What Can I Expect for Healthcare Costs in Retirement?

The nation’s health expenditure growth is anticipated to average 5.5 percent annually from 2017 through 2026, compared with 4.6 percent through 2028 for Medicare’s per-capita spending.

Although it’s expensive, the good news about retirees’ health-care costs is that they aren’t rising as fast as they were even a few years ago.

CNBC’s recent article, “Health-care costs for retirees climb to $285,000,” says that a healthy male-female couple retiring at age 65 in 2019 can expect to spend $285,000 on health-care expenses in retirement, according to Fidelity Investments’ annual analysis. When looked at by gender, the estimate is $150,000 for women and $135,000 for men.

The amount is up a bit from $280,000 in 2018. Although the annual increase slowed over the last two years—3.6% compared with 12.2% from 2015 to 2017—the amount still is a challenge for retirees who are mostly unprepared to cover the overall cost of retirement.

Since Medicare is the primary insurer for those 65-and-older, various factors have led to slower increases in older Americans’ health-care costs versus those of the general population. The national health expenditure growth is anticipated to average 5.5% annually from 2017 through 2026, but Medicare’s per-capita spending is projected to grow at an annual rate of 4.6% through 2028.

Fidelity’s analysis assumes that the two theoretical people are eligible for Medicare and includes premiums, copays and other cost-sharing expenses, as well as prescription drug costs. However, there are items that aren’t covered by Medicare, like dental, basic vision, over-the-counter medicines and long-term care. Those costs would be in addition to that $285,000 estimate.

The biggest unknown for retirees is long-term care. This can include assistance for daily living activities, such as eating and dressing. Someone turning 65 has a nearly 70% chance of needing long-term care services in the future, according to government data. There are insurance policies that cover those costs, but the premiums can be expensive. Some life insurance policies may have a rider that covers long-term-care costs.

Pre-retirees should familiarize themselves with Medicare, which isn’t free. Part A (hospital coverage) has no cost, but Part B (outpatient coverage) has an average monthly premium of $135.50 for 2019. For prescription coverage under Part D, the average premium is $32.50 this year.

We should all be saving for retirement as much as we can, and taking advantage of the tax-advantaged accounts at our disposal.

Reference: CNBC (April 2, 2019) “Health-care costs for retirees climb to $285,000”

Suggested Key Terms: Medicare, Long-Term Care Planning, Retirement Planning, Health Care Costs

About the author

Bob Brumfield

Attorney Bob Brumfield has been practicing law since 1984 and regularly receives the “Top Lawyers in California” award as well as the “Client Distinction” and “Client Champion” awards from Martindale-Hubbell.

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