What Will Health Care Cost in Retirement?
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Many workers are quick to assume that once they retire, their living costs will automatically go down. But if there’s one expense that’s practically guaranteed to go up in retirement, it’s health care. Between out-of-pocket costs associated with Medicare, Part B premiums, and long-term care, countless seniors will spend a huge chunk of their savings and Social Security income paying for their health-care needs. It’s important to read up on the cost of senior health care so you can factor it into your retirement planning and avoid getting caught off guard.
What will you spend on health care in retirement?
If you’re wondering what health care will cost the typical retiree today, you may need to prepare for a shock: The latest projections state that the average healthy 65-year-old couple today will spend $400,000 or more on medical care when you account for things such as Medicare premiums, copays and deductibles, and services not covered by Medicare.
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And that’s just for healthy couples. If you have a known medical condition, your spending might easily surpass the $400,000 mark. Furthermore, you should know that our $400,000 estimate doesn’t include long-term care—something 70% of seniors ultimately end up needing.
How much might you spend on long-term care? According to Genworth Financial, the average assisted living facility costs $43,539 per year, which is a bargain compared with a nursing home. A year of shared living in a nursing home costs an average of $82,125. Don’t want a roommate? Then expect to pay $92,345 per year. Talk about painful.
Lowering your health-care costs in retirement
When you see numbers like those thrown at you, it’s easy to fall into a state of instant panic. But here’s some good news: There are steps you can take to keep your health-care costs in retirement to a minimum, one of the easiest of which is getting ahead of health problems before they develop or escalate. This means seeing your doctor sooner rather than later when you start to experience issues, and keeping up with whatever diagnostics and screenings your physician recommends.
For example, if you develop a bronchial infection and get it checked out before it worsens, your doctor might manage to treat it with low-cost antibiotics. But if you let it develop into full-blown pneumonia and require a hospital stay, your out-of-pocket costs will be much, much higher.
Another way to protect yourself from astronomical health-care expenses in retirement is to invest in long-term-care insurance when you’re younger. Long-term care insurance can help defray the cost of nursing homes and assisted-living facilities, both of which Medicare won’t cover.
And speaking of Medicare limitations, part of the reason health care in retirement costs so much is that routine dental, vision, and hearing services aren’t covered by Medicare, either. That said, if you purchase a Medicare Advantage plan, you’ll generally get coverage for dental, vision, and hearing, not to mention a host of additional benefits. In fact, in some cases, you might end up paying less for Medicare Advantage than traditional Medicare, yet come out way ahead coverage-wise.
Furthermore, whereas your out-of-pocket costs under original Medicare are virtually limitless, many Advantage plans impose limits on what you’ll be responsible to pay within a given coverage period. And that could end up being a huge money-saver in retirement.
Plan ahead, save wisely
Even if you take steps to lower your medical costs in retirement, you should still expect to spend a bundle, especially if you live a longer life. That’s why it’s crucial to save wisely and aggressively during your working years—so that you have money available to cover the costs you eventually come to encounter. Without a crystal ball, there’s no telling exactly how much you’ll ultimately spend on health care as a senior, but if you save appropriately, you’ll have much less stress to deal with when you’re older.
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