(AP Photo/Pablo Martinez Monsivais)
Will healthcare costs devour your retirement income? New estimates may cause you to adjust your retirement plans.
The dream is that you will eventually turn 65 and all your healthcare worries will be covered by Medicare. I hate to be the bearer of bad news but in the real world, healthcare costs in retirement years can take a ridiculously large chunk out of your retirement income.
The average 65-year-old couple retiring this year will need about $280,000 to cover healthcare in retirement, according to a new study from Fidelity. That stunning amount is more than many households have saved. The estimates are about half that figure for single folks. It’s important to point out that women can expect to spend a bit more as they tend to live longer. Perhaps equally important is that long-term care expenses are not included in that total. Ouch!
“There is no way I will spend that much on medical care in retirement,” you may be saying. “I’ll be covered by Medicare at 65.” While that may be true, there are still monthly premiums for Medicare Part B (which covers doctor visits, surgeries, etc). Premiums will also be incurred for medication with Part D. These two things alone make up about 35% of the estimated costs in retirement while the remainder is the cost-sharing in and out of Medicare that you will have for co-payments and deductibles. That includes out-of-pocket expenses for prescriptions drugs.
Nursing home or long-term care costs will be extra as will dental expenses. As you can see, things add up quite quickly.
Can you contain the costs of healthcare in retirement?
As a retiree you can buy supplemental coverage plans. Often called Medigap insurance, these types of plans can potentially help cover some of the things that Medicare does not. On average, those premiums would lead back to around the same basic cost estimate.
Four in 10 retirees said their retirement expenses are higher than expected, according to the EBRI 2018 Retirement Confidence Survey. About the same number of those retirees surveyed admitted to not calculating their health care expenses before they retired. One third of respondents admitted to having no idea what to expect in regards to health care expenses in retirement.
Wait it gets worse:
These cost estimates continue to go up year after year. If you are planning to retire years down the road, your expected costs will likely be much more than the $280,000 estimate.
If we dig back to 2002 (the first year Fidelity did their estimate), those expected costs are up 70%. The cost increases are compounding well beyond inflation, which can be devastating to those on a fixed income. What might be barely affordable at 65, will be impossible at 85.
Invest in your Health Care Now. Don't let the increasing cost of health care ruin your retirement…
