available at www.aarp.org/healthcostscalc.
The Health Care Costs Calculator estimates health costs in retirement by using a database that includes $136 billion in costs from actual health care claims. Individuals can select from 82 medical conditions to estimate how much they may need to spend on out-of-pocket health care costs. The calculator also assumes that individuals will be eligible for and select Medicare Parts A, B, and D.
I tried out the calculator. Although it was slow, it finally told me I’d have about $450,000 in health care costs during retirement, about $300,000 of which would be paid by Medicare leaving a balance of about $150,000.
Then, the program offered information on healthy living including what to do about osteoarthritis, one of the health items I’d checked from a list, Social Security, and other items plus a link to AARP’s Retirement Calculator.
It also had a link to information on health care savings accounts.
At the link, the program compared an estimate of what I’d pay under my traditional health plan compared to having a high deductible health plan and a health care savings account. It said I could save $238 a month if I had the latter two.
The program also had an advertisement for Medicare Advantage plans, plans that combine traditional Medicare with the kinds of options you get in a Medigap policy, both managed by one company. Making the switch to a Medicare Advantage plan is a complicated decision. Read more about it in my article “Boomers Consumers or Their Parents Need to Be Careful If They’re Thinking About Changing, Buying Supplemental Medicare Coverage.”
While the new AARP calculator is interesting, raising the question of how much in medical costs I may have in retirement that aren’t covered by Medicare or my Medigap policy, I didn’t appreciate being steered toward a high deductible health plan and a health care savings account.
I have a really good Medigap insurance plan. I’m not interested in trading it in for something that won’t work as well for me.
AARP Vice President for Financial Security Jean Setzfand said health care costs can have a significant impact on retirement savings.
“With this calculator, AARP aims to help more Americans confidently plan for and achieve retirement goals,” Setzfand said.
She said after estimating costs with the calculator, users can create a customizable action plan to help save for health care in retirement and make impactful changes in their lives that include planning, saving, and making healthy changes.
However, the Health Care Costs Calculator seems to be designed to point consumers toward buying high deductible health plans and setting up health care saving accounts, a move that I don’t think is beneficial for most consumers.
The calculator requires no registration and collects no personal data on any user.