Health Care Expenses in Retirement
Of all the expenses to expect in retirement, health care often makes up a significant portion of your costs. Monthly premiums, out-of-pocket expenses, and services not covered by Medicare can quickly eat into your retirement savings if you haven’t planned accordingly.
David Shapiro joins Better Money Boston with WCVB Channel 5 to highlight the key considerations when preparing for rising health care costs in retirement.
Accounting for Rising Costs
When you’re healthy, it can be hard to imagine a time when you’ll need to finance health-related issues or unexpected medical events, but these costs must be accounted for. Today’s average 65-year-old married couple can expect to pay around $600,000 in health care expenses during retirement – not factoring in the cost of long-term care, which can exceed $100,000 per year. As such, it’s crucial to realistically build these expenses into your overall financial plan.
Understanding Medicare Coverage
If you plan to retire before age 65, you’ll need to look for other health insurance options until you’re eligible for Medicare. Once you qualify, it’s important to understand what is covered and what isn’t. Medicare Parts A and B cover a portion of hospital stays and medical services, but they do not cover vision, hearing, or dental care. A Medicare Supplement Insurance Policy, commonly known as Medigap, can help bridge the divide by covering some of those out-of-pocket costs. Long-term care is also not covered by Medicare.
Planning for Long-Term Care
About 70% of people turning 65 today will face chronic conditions or other challenges that require some form of long-term care. These costs can be expensive – in the Boston area, long-term care can range from $150,000 to nearly $200,000 a year. A home health care aide alone could cost between $75,000 and $100,000 per year. You might choose to self-insure and pay from your own investments, or you could obtain a long-term care insurance policy, either traditional or hybrid. Alternatively, certain types of trusts could help protect some of your assets.
There’s a lot to consider when it comes to health care, and the sooner you evaluate your needs, the more options you’ll have. It’s crucial to understand how to get the most out of your plan and ensure there are no surprises that could derail your retirement.
Information presented in our podcasts is considered current as of the created date. Over time, some information presented may become stale. We recommend you consult with your Financial Professional before making any changes based on information contained here.
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