Data Entry: Retirement Health Care Costs
You can reflect clients' health care costs in retirement on the Profile / Goals screen within the 'Annual Retirement Health Cost' card:
By default, retirement health care costs will begin at the client or co-client's retirement. However, you can choose to start costs at a different time if you wish by using the 'Cost starts' drop-down box in the card to select a different starting point:
You can specify a specific year or client age to start at. If clients are already incurring retirement health care costs you can select 'Already started'.
There are three ways you can reflect retirement health costs, which you can control using the 'Cost estimate' drop-down box in the card.
If you use the 'Customized amount' option, you can specify an annual cost number that will be included every year between the 'Cost starts' year through the end of the client's planning horizon.
If you use the 'Detailed estimate' option, you can break out the health care expenses in more detail:
Pre medicare: This represents the health care costs that will be included between the 'Cost starts' date through age 64 (prior to the client being eligible for Medicare). If the client's retirement health costs start after age 65, this value will not be used.
Medicare part B: Starting in the year when the client turns age 65, we will calculate Medicare part B premiums based on Medicare guidelines. This includes the standard premium of $1,735 /yr plus any Income Related Monthly Adjustment Amount (IRMAA). We calculate IRMAA using your calculated AGI from 2 years prior to the current year. For a more exact calculation, list MAGI from prior 2 years within the Profile > Expense > Taxes and Fee's card using the "Detailed input of past MAGI" checkbox.
Medicare part D: Starting in the year when the client turns age 65, we assume an average standard Medicare part D premium of $393 /yr. We will also add in IRMAA for Medicare part D using your calculated AGI from 2 years prior to the current year. For a more exact calculation, list MAGI from prior 2 years within the Profile > Expense > Taxes and Fee's card using the "Detailed input of past MAGI" checkbox.
Out of pocket: You can add in any additional out of pocket costs to Medicare part B & D premiums starting at age 65. The default value of $3,214 represents the approximate remaining costs from the national average, less Medicare part B & D premiums. Out of pocket costs can also include supplemental Medigap, dental, and vision coverage.
If you use the 'National average' option, the cost used ($5,716) will be the current average cost for a hypothetical individual retiring in 2021 at 65 years old, per Fidelity Investments 2020 retirement health care study. This value will be updated annually; if you select 'National average', the cost will be automatically updated in your client's plan whenever RightCapital updates the national average value.
If you use the detailed approach, you can see a breakdown of the retirement health care costs in the cash flows section. On the Retirement / Cash Flows screen, click on the column headings to navigate to Summary / Expenses / Health Care / Client’s Retirement Health Care (or Co-Client's Retirement Health Care) to see the breakdown. This includes the calculated values for Medicare part B & D premiums.