How Much Should Retirees Save For Health Care?

healthcareAre you a retiree or soon to be retiree and are you concerned about the rising costs of medical care? 

If you’re not, you should be.  When meeting with clients that are either in retirement or approaching retirement, one of the most unexciting things to talk about is the rising cost of medical care. 

But for obvious reasons, this is a discussion that must be brought up; otherwise we will not have planned for what could potentially be the demise of our retirement portfolio.

Health Care Costs During Working Years

In your working years, the cost of health care is usually an afterthought.  If you’ve got a good employer with decent insurance, routine visits to the doctor are taken care of just by paying simple co-pay.  In fact, when either my wife or I go to the doctor, we are only required to pay a $15 co-pay for what is called a wellness visit.  But upon retirement, things change.  

Medical Care For Retirees, Let’s Look at the Numbers

Although despite retirees do have access to Medicare at the age of 65, the cost of health care retirees is getting higher and higher each and every year.  In the report that was done by the Employee Benefit Research Institute, they have projected that people retiring in the year 2018 that are retiring at age 65 would need approximately $325,000 just to handle the gap between Medicare part A and Medicare part B.  The institute also had projected that a man currently age 55 will need to accumulate $132,000 by the year 2018 to help pay for the Medigap policy.

The scary thing about these numbers is that these are just the average.  Studies show that more than half the population lives longer than the average life expectancy.  If prescription drug consumption was assumed to be average but a couple lived to be in the top 25% percentile, the necessary amount needed at age 65 would balloon to be $424,000.  If you happen to live in the top 10%, then now your costs have skyrocketed to $511,000.  Remember, these costs do not include basic visits to your dentist or any other out of pocket medical equipment such as wheelchairs or canes or anything else that may be needed.

How To Plan For These Costs

Based on these numbers, what is one to do?  Do you plan for the average of $325,000 or do you assume you will be in the top 10% that will require over $500,000 just to get by on medical care costs?  Obviously, it always makes sense to plan for the worst, but in some cases, it is almost impossible. Especially if retirement is just around the corner.  All in all, it pays to understand your Medicare coverage and to know what you are eligible by.  Medicare coverage is definitely something you do not want to underestimate, and don’t opt for a different policy in retirement just because they offer a cheaper premium.

References:

Medicare.go

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Comments | 1 Response

  1. Health and Wellness Products and Services says

    Great information! I think this will be a great help for our retirees. it’s hard to to prepare for retirement that’s why we need to know our option after we retire.

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