Medical Costs During Retirement

average health care costs for retirees

Medical costs during retirement account for a retirees, most risky and pricey expense. Improper planning for an expense of this nature can ultimately derail even the well-thought out, professionally configured financial plans. Believe it or not, retirees who have confided in trusted financial advisors, mentors and counselors have also suffered the catastrophic effects associated with neglecting to account for medical costs during retirement.

Have you properly accounted for your estimated medical costs in retirement? Many have not. In fact, a National Consumer Study on “Health Costs in Retirement” 2012, found that 4 out of 5 planning for retirement do not have an accurate estimate for how much they will pay in medical expenses throughout their golden years. Another similar study revealed that only 8 percent of those individuals who had completed their financial planning for retirement had factored in medical costs.

Most Americans are not properly educated on the importance of such a line item in a retirement budget and so it makes no sense to them to plan for such an expense. Do not be one of the many that forgets such a vital budgetary expenditure.

Do You Know How Much Medical Costs During Retirement Can Equate To?

A large percentage of Americans asked whether or not they can estimate their medical costs during retirement, underestimate hugely. This is very risky when you consider that over 66 percent of Americans rely on Social Security benefits to account for 52 percent of their retirement income (more on that later). A majority of Americans planning for retirement believe that a mere $50,000 will cover their medical costs during retirement. Not likely. If they budgeted this 50k to afford health care costs in retirement they would be at a deficit of greater than $240,000, according to the Health Cost Institute.

Though Medicare and other forms of health insurance can help to cover medical expenses in retirement, the $292,800 estimated for a couple retiring today (2015) at age 65 and planning to be in retirement for 20 years, is an estimated out-of-pocket expense to the retiree.

Social Security, Medicare And Medical Costs During Retirement

It is important to understand the relationship between Social Security and Medicare today. The AARP Public Policy Institute predicts an inflation rate of health care costs in retirement will continue to rise at an inflation rate of approximately 7 percent over the next ten years. However, Social Security benefits are not expected to increase at the same rate. In fact, Social Security benefits are predicted to remain constant and eventually begin to decline. So what does this mean for you?

Many Americans rely heavily on their Social Security benefits to cover their medical costs during retirement. Some count on the benefit to be enough to cover their obligatory expenses such as housing, transportation, groceries, etc. Regardless of how Social Security is to be spent, the point is that retirees rely on it as an important source of income. For those who have no retirement assets, a decline in the amount could be catastrophic. Especially when you consider that health care costs nationwide are on the rise and coverage is mandatory. Therefore, it is an expense that cannot be forgone. So, as the costs increase and the amount of assistance decreases, the gap in which the retiree is obligated to fill out-of-pocket becomes greater. Thus, placing a heavier financial burden on those already strapped with limited resources.

How Heavily Can I Rely On Medicare To Assist With My Medical Costs During Retirement?

Some retirees enter retirement under the impression that Medicare will cover all of their medical costs during retirement. Yikes! Can you imagine their surprise when they find out it doesn’t and they further find out that the estimated average costs of health care for a healthy couple is $292,800. Hope they had a hefty savings account!

So, then how much will Medicare cover? According to the Employee Benefit Retirement Institute Medicare will cover approximately 51 percent of medical costs during retirement. Bear in mind this does not include long-term care, nursing or hospice care.

You can apply for Medicare the month of your 65th birthday and are allowed a 7 month grace period to enroll without penalty. After the grace period has expired, you can still enroll, however you will face Late Enrollment Penalties that will stick with you for the remainder of your life.

In an effort to adequately prepare yourself for your enrollment period take time to get to know the program. Learn the plans and understand what is covered and what is not. This will help you to select the best plan offering you the most benefits.

Estimating Your Medical Costs During Retirement

A properly configured retirement plan will account for long-term expenses, insurance premiums, out-of-pocket expenses, health history, potential for incident and so many other variable factors. The process to precisely equate your potential health care costs is complicated and takes time as well as patience. Not to mention, there is much room for error. That is where we come in.

Use our FREE online calculator for a fast, accurate and reliable estimate of what you can expect to spend on health care in your golden years. Being informed of your possible medical costs during retirement will help you to create a more practical budget, reinforcing confidence in your future financial security. Contact Jester Financial Technologies for more information on how to get an accurate estimate on your medical costs during retirement.