A 55-year-old couple today can expect to pay more than $1 million for healthcare costs during their retirement.
Gets your attention, doesn’t it?
And if you didn’t already know, here’s the truth: Medicare doesn’t cover everything. In this new age of longevity, that means you are going to have to include rising healthcare costs in your retirement planning as never before. These costs can include over-the-counter medications, long-term care, and dental care, for starters.
Of course, several factors will affect how much money you’ll need for future healthcare costs:
- Where you live
- Your health status
- How you plan to pay for health care (savings, 401k, HSA, IRA, etc.)
- Your tax rates in retirement
- Your gross income (if applicable)
Now you might be thinking, hey, I’m in good health right now. I exercise and eat right. I don’t smoke, and I try to avoid over-indulging in anything that might be harmful to me. I know I’m getting older but doesn’t all this really apply to people who’ve never been that healthy? How much do I need to worry?
Before you throw the dice on your future health needs, consider this:
- A person turning 65 today has almost a 70 percent chance of needing some type of long-term care services and support in their remaining years
- One-third of today’s 65-year-olds may never need long-term are, but 20 percent will require it for more than 5 years
- Women need care longer (3.7 years) than men (2.2 years)
We’ve entered a new age of longevity
Today’s 65-year-old man has a life expectancy of 84; for a woman, it’s 86. If he’s never smoked, he is likely to live to age 92 (95 for a woman). And unfortunately, it has been estimated that Americans will spend 12 years of their life in poor health.
As you see, it’s great to live longer, but you must be ready to foot the bill just in case needs change. That’s why including healthcare costs in your retirement plan is so important.
Why are healthcare costs rising?
New technology. Robotic surgery. New medical components such as artificial hips and knees. Rising pharmaceutical costs. And then there’s the plain truth that Americans overall are not always scoring the highest on good health. There’s rising obesity rates. Chronic disease. Poor diet and bad habits. Heart disease and stroke.
The fallout from years of poor lifestyle choices
While chronic diseases are the biggest driver of rising healthcare costs, they also can be prevented. According to the experts, smoking, not exercising, poor eating habits and alcohol abuse are the drivers behind the numerous complications of chronic diseases. It’s worth thinking about as you plan for your ideal retirement. Are you making the best choices for your health right now?
So just how do you approach planning for rising healthcare costs?
- Retire later. Reconsider how long you will keep working, especially if you currently have a health plan with your employer that meets your needs.
- Save more. Look at what you’re putting away in your 401(k) or other retirement accounts—is there a way you can increase your deposit? Maybe consider a part-time job or a consulting position to supplement your income.
- Carefully consider when to take Social Security. If you wait until the maximum age (70), your monthly benefits will increase.
- Investigate long-term care insurance. Long-term care (LTC) insurance helps to pay for the cost of home care, adult day care, assisted living, memory care, skilled nursing, respite care and hospice by covering services typically not covered by health insurance, Medicare or Medicaid. But be aware: if you haven’t purchased it by the time you’re in your 60s, the premiums may be out of reach and, after age 70, it may be harder to obtain coverage.
Remember, Medicare may pay for some health care, but it will not cover all expenses. (It might be wise to investigate the details behind Medicare Advantage and Medigap plans as well). Also, if you have not yet enrolled in Medicare, you can deposit funds for qualified healthcare costs into a health savings account (HSA), which will earn you some tax advantages.
Changes to health can occur without warning, turning your world upside-down. As you plan how to address future healthcare costs—remember how important it is to practice good health habits in the present, so that your healthspan will match your lifespan. The healthier and more independent you can remain, the lower your future spending will be.
If you can’t see yourself in retirement, that’s because the retirement you’ve been imagining isn’t one that was created just for you.
It’s time to update your beliefs about what retirement can be, so you can create a retirement lifestyle that’s customized just for you, in all your vitality and uniqueness. Retirement Lifestyle Coaching is here to make your retirement dreams your new reality.
About Bob Foley
Bob Foley is your Retirement Lifestyle Coach and you can reach him by email at bob@retirementlifestylecoach.com or simply by scheduling time on his calendar.
