Estimated Health Care Costs in Retirement

average health care costs for retirees

A properly estimated health care costs in retirement figure can help you to adequately allocate your finances to make for a more secure financial future for you and your family. Knowing your health care costs in retirement planning is an essential factor that must be considered prior to leaving the workforce. Many Americans are unaware of the role that health care costs for retirement medical needs plays in their financial plan. Since the importance of health care costs in their retirement plan is generally unknown among those planning for retirement, the cost is often overlooked all together. For the very few individuals that do consider estimated health care costs in retirement the cost is generally cripplingly underestimated.

Your Estimated Health Care Costs In Retirement Is Probably Larger Than You Think

As if the average estimated health care costs in retirement were not already high enough, figures show that inflation will cause them to steadily continue to increase through 2020. Though you can rely on Medicare and other forms of private medical insurance coverage to assist you with medical expenses, they cannot be depended upon. Not by any means, in fact. A 65-year-old couple retiring today is estimated to pay an average of $17,000 out-of-pocket for medical expenses annually, according to Fidelity Investments.

With estimated health care costs in retirement on the rise, the possibility for needed long-term care (which is not covered by Medicare) and Social Security benefits expected to level out and even potentially decrease – it becomes apparent that planning for health care costs in retirement is indispensable. According to Fidelity Investments the likelihood that your estimated health care costs in retirement are higher than you think are great. In a recent study it was found that among asked individuals who had completed their retirement planning approximately 80 percent of the individuals underestimated their potential cost of health care in retirement. Where the average estimate was $ 50,000. The actual number is more like $240,000.

Risks Should Be Considered When Estimating Health Care Costs In Retirement

In early retirement planning, your mind is likely to be plagued with despairing thoughts regarding inflation and potential market decline. However, as you move closer to your retirement date and eventually cross the line as an official retiree, the risks that you consider to be threatening will change. Though Inflation and market decline will (and should) weigh heavily on your mind still, other risk factors will now come into play as well.

The reality that you forgot to consider health care costs in retirement planning and therefore now face the grim potential of running out of money in early retirement may begin to sink in. That is, assuming that you are one of the many Americans that unknowingly overlooked such an important detail. Another potential risk that you should consider may be that since you forgot to account for health care costs in retirement the likelihood that you will outlive your retirement savings, leaving your family with nothing, is increased. Obviously, these scenarios are frightening to consider given you are already in retirement and perhaps are unable to work to reestablish your savings. However, for those who have only just begun to plan for their golden years, there is still time to properly arrange your retirement budget to factor in health care costs.

Can I Count On Medicare To Help Cover My Health Care Costs For Retirement?

Assuming that you are of age to qualify for Medicare (65) you can rely on Medicare to cover some of your health care costs in retirement, but not depend on it to cover all of your costs. According to the Employee Retirement Benefit Institute, Medicare will only cover approximately 51 percent of health care costs in retirement. That leaves you with a hefty out-of-pocket expense.

Properly educating yourself on the available Medicare plans and what they cover will help you to make a more informed decision when the time to enroll in a plan rolls around.

Here is a brief overview of the four plans and what they focus on.
– Medicare Part A
Medicare Part A is referred to as “hospital insurance.” This plan covers inpatient hospital stays, some nursing home expenses and a select hospice facility costs.
– Medicare Part B
Medicare Part B is known as “medical insurance.” This plan covers outpatient treatment from doctor visits, some preventative care, but no specialist care and co-pays as well as deductible falls on you.
– Medicare Part C
Medicare Part C is what is known as “medical advantage plans.” It combines the benefits provided in Part A, B & C as well as in some cases, includes prescription drug coverage.
– Medicare Part D
Medicare Part D covers prescription drug costs after deductible is met.

Do You Know Your Estimated Health Care Costs In Retirement? Let Us Help

Have you just begun your retirement planning, or perhaps have already completed it but forgot one not-so-minor detail – health care costs? Not to worry. At Jester Financial, we are here to help. Use our FREE online calculator and get an accurate estimated health care costs in retirement figure that you can use to properly prepare your financial budget in a reliable manner.Contact us today to find out more about your estimated health care costs in retirement.