For many retirees, health care expenses are going to be the largest expense in retirement. People all have different health care needs which leads to different costs. A key part of the retirement planning process is to develop the best approach for your unique health care needs.

Knowing your expected health care costs and coverage options will allow people preparing for retirement to create a plan to cover costs to and through retirement.

Here are some strategies for preparing for health care expenses in retirement.


Estimate Your Costs

A recent study by the National Bureau of Economic Research uncovered interesting trends in health care costs. The average 70-year old can expect to spend roughly $122,000 on health care through the end of their life. Although for a healthy woman, you can expect to spend roughly 5 times that amount! Some of the trends are counterintuitive. For example, the healthier you are, the higher your health care costs will be. This is due to a longer lifespan. Women will also have higher health care costs due to their higher life expectancy compared to men.

A financial advisor will be able to provide an accurate estimate of these costs and adjust variables such as Medicare coverage and other expense that might be unique to your situation.


Online Health Care Cost Calculators

There are several online calculators to help you get started estimating Health Care cost in retirement. These are the best free tools we found online.

Through our technology partner Money Guide Pro, we are able to provide clients and prospects with a very detailed estimate of costs with multiple variables. If you would like to schedule a consultation please contact us.


Understand Your Benefits

Most employees medical benefits stop at retirement. Medicare eligibility begins at age 65. You will need to explore the coverage options to fill any gaps in coverage depending on your retirement target age. Even if you plan to continue working part-time into retirement, you will want to have a clear understanding of your coverage and how that might change with a reduced work schedule.

As you approach Medicare eligibility it is important to research what is covered and what you will be responsible for. You may be surprised at some of the items that are not covered, for example, routine dental and hearing exams are not covered. Another best practice is to ask your pharmacy for a Medicare Part D report. This will provide a breakdown of what your medications would cost in retirement and what is covered by the various Part D options. If you take regular medication this is something you must do as you prepare for retirement.


Plan for Long-Term Care

More than half of Americans age 65 or older will need long-term care services at some point. Long-term care involves services people may need if they have issues that render them unable to perform activities of daily living such as bathing, dressing or just moving around the house.

Medicare coverage kicks in if long-term care is medically necessary and then only for 100 days in a skilled nursing facility following a 3-day hospital stay. Without coverage staying in a nursing home costs over $7,000 per month.

Additionally, LTC insurance coverage extends beyond long-term stays in a care facility. In my own family, my mother used her LTC insurance to provide in-home assistance around the house and rehab from a knee replacement surgery.


Fill the Gap

Once you understand your coverage and potential coverage gaps you can start exploring additional resources.

Those who have Medicare may want to consider Medigap which is a supplemental health insurance policy to cover costs Medicare does not cover.

Long-term Care insurance can help reduce costs in the event you have LTC related costs. The average stay in an LTC facility is four years. Without insurance that would cost between $250,000 – $400,000 out of pocket depending on the level of care required.


What Next?

Retirement planning is all about understanding the biggest risks based on your unique situation. Once you understand the risks you can decide on the best way to mitigate the risks in a way that you feel comfortable about your future. 

If you are approaching retirement, you should start looking at your medical needs. If you are still working you should consider funding an HSA to help build savings to address this specific cost. 

Evaluating your potential needs and navigating the various coverage plans and options can be a daunting task. If you are looking for a team with the technical experience to design comprehensive plans and the experience implementing those plans to and through retirement, we are here to help you. 

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