Underestimating Health Care Costs In Retirement

average health care costs for retirees

When it comes to financial planning for your future, underestimating health care costs in retirement is a very common occurrence. Whether it be that you simply did not think to factor in medical-out-of-pocket expenses, unplanned incidences, or even forgot to include health care expenses all together this is likely a much more popular mistake than you might think. In fact, it is estimated that of the Nation’s largest generation – the Baby Boomers – only a mere 8 percent those who have begun financial planning have factored in health care costs into their retirement budgets.

Health Care Costs In Retirement Can Make You Sick

It is not poor market performance or even inflation in retirement that poses the largest threat to your financial peace-of-mind in retirement. It is unplanned medical expenses. Health care costs in retirement really can make you sick. There is just no way to put it lightly, they are expensive and if not adequately prepared for can be cause devastating effects on your life post retirement. One of the most common mistakes when preparing a retirement plan is overlooked or underestimating health care costs in retirement.

Underestimating your health care costs in retirement can not only leave you broke and out of capital, but more often than not it is your children that have to come to the rescue. That is no financial burden that any parent wishes upon their child.

Why Are People Frequently Underestimating Health Care Costs In Retirement?

A recent finding through the Employee Benefit Research Institute found that a 65 year old couple, who have only median prescription drug expenses, can expect to pay a projected $295,000 in order to be able to have a 75 percent chance at paying off all of their medical bills in their lifetime. Want to increase that percentage to a 90 percent chance of being medical debt-free? That would take the same couple, looking to retire this year, a whopping $395,000.

So, why is underestimating health care costs in retirement such a common occurrence if studies show that medical costs will be expensive? Well, first off – not everyone is properly educated on the potential costs of health care in retirement. Second, consider the following bit of information, brought to you by Fidelity Investments. A study in 2013, found that 48 percent of respondents that were aged 55-65, were under the impression that a mere $50,000 would cover their medical expenses in retirement.
Can you imagine their surprise when they found out the actual projection? Surely the actual cost of health care in retirement made them sick!

Medicare Does Not Cover All Health Care Expenses In Retirement

It generally comes as quite the shock to individuals nearing retirement when they are informed that Medicare will not 100 percent take care of retirement health care expenses. In fact, according to the Employee Benefit Retirement Institute Medicare only covers approximately 51 percent of medical health care expenses in retirement. It is a common misconception that Medicare will cover all medical expenses in retirement and this is simply not true. In fact, it is very far from the truth.

Underestimating Health Care Costs In Retirement Can Be Disastrous With Legislative Mandates

For the first time in history retirees now face mandatory expenses going into retirement. Changes in legislation have led to provisions that require all eligible seniors to enroll in Medicare when applicable or otherwise face harsh lifetime penalties.

That being said, if you are among the large portion of Americans whose retirement plan consists of Social Security covering most all expenses, then you might be in for a big surprise come time to retire. Not a good surprise.

Other statutory changes have resulted in increased taxes, increased overall health care costs in retirement and decreased Social Security. That means that for those looking to live off Social Security the odds are not ever in your favor.

Underestimating health care costs in retirement when the odds are already not in your favor for living above the poverty line (referring to those planning on Social Security being their main source of income), truly can be detrimental to a retirees. Therefore, it has never been more important to do your due diligence in terms of working on your retirement plan.

Even if you feel that because you do not have any assets going into retirement that financial planning is not important, it is recommended that you reconsider that notion.

We Are Here To Prevent The Underestimating Of Health Care Costs In Retirement

When it comes to your financial planning time, consideration and facts all must carefully be factored into your plan. That is in addition to many other factors that will dictate what you can expect to pay for health care in retirement. Some of these additional factors include (but are certainly not limited to):
– Your age
– Your overall health and health history
– Whether or not you have employer-provided health care coverage
– Which Medicare plan you selected and whether or not you purchased a supplemental plan.

All things considered, and as complex a process as it may seem professional assistance is not always necessary when establishing an adequate retirement plan. At Jester Financial Technologies we give you the tools needed to properly prepare yourself financially for your retirement. Use our FREE online calculator to estimate what you can expect to pay for medical expenses in retirement. Eliminate the likelihood of underestimating health care costs in retirement and ultimately afford yourself the peace of mind that you deserve going into your golden years.