Healthcare Costs Can Add Up in Retirement

Healthcare Costs Can Add Up in Retirement

Americans today are living longer than ever before, and life expectancy has been on the rise for decades. A male born in the U.S. in 1980 had an average life expectancy of 70 years, a female more than 77 years. By 2013, those numbers had climbed to about 76 and 81, respectively, and those already in their mid-60s can look forward to about 20 more years, on average, according to the U.S. Department of Health and Human Services. While most would agree the prospect of living longer is a good thing, it does raise challenges from a retirement planning perspective.

A big one is dealing with healthcare costs in retirement. Many prospective retirees are counting on Medicare to provide the healthcare coverage they will need later in life. While most people do not pay for the hospital insurance portion of Medicare (Part A), they do have to pay a monthly premium for Part B, which covers doctor visits and preventative services. Most Medicare beneficiaries also have to pay for Part D prescription coverage and/or supplemental coverage such as Medicare Advantage or Medigap. Clearly, budgeting for future healthcare costs should be a central component of any retirement savings plan.

The possibility of long-term care, such as a nursing home, may also need to be taken into account. By 2030, a semi-private room in a nursing home is expected to cost $190,600 per year, and the average stay is 2.6 years, according to the Bureau of Labor Statistics. The possibility of long-term care in a nursing home is not something covered by Medicare or most other health insurance policies. A separate long-term care insurance policy is typically required for that.

Healthcare costs are also unpredictable. As more people join the ranks of Medicare, costs may rise. Currently, the Kaiser Family Foundation reports that the average Medicare household spends 14% of their total annual budget on healthcare. There are tools out there to help you estimate what you might spend, such as the AARP retirement healthcare costs calculator, which you can find online. While this is only a gauge, it may provide a ballpark figure to start planning.

With all these healthcare costs in mind, don’t be afraid to start saving today. It’s never too late to start and can put you in control of the lifestyle you’d like to live in your retirement years.