Overestimate Health Care Costs for a Healthier Retirement Budget

Ray’s Take It’s not news that health care costs are increasing. Whether you’re just in the planning stages or you’ve already left the workforce, estimating your health care needs is a major cost to consider during retirement. According to Fidelity, a 65-year-old couple that retired in 2015 will need $245,000 to cover future medical costs – not including the cost of long-term care. And yes, that’s with Medicare. Many workers and retirees are totally unprepared for this cost, which can completely wipe out their savings and retirement plans.

Most people, especially healthy ones, will underestimate the potential cost of health care, which can be financially devastating. Don’t assume just because you’re healthy now that you will continue to be throughout retirement.

Most people don’t realize Medicare covers much less than traditional employer plans. People who are near retirement routinely and wildly overestimate the percentage of health care costs covered by Medicare. It covers only 51 percent of health care services, according to the Employee Benefit Research Institute.

Then there’s the issue of long-term care insurance. Various studies estimate that the percentage of people who reach 65 that will need long-term care is 30 to 50 percent. Are you going to pay for that out of your current assets or are you going to get a long-term care policy? While cost is certainly a factor in not buying long-term care insurance, another reason is that many people simply don’t want to think about something as unpleasant as ending their days not being in control of their own lives. Some think they can throw the risk on Medicaid. Go visit one of those facilities before you decide. 

Regardless of the approach you take in planning for health care after retirement, doing some research and consulting a professional planner can help you create a plan that works for you. The harsh, cold truth is that money buys options. And the more options the better.

Dana’s Take According to a 2014 study published in Psychological Science magazine, having a sense of purpose can add years to our lives. Why? Having purpose after retirement brings all those other good things into our lives, like mental stimulation, movement, socialization and even sunshine. Those healthy bonuses can prolong independence and save retirement dollars spent on ill health.

If you can’t find your purpose, think of your elders when you were growing up. What kept them going? Was it work, grandchildren, a garden, a hobby or sport, travel, or a faith-based project or cause? What keeps your peers going? Ask to sit in on a friend’s activities. Try on a few projects to find one that fits. 

Health is wealth. Especially in retirement.

Midlife Insurance Audit
Retirement Spending Budget