Cost of Health Care in Retirement

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The cost of healthcare is a big concern for everybody, none so much as people facing retirement and a set income.  Many people don’t know how much healthcare is going to cost or how much coverage they are going to need.  The biggest threat to retirement is the combination of getting sick and spending more than expected.  However, understanding your health insurance and other coverage options as well implementing a savings plan can help make sure you’ve saved enough to retire in the lifestyle you want.

One of the biggest misperceptions is that Medicare pays for everything, when in fact, it does not.  For example dental care, eye care, routine hearing tests, custodial care, long-term care – none of those are covered by Medicare.  In order to have comprehensive coverage, you need to purchase a medical supplement insurance plan or having funding provided in your plan.  There are different options under Medicare.  Part A covers hospital stays and is generally free, with Part B covering doctor visits.  Part C or Medicare Advantage offers coverage beyond the standard insurance, and Part D covers prescription drugs.  Private insurers also provide coverage for some of Medicare’s out-of-pocket expenses.

As you start to plan for your long-term healthcare needs and costs, take a look at your family health history and your own medical history.  If there is a history of long-lasting illness, or consistent diseases that run in the family, getting long-term care insurance could help reduce costs significantly in the future.

Once you determine how much you will need and what is covered and not covered by Medicare, you may need to look at medical subsidies because costs beyond insurance can be high.  According to the Employee Benefit Research Institute, the average couple spends more than $400,000 over their lifetime on medical expenses beyond what Medicare covers.  There are tax-deferred ways to save money, which can help ease the costs, such as HSAs and MSAs.

Making sure you have the right insurance could help keep your savings intact.  Depending on your health there is a very real possibility of going into a retirement or assisted living facility.  Many need to take a hard look at whether or not they have the resources to pay for it and if not, what are the insurance options.  According to experts, 70% of people over the age of 65 will need long-term care.  And even though there are government-funded assisted living facilities, these may not be the type of care you want.

However, paying for a long-term care facility can be expensive depending on the type of care.  If you’re in a nursing home for a year that could be well over $100,000, which is more than the average person saves for health care.  Depending on how many assets you have or whether or not you want to pass these on as an inheritance, long-term care insurance may or may not make sense.  Even though long-term care insurance can afford you a nicer facility, it may make more sense to pay for it yourself.

Long-term insurance isn’t the only option.  Certain life insurance plans have long-term care riders with a death benefit if you don’t use that money.  Some states have programs that if you purchase for long-term insurance you’ll automatically go onto Medicaid.  However, the rules for Medicaid can be strict and this may not be the best option for everyone.

We encourage people to have a realistic view of their health care needs.  Most are under-planning and waiting until the last minute to figure it out.  But people can start to save and make sure they have medical care for the long haul.

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