When it comes to financial planning, saving for retirement is nothing new. If you’re like most Americans, though, you aren’t sure if you’ll have enough set aside when the time comes and you’re likely forgetting a crucial aspect of the bills.
Health care costs in retirement often get overlooked for a number of reasons, but they can often be the most costly part of retiring. If you haven’t yet put any thought into how you will handle your health expenses as you age, consider these four things to know about paying for health care in retirement.
Many people assume their regular costs will go down in retirement, but they forget to consider the few costs that actually increase, like health care. It’s easy to forget the small costs that you will need to cover, but they add up fairly quickly.
A recent Fidelity study estimates the average 65-year-old couple retiring in 2013 will need $220,000 to cover medical expenses. That estimate assumes the couple is enrolled in Medicare and includes only costs not covered by the government program. Those costs include things like copayments and deductibles, prescription drug costs, dental work, eye exams, and hearing aids. Fidelity also found that the average pre-retiree only expects to need around $50,000 for healthcare in retirement. If you are amongst that group, it’s time to re-evaluate your savings and begin planning for more costlier bills.
It can catch you off guard
A health emergency can occur at any time, and the chances of that just go up as you get older. Heart attacks, strokes, falls, and other medical situations can be random, so being prepared for these types of costs is paramount. Though insurance will likely cover most of the costs, if you need care at home once you leave the hospital, you will have to pay for that yourself.
If you were to suffer a bad fall, chances are you might still need some help getting around and completing basic tasks after you left the hospital. Hiring a caregiver for this type of situation is expensive and falls under the category of long term care, which is often left out of retirement planning altogether.
It includes the risk of long term care
The chances of needing long term care, like an in-home caregiver after a bad fall, are high. Government studies estimate 7 in 10 Americans over the age of 65 will need long term care at some point. As we age, the chance that we will become frail and need some assistance continues to increase. For some reason, though, it rarely gets discussed until the situation is at hand. Approaching long term care this way is a mistake, because by the time you need help, it’s too late to qualify for an insurance policy, which is the best way to shield your assets from the rising cost of care.
A room in a nursing home averages more than $83,000 annually, and the cost is expected to more than double in the next few decades. The Fidelity estimate of $220,000 doesn’t even include the cost of long term care, a frightening realization. This type of care is becoming more common and requires real research and advanced planning.
Health care costs and everything associated with health insurance is changing rapidly, as the Affordable Care Act begins to take hold. Understanding the new adjustments to your policy, benefits, and premium rates is crucial to understanding how it will affect you in retirement. Though most people turn to Medicare once they reach retirement age of 65, if you opt for an early retirement, you’ll need to take your regular health insurance into account, too.
If you are confused about what the new regulations entail, do some research on your own and read over your policy changes carefully, if you have received any. It’s crucial to recognize what insurance covers and what you will be expected to pay.
More than half of retirees are not confident they will have enough saved for medical and health expenses during retirement. Taking the time to learn the true costs associated and the different ways to help you pay can set you apart from the crowd and ensure that once you enter retirement, you won’t be struggling to stay afloat.