How Short-Term Inflation Packs a Long-Term Punch

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March 22, 2022

Health care prices are sneaky. While they tend to rise at a rate of 1.5 to 2 times general inflation, they don’t jump suddenly like you see with gas prices. Instead, they stealthily gobble up a bigger and bigger portion of your paycheck. And today’s inflation means tomorrow’s medical bills will be even higher than they would have been had price increases remained moderate. A recent report by HealthView Services projects that health care inflation will remain elevated at an annual 11.9% over the next two years, leading a 65-year-old couple to spend an additional $85,917 in lifetime medical expenses. For younger people, it’s even more. As sobering as this is, knowledge is power: start saving more today, and you’ll be in better shape down the road.

Best wishes,
 
 
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Reader of the Week

What are you up to these days?

Now that my husband is winding down his work, we’re on a seven-week cross-country road trip to check out different retirement locales, including Asheville, North Carolina, and Memphis, Tennessee, where our son lives. California is still an option as well.

We’ve looked at a few continuing care retirement communities (CCRCs), and given that wait lists are three to five years, we thought we might get on some waitlists. You generally pay a $1,000 deposit and get $500 back if you don’t go. We are looking at not-for-profit Life Plan continuing care communities which have all levels of care, from independent living in apartments or stand-alone cottages through skilled nursing.

Got it. What advice do you have for folks looking at retirement communities, either for themselves or their loved ones?

You really have to look at the details of each community, including what is covered at each level of care. My father lived in an assisted living community where if you needed to hire additional help, you had to hire someone from their facility, and there was constant turnover. Plus, the aides weren’t allowed to accompany him off the property. While most places offer transportation to medical appointments and grocery stores, this is usually just transportation, not actual assistance once you are off the van. What are the options if you need help?

Also, many places have doctors that come to the facility.  If you have a Medicare Advantage plan rather than original Medicare, make sure that you'll be able to access care through your plan. The same with Part D for prescriptions — if you're in assisted living or skilled care, you may have to use their pharmacy, which may not be in the network. And understand what is covered in the monthly fee. For example, medication management can be an expensive monthly add on.

Smart tips! Any other advice for people preparing for retirement?

Get your estate planning and related documents in order — for example, durable powers of attorney. (As an aside, everyone age 18 and over needs a power of attorney for both health care and property.) To avoid hassles, make sure they comply with current law and that whomever you are naming knows how to access the documents if needed. In particular, understand what the criteria are in the document for determining when someone can step in to manage your affairs. Most documents are drafted to require a physician's determination, so discuss this with your physician. For example, my husband’s father had a very old power of attorney that required three physicians, including his primary care physician, to sign off on his inability to manage his affairs. The physician he saw at his independent living community said he wasn’t incapacitated, even though he wasn’t opening his mail or managing his finances. He forgot to pay his phone bill and his service was shut off a few times. If his pension hadn't been automatically deposited into his checking account and my husband and brother in law weren’t signatories on that particular account, they wouldn’t have had access to the money to pay for his care. As it was, they couldn't access the bulk of his funds.

Retirement News From Around The Web

How Retirees on Fixed Incomes Are Dealing With Inflation
They’re making difficult choices and forgoing simple pleasures. WASHINGTON POST VIA YAHOO FINANCE

Medicare Advantage Plans Send Pals to Seniors’ Homes for Companionship — And Profits
Companions do light housekeeping and monitor beneficiaries’ health. KAISER HEALTH NEWS

Preventing the Problems of Dying Without a Will
Proper estate planning is key. NEXT AVENUE

You’re Probably Better off Buying an Index Fund
About 80% of all actively managed U.S. stock mutual funds underperformed in 2021, according to S&P Dow Jones Indices. CNBC

Elizabeth O'Brien is deputy editor at Money. She has covered retirement and health care for nearly a decade. A Brooklyn resident and mom of two boys, she navigates the alphabet soup of Medicare and the New York City subway system with equal ease. You can email her at elizabeth.obrien@money.com and follow her on Twitter at @elizobrien.

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