Prepare for rising health care costs

WASHINGTON (3/13/07)--Today, 43% of seniors' total consumption is on health care. With 77 million baby boomers approaching their retirement years, that should serve as a wake-up call for many folks to start planning (National Center for Policy Analysis Feb. 20).

By 2024, health care will account for half of seniors' total consumption. For seniors older than age 75, health-care related expenditures already account for more than half of all they consume.

Much of seniors' health-care spending is paid by public and private third parties like Medicare and former employers, but as spending on health care rises and businesses cut costs, seniors will be asked to contribute an increasing share of their own incomes to pay for health care.

Already, seniors spend an average of 17% of their own incomes on health care, according to a new study from the National Center for Policy Analysis titled "The Rising Burden of Health Spending on Seniors." That will grow to nearly 25% by 2030.

The implications of rising health-care costs are dramatic. If health-care spending continues to increase as expected, more and more seniors will be called on to share the burden. "That means current and future workers will need to extend their time in the labor market--or save or invest more money while working--to prepare for the higher expected health-care costs awaiting them in retirement," the study reported.

Steps you should take immediately:

• Increase your retirement savings every time you get a raise.

• If you're still working, review your employer's current health-care benefits for retirees. Make sure you understand how they'll perform after you retire.

• Expect to pay more of Medicare's tab than current retirees are paying.

• Consider a health savings account. Ask at the credit union if this option may be a way to control health-care costs in the future.

• Investigate the benefits of Roth IRAs and other retirement savings programs.

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