How Much to Save for Health Care in Retirement?
Date: January 16, 2017
Housing, food and vacations shouldn’t be your only concerns when it comes to retirement planning. Failing to account for health care costs can be financially disastrous; especially when you consider that those costs often increase the longer we live. Although the cost of health care in our retirement years can vary, here are some tips to help you estimate how much you’ll need.
Some Basic Numbers
According to the American Association of Retired Persons (AARP), the total health care costs for a typical male from age 65 to 82 will be about $107,000, based on 2015 statistics. Medicare will cover $60,000 of this amount, which means the remaining $47,000 must come out of savings. Women should have a bit more saved for health care, because they tend to outlive men. Medicare will cover about $79,000 of a total bill of $137,000 for a woman age 65 to 85, leaving $58,000 that must come out of pocket.
Behind the Basic Numbers
The healthcare estimates provided by AARP include hospital visits and doctor appointments, but not long-term care. These numbers are also based on the assumption that you’re enrolled in Medicare Parts A, B and D, which includes optional prescription coverage. The out-of-pocket costs include Medicare premiums. If you have private health coverage through an employer, factor in those premiums when calculating your annual expenses after you stop working.
Rising Costs With Age
You should expect your health care costs to increase as you age: more prescriptions, more doctor visits and, unfortunately, more trips to the hospital. At age 70, you can expect health care costs to be about $5,000 for the year, half of which should be covered by Medicare. By age 80, the cost will have risen to about $8,800 per year, with $5,200 covered by Medicare. By age 85, healthcare costs will be closer to $11,000 per year, with only about $7,000 covered by Medicare.
Additional Considerations
Obviously, your health will have a lot to do with the cost of health care in your retirement years. Staying fit, seeing the doctor regularly for checkups and other preventative healthcare should be part of your overall retirement strategy.
One aspect that often gets overlooked when estimating the cost of health care is where you plan to live and retire. Retiring in Michigan can cost you $40,000 more in health care costs over 20 years compared to living in Hawaii. According to a report from HealthView Services, Michigan, Florida, Nevada and Maryland are the most expensive states when it comes to health care, while Hawaii, Vermont and Maine are ranked as the least expensive.
Quicken has made the material on this blog available for informational purposes only. Use of this website constitutes agreement to our Terms of Use and Privacy Policy. Quicken does not offer advisory or brokerage services, does not recommend the purchase or sale of any particular securities or other investments, and does not offer tax advice. For any such advice, please consult a professional.