Health Care Costs Early Retirement

average health care costs for retirees

Health care is expensive when you retire at the common age of 65, but consider calling it quits before then and there will be hefty associated health care costs for early retirement – that is where we come in. Providing you with the tools needed to account for these extra costs will help you to better plan for your golden years and offer you the peace of mind that you deserve should you decide to retire early.

The Cost Of Early Retirement

Early retirement is a dream of many, but a reality that not many can afford. Just like owning a multimillion dollar mansion or cruising through town in your Maserati, there are substantial bills that come along with a lifestyle of this nature or with retiring at say age 55.

Retiring early can be great if you have been fortunate enough to save up a large nest egg to cover your expenses for a longer period of time. However, throwing in the towel early also comes with a few downfalls worth mentioning.
– The salary you will miss out on
If you retire at the age of 55 instead of the now traditional 65, you will be missing out on – as defined by the Social Security Administration – ten years’ worth of working salary. Say that you make $80,000 a year – that equates to $800,000 that you are forfeiting – but wait, there’s more! Say that you receive the common 3 percent annual raise (as most do) that would mean that come time to retire you would be making close to $100,000 in your annual salary. Which results in an overall forfeiture of close to a million dollars should you decide to retire early.
– Social Security benefits
For every year that you retire early Social Security deducts 7 percent from what you would normally receive monthly in benefits. So, say that you elect to begin receiving Social Security at the youngest possible age (62) then you will be sacrificing around 25 percent of your monthly benefits, forever.
– Depleting your savings
When you leave the workforce early not only do you have the additional health care costs in early retirement, but you are also foregoing the ability to continue earning. If you are not making money, then you are just spending it, which leads to depletion of your savings. By electing not to work when you are capable, you are taking away from capital that you would have had later in life, when you are less capable.

You Will Be Responsible For Your Health Care Costs In Early Retirement

Are you currently receiving health insurance through your employer? If so, the rate you pay is a group rate – where your employer pays a portion of the premium to offer you a discounted rate. Opt for leaving the workforce before age 65 and you will be on your own in terms of health care costs. Early retirement does not make you eligible for Medicare. That means that with no group rate and no enrollment eligibility with Medicare until age 65, you will be stuck with the full burden of purchasing a health insurance policy on your own. The Affordable Care Act is supposed to make health insurance more affordable for some, however if you have the capital to retire early it is unlikely this will be of any benefit to you.

Out-Of-Pocket Health Care Costs In Early Retirement

According to Fidelity Investments a couple that retires this year at the age of 62, can expect to spend a minimum of $17,000 on out-of-pocket health care costs. Early retirement is glamorous on the forefront, but when additional costs, lost wages, forfeited benefits and sacrificed savings come into play the reality of the situation may not be all that great. When you factor in Fidelities estimate of an average $10,000 savings per year for couples that wait to retire until age 67, it makes it a bit less tempting to consider early retirement. Unless of course you can just afford it.

What Will Your Health Care Costs In Early Retirement Be?

It is near impossible to give a surefire number one can expect to pay for health care costs in early retirement. Many factors must be considered and the equation tends to get a bit messy, to say the least. However, if you plan on retiring early it is essential that you reliably estimate what health care in early retirement might cost you prior to throwing in the towel.

Many unexpected costs and unforeseen events could toss a wrench in the gears of your financial plans in terms of early retirement. Therefore, it is imperative that you look at the numbers very closely to ensure no expense has been overlooked.

Calculating Your Health Care Costs In Early Retirement

If all potential medical expenses are not considered when configuring your financial plan for retirement the likelihood of outliving, or rather running out of your savings is great. All things considered, a sufficient retirement plan will consist of factors bearing in mind long-term medical expenses, premiums, out-of-pocket costs and potential unforeseen medical emergency expenditures. Proper education and the use of professional estimation tools from Jester Financial will help you more adequately calculate your expenses.

Using our FREE online calculator will help you to reliably estimate what your health care costs in early retirement might be, in order to better help you prepare for future financial security. Contact us today.