Retiring Workers Will Need $130,000 Just to Cover Health Care, Study Finds

Today’s 65-year-olds can expect to spend an average of $130,000 on health care after retiring, from premiums to co-payments to eyeglasses, according to new estimates. The average single 65-year-old woman can expect to need $135,000 to spend on health care in retirement, while a man will spend $125,000, according to estimates from Fidelity Investments. (The difference is because the woman is expected to live longer — an additional 22 years, vs. 20 years more for the man.) Every year, Fidelity estimates how much it will cost for today’s average 65-year-olds to cover health care expenses for the rest of their lives if they retire now. For a while, it looked as if health care costs were holding steady, but Fidelity this year says couples need to set aside a record $260,000 for Medicare premiums and all other out-of-pocket medical costs — up 6 percent from last year and 18 percent from 2014.

Prime culprits in accelerating health expenses are prescription drugs, especially high-priced specialty drugs, Fidelity says. And as the economy recovers, retirees are using more health care, driving up costs. Fidelity’s estimates, based on an analysis of Medicare’s claims database and trends in survey data, assume that retirees are eligible for Medicare and try to capture all the costs it doesn’t cover — including premiums, co-payments, and things Medicare doesn’t pay for, such as hearing and vision exams. But the estimates are only averages, and people’s costs can vary widely, according to where they live and how healthy they are.

What are the major expenses for retiring that I must plan for?

As retirement approaches, your life’s expenses don’t go away! They remain and now they must be paid on a fixed income. However, the big bills that I get called about are those possibly catastrophic costs associated with paying for the healthcare of a loved one who must reside inside a medical institution/rehabilitation center/nursing home. Family members are shocked with the reality that their existing health insurance will not cover this expense and that couples are left to finance these expenses out of their life savings.

As noted above, the cost for Medicare insurance is projected to cost a person over $130,000 over the remainder of their lifetime. What if you were to learn that you needed to pay that amount PER YEAR to care for a person in a nursing facility. That would certainly change the landscape of everyone’s financial future.

At Rhode Island Medicaid Planning, we discuss the Medicaid program, the program that if your assets and income are within certain limits will pay for the costs of nursing facilities. We discuss the rules and regulations and allow you to make a decision that works best for you and your loved ones.

Source/more: Bloomberg