Healthcare Costs in Retirement
In a 2021 survey, 32% of all workers reported they were either “not too” or “not at all” confident that they would have enough money to pay for their medical expenses in retirement. Regardless of your confidence, however, being aware of potential health care costs during retirement may allow you to understand what you can pay for and what you can’t.1
There are a number of drivers behind this mounting retirement health care cost challenge. In general, people are living longer, health care inflation continues to outpace the rate of general inflation, and the average retirement age is 62 for most Americans—that’s 3 years before you are eligible to enroll in Medicare. 3
A retired household faces three types of health care expenses.
- The premiums for Medicare Part B (which covers physician and outpatient services) and Part D (which covers drug-related expenses). Typically, Part B and Part D are taken out of a person’s Social Security check before it is mailed, so the premium cost is often overlooked by retirement-minded individuals.
- Copayments related to Medicare-covered services that are not paid by Medicare Supplement Insurance plans (also known as “Medigap”) or other health insurance.
- Costs associated with dental care, eyeglasses, and hearing aids – which are typically not covered by Medicare or other insurance programs.
It All Adds Up
According to a HealthView Services study a 65-year-old healthy couple (male living to age 87; female, age 89), can expect their lifetime health care expenses to add up to around $662,156.2
Should you expect to pay this amount? Possibly. Seeing the results of one study may help you make some critical decisions when creating a strategy for retirement. Without a solid approach, health care expenses may add up quickly and alter your retirement spending.
Prepared for the Future?
Workers were asked how much they have saved and invested for retirement – excluding their residence and defined benefit plans.
“Although health care costs continue to rise, there are financial planning steps that you can take today to help prevent health care costs from eating into your retirement lifestyle,” Feinschreiber advises. “For example, if you’re age 50 or older, you may be able to make up for a savings shortfall with additional catch-up contributions to your 401(k) or IRA. In addition, if you are age 55 or older, you can make an additional $1,000 catch-up contribution annually to your health savings account.” 3
Source Employee Benefit Research Institute, 2020
1.Employee Benefit Research Institute, 2021
2. HealthView Services, 2022
3. Fidelity Viewpoints, 2022
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