Average Health Care Costs For Retirees

average health care costs for retireesThe average health care costs for retirees plays a large role in one’s future planning for retirement. Contrary to common belief, medical expenses are the largest financial risk for retirees of which are capable of catastrophic effects to even the “finest” of retirement financial plans. Most people – even those who use trusted financial advisors, counselors and mentors to guide them through the financial planning involved in preparing a retirement plan – are not aware of the impact that health care costs can have on their retirement budget. At Jester Financial, we know that having an accurate retiree health care costs estimate will greatly improve the odds that you will not out live or run out of money in your retirement.

Do you know as a retiree, or soon to be retiree, your health care costs estimate in retirement? Most do not, so if you answered “no” know that you are not alone. In fact, a Nationwide Survey “Health Care Costs in Retirement” consumer study 2012, revealed that 4 out of 5 individuals planning for their retirement had no clue as to their retiree health care costs estimate.

The Average Health Care Costs For Retirees Is Likely Much More Than You Think

So we have established that a mere 1 out of 5 individuals planning for their retirement can accurately estimate their retiree health care cost. A recent study of Americans aged 55 found that those individuals who have begun financial planning and think that they know what to expect in terms of health care costs in retirement, are off by about $190,000. The average out-of-pocket health care expense for a couple retiring today would equate to $240,000. That is a long way off from what the vast majority believes is an adequate amount to cover medical expenses in retirement – $50,000.

Finding out the hard way that the average health care costs for a retiree is 5 times what your retiree health care costs estimate was once you have already entered retirement, would likely wreck your odds of financial security in your golden years. Furthermore, it would destroy any savings that you may have hoped to set aside for your spouse or family once you have passed.

Count On Risks Affecting Your Retiree Health Care Costs Estimate

During the planning stages of your retirement finances, you are likely concerned about such risks as market declines and inflation. However, as you cross the threshold to a retiree yourself, you can expect that these same risks will amplify and that new ones will begin to emerge – all of which have an effect on the average health care costs for retirees.

In addition to the already planned for inflation and possible market declines, you can add outliving your savings to the list of risks. However, arguably the most concerning of risks upon entering retirement is health care cost increases. With the cost of health care inflating at a steady 5.8 percent over the next five years (according to “National Health Spending Projections Through 2020,” Health Affairs) in addition to the non-inflation, but rather potential decline of Social Security benefits, rising medical expenses should be a real concern to retirees.

As Part Of My Retiree Health Care Cost Estimate Can I Include Medicare?

Medicare is a federal insurance program for those individuals of retirement age – 65 or over. Educating yourself on the different parts of Medicare prior to enrolling will allow you to better prepare your retirement budget and make a more informed selection come time to enroll.

  • Medicare Part A
    Medicare Part A is often referred to as “hospital insurance.” It only covers inpatient hospital stays, some nursing care facilities and some hospice treatment.
  • Medicare Part B
    Medicare Part B is known as “medical insurance.” It covers most doctors’ visits not including specialists (co-pays not included, a deductible must be met) and certain preventative services.
  • Medicare Part C
    Medicare Part C is referred to as a “medical advantage plan.” This type of coverage is through a private provider working with Medicare. It combines the coverage of Medicare Part A, B & C and often includes prescription drug coverage.
  • Medicare Part D
    Medicare Part D is prescription drug coverage.

It is important to note that Medicare, though most think that it does, does NOT cover all medical expenses in retirement. The Employee Benefit Retirement Institute says that you can expect Medicare to pay 51 percent of the average expected health care costs for retirees.

You can apply for Medicare coverage to help pick up some of the burden of medical expenses in retirement during the month of your 65th birthday. You will get a 7 month grace period to enroll before you will be charged a late enrollment penalty. Enrolling any time after the grace period expires will result in higher premiums that will stick with you for the rest of your life.

Use Our Retiree Health Care Estimate Tool To Help You Better Prepare Your Financial Plan

A well thought out and accurately built financial plan will account for risks, long-term care, inflation, decrease in Social Security benefits and health history in retirement. Use our FREE online calculator for reliable average health care costs for retirees estimates aimed at helping you better secure your financial future in retirement. For more ways to contact and connect with us, check us out on Facebook, read up on our blog, and check out our YouTube pages for more information.

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