Are You Saving Enough for Health Care in Retirement?

Published by Taylor Financial Group

According to research performed by Nationwide Financial, health care will likely be the greatest expense for people in retirement.  Yet, 60% of people cannot estimate what their health care costs will be in their retirement, which is not surprising given all of the variables, such as Medicare changes, the rising cost of health care, and the uncertainty surrounding the most recent version of the Health Care Act.  One thing we do know for sure is that the cost of healthcare is increasing faster than the rate of inflation — whether you like it or not.  So, figuring out whether you’re saving enough to account for these changes is a must, if you want to help ensure you don’t spend your retirement savings on health care expenses.

Retirement Health Care Costs
The truth is that a large part of your retirement budget will likely be eaten up by health care costs, which will affect your living situation in retirement if you don’t plan properly.  Medicare and other private insurance will help pay for some health care expenses, but a significant portion will come out of your own pocket.  In fact, the average 65-year-old couple spends about $250,000 (in today’s dollars) out of their own pocket for health care costs during a 20-year retirement, and that figure can go as high as $461,000.

What Does Medicare Cover?
Currently, Medicare only covers about half of beneficiaries’ total health care costs, and it normally does not pay for long-term care expenses.  Moreover, your monthly Medicare premiums are dependent on the amount of your adjusted gross income (AGI) – the higher your AGI, the higher your monthly premium.  So, the bottom line is, although Medicare helps cover a lot of expenses, the accumulation of Medicare premiums, deductibles, co-pays and other shared expenses become your responsibility.

Planning Ahead to Cover the Gap
One of the best ways to help minimize your out-of-pocket health care expenses in retirement is to start planning and saving now.  But it’s hard to know how much you should be saving without evaluating your overall situation and your plans for the future.  We have access to various resources that can help us estimate what your Medicare premiums, long-term care expenses, and out-of-pocket expenses might be in retirement.  And we monitor the changes in health care insurance and laws in order to advise you how to adjust your savings along the way.

We also send out an annual Medicare newsletter in October that discusses the Medicare Open Enrollment period (October – December), what your options are, and what you should do if you’re eligible (age 65 or older).  Click here for a copy of our October 2016 Medicare newsletter, which includes links to helpful tools and resources.

If you would like to review your financial plan and consider how you might need to adjust your savings to account for retirement health care expenses, contact us today.  We can help!

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