Retirement Healthcare Budget Estimates: How Much Will Your Retiree Healthcare Cost?
Medical expenses more than double between ages 70 and 90, with most of the increase coming from nursing home spending. For example, the median retiree spent $5,444 on medical costs in 2022, but in the last 12 months of life - average medical spending is $59,000. In the Health and Retirement Study, the median individual near end-of-life spends $6,300 in their last year, with five percent of those surveyed spending over $62 -000.
In addition to end-of-life costs, retirees have to pay for routine medical services like doctor visits and prescription drugs. A retiree might also need additional care to help with daily activities like bathing, dressing, and eating. This care could come from family members, paid caregivers - or an assisted living facility. The cost of these services can add up quickly, especially if the retiree needs to move into a nursing home.
To estimate your retirement healthcare budget, start by looking at your current health status and any chronic conditions you have. You'll also want to consider your family history and how likely it's that you'll need expensive treatments or surgeries. Once you have a good sense of your health risks, you can estimate how much money you'll need to set aside for healthcare costs.
What Will Medicare Cover in Retirement?
Medicare provides basic coverage for many medical services, including hospital stays - doctor visits, and prescription drugs. However, there are still many services that aren't covered by Medicare, such as dental care, vision care - and hearing aids. And even for services that are covered, you'll still have to pay copays and deductibles. The government pays for over 65 per cent of health care spending by the elderly, with Medicare accounting for the majority of this.
Medicare Advantage plans, which are offered by private insurance companies, offer some extra benefits that original Medicare doesn't cover. These plans often provide dental and vision coverage - as well as prescription drug coverage. But Medicare Advantage plans typically have higher premiums than traditional Medicare, and they may also limit your choice of doctors and hospitals.
Many retirees opt to buy supplemental insurance policies, known as Medigap plans, to fill in the gaps left by Medicare. Medigap plans can cover things like copays and deductibles, as well as certain types of care that aren't covered by Medicare - such as hospice care and skilled nursing facility care. But Medigap plans can be expensive, and they may not cover all the services you need.
Ultimately, you'll need to choose the type of Medicare coverage that best meets your needs. It's a good idea to shop around and compare different plans to find the one that offers the best combination of coverage and affordability.
How Can You Pay for Healthcare in Retirement?
Healthcare costs are a major expense in retirement, and they can put a strain on your finances. But there are several ways to manage these costs:
- Medicare and supplemental insurance can help you pay for medical services and prescriptions.
- A Health Savings Account (HSA) allows you to save money on a tax-free basis for future healthcare expenses. To contribute to an HSA, you must be enrolled in a high-deductible health plan (HDHP).
- Long-term care insurance can help you pay for assisted living facilities and nursing homes. But it's important to shop around and compare different policies to find the one that offers the best coverage at the lowest price.
- If you have access to a defined benefit pension plan - you may be able to take out a lump-sum distribution and use the funds to pay for healthcare expenses.
- You may be able to get assistance from charities or nonprofit organizations if you have low income and few assets.
The key is to plan ahead and make sure you have enough money set aside to cover your healthcare costs. It's also a good idea to talk to a financial advisor or healthcare professional to get personalized advice on how to manage your healthcare expenses in retirement.
References
- more than double between ages - pmc.ncbi.nlm.nih.gov
- $5,444 - crr.bc.edu
- $6,300 - pmc.ncbi.nlm.nih.gov
Disclaimer
This article is for general information only and isn't medical advice. Talk to a qualified clinician about your own situation before acting on anything here.
