Healthcare Costs in Retirement

Americans workers are split about 50/50 when asked if they are confident they will have enough money to pay for medical expenses in retirement.

In a 2014 survey, 45% of all workers reported they were “not too” or “not at all” confident they would have enough money to pay for their medical expenses in retirement. The other 55% said they were “very” or “somewhat” confident they could pay the cost.¹
Tip: Medicare beneficiaries spent an average of $3,324 out of pocket in 2010, the most recent year for which figures are available. An unfortunate 10%—more than 4 million beneficiaries—spent more than $8,030. Source: AARP, 2013
Regardless of whether you’re confident or not, it’s important to have an idea about how much healthcare may cost in retirement. By putting the costs in better perspective, you might be able to better understand what you can pay for and what you can’t.

Health-Care Breakdown

Faucet A retired household faces three types of health-care expenses.
  1. A household may have the expense of premiums for Medicare Part B (which covers physician and outpatient services) and Part D (which covers drug-related expenses). Typically, Part B and Part D are taken out of a person’s Social Security check before it mailed, so the premium cost is often overlooked by retirement-minded individuals.
  2. The household should expect to pay for co-payments related to Medicare-covered services that are not paid by Medigap or other health insurance.
  3. The retired household should expect to pay for dental care, eyeglasses, and hearing aids, which are typically not covered by Medicare or other insurance programs.

It All Adds Up

A typical married couple, age 65, can expect these health-care expenses to add up to $197,000 over their lifetime, according to a study by the Center for Retirement Research. The study also concluded that there is 5% risk these costs will exceed $311,000.²

If nursing home costs are included, the uninsured health costs for a typical couple jumps to $260,000, with a 5% risk of it exceeding $570,000.³
Fast Fact: Nursing Home Costs. In 2014, the national average rate for a private room in a nursing home was $87,600 a year. The national average rate for a semi-private room in a nursing home was $77,380. Source: U.S. Department of Health and Human Services, 2014
Should you expect to pay this amount? Possibly. Seeing the results of one study may help you make some critical decisions when creating a strategy for retirement. Without a solid approach, health-care expenses may add up quickly and alter your retirement spending.

Out-of-Pocket Health-Care Cost

How much a typical couple, age 65, can expect to pay for uninsured health-care costs.
Without nursing-home costs With nursing-home costs
Average $197,000 $260,000
Top 5 percent $311,000 $570,000

Source: Center for Retirement Research, March 2010; (most recent figures available).

Prepared for the Future?

Workers age 55 and older were asked how much they have saved and invested for retirement — excluding their residence and defined benefit plans. Chart

Employee Benefit Research Institute, 2013 Retirement Confidence Survey.

1. Employee Benefit Research Institute, 2014 Retirement Confidence Survey 2,3. Center for Retirement Research, March 2010; (most recent figures available)

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