Getting a Handle on the Cost of Healthcare in Retirement

It may seem daunting, but it’s a vital step to retirement planning.

Posted on

Are you planning for retirement? Don’t forget the cost of healthcare. Fidelity recently estimated that a 65-year old couple would need $240,000 to cover medical expenses through retirement. This estimate was a 4% increase from a year earlier, and takes into account savings from the Patient Protection and Affordable Care Act that was recently upheld by the Supreme Court.

Our experience has shown that for the first ten years, people usually maintain the same spending level in retirement as they did when they were working. Their spending level then declines, with the exception of healthcare. The Employee Benefit Research Institute reports that healthcare expenses account for 10% of the budget for those between 50 and 64, but increases to 20% of the budget for those over 85.

Getting a handle on these costs must start with your insurance coverage. Does your employer provide coverage for their retirees? If not, you will need your own coverage or a supplement if you are eligible for Medicare. Anyone within a year of retirement should start shopping for their coverage to determine what cost they will be facing. Long-term care insurance is another factor you need to consider. The National Association of Health Underwriters state that one-third of people will need some type of long-term care. The Genworth 2012 Cost of Care Survey reports the national median daily rate for a semi-private room is $200 per day. If you can’t afford to self-insure for this expense, you will need to consider some form of long-term care insurance.

Estimating medical costs and researching insurance can seem daunting, but it is a vital step to be sure you don’t get blindsided by expenses after you enter retirement. Other important issues to consider can be found in an earlier blog post: “Seven Sensible Things You Should Do Before Retirement”. This is a big step, and one that requires careful planning. The last step should be to have a financial adviser go over your plans to make sure nothing has been missed.

Will Your Money Last Through Retirement?

No one wants to run out of money. But without goals and a solid plan,
how can you know for sure whether you’re on the right track?

Will I be able to maintain my current lifestyle?

What will my monthly income be in retirement?

Can I protect my hard-earned savings and still
have the income I want?

Rodgers & Associates answers questions like these every day.

Get Personalized Answers
2025 Lititz Pike, Lancaster, PA 17601
Phone: 717-560-3800, Toll-Free: 888-876-3437