Healthcare Costs To Work Into Your Retirement Budget

If you’re gearing up for retirement , don’t forget to factor in healthcare costs. According to Fidelity , the cost of health care will be one of your largest expenses after housing and transportation.

Fidelity’s 2023 Retiree Health Care Cost Estimate found that people who retire at 65 can expect to spend $157,500, on average, for health care and medical expenses throughout their retirement. You need to budget so much including that people are living longer, retiring before Medicare kicks in and enduring a high rate of health care inflation.

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Marty Burbank, an expert in estate planning and elder law at OC Elder Law , said healthcare costs are often underestimated in retirement planning.

“My advice is to overestimate rather than underestimate these expenses,” he said. “With proactive planning, cost management strategies and supplemental insurance options, healthcare can remain affordable for most retirees. But underestimating the need for medical care as you age is one of the biggest mistakes in retirement planning.”

Here are some healthcare costs to work into your retirement budget to avoid coming up short :

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Typical Healthcare Costs in Retirement

Griff Harris, CIC, owner and principal of Griffith E. Harris Insurance Services , said that healthcare costs are one of the largest expenses in retirement. This holds even if you’re 65 and eligible for Medicare.

“Medicare covers many basic services, but out-of-pocket costs for premiums, deductibles and non-covered care can easily reach $5,000 per year or more for an individual,” he explained.

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Medicare and Out-of-Pocket Costs

“Dental care, vision and hearing services must also be budgeted for, as Medicare does not cover routine dental visits, glasses, contacts or hearing aids,” said Harris. “Private insurance for these services averages $1,000 to $1,500 yearly.”

According to Harris, other services Medicare doesn’t cover are acupuncture, cosmetic surgery, private-duty nursing and orthotics. “These out-of-pocket costs can be $2,000 to $10,000 per year depending on one’s needs,” he said.

Prescription Medication Costs

Burbank said that prescription drugs are often one of the largest out-of-pocket costs for retirees when it comes to health care.

“Using mail-order pharmacies and generic medications when possible helps, but retirees can still pay $50-$500 per month or more,” he explained. “Don’t assume drug prices will remain stable; plan for increases and talk to your doctor about lower-cost alternatives.”

Long-Term Care Expenses

Harris said that long-term care costs are substantial and not covered by Medicare.

“A private room in a nursing home averages over $100,000 per year,” he said.
At-home care can also cost $50,000 or more. Long-term care insurance is essential, as it can cover a large portion of these expenses.”

Burbank added that you should make sure LTC policies cover inflation and factor in your health, age and budget when determining how much coverage you need.

Dental Expenses

“Dental work isn’t covered by Medicare and the need for expensive procedures increases with age,” said Burbank.

“Most retirees pay $50-$200 for routine cleanings and exams and $500-$3000 or more for crowns, implants or dentures,” he explained. “Dental insurance or membership plans help budget for these unpredictable costs.”

Role of Supplemental Insurance

You might also want to consider supplemental insurance to help cover some of your healthcare costs in retirement.

“Supplemental insurance (Medigap policies) helps pay for some of these uncovered costs and the out-of-pocket portions of Medicare services,” said Harris. “The average Medigap policy costs around $2,000 per year.”

Important Things To Remember

While budgeting over $150,000 for health care in retirement probably sounds intimidating, it’s important to remember that you don’t have to pay that expense in one bulk payment.

Even so, you should be prepared. According to T. Rowe Price , here are some things you should do to prepare for health care expenses before you retire.

• Compare premiums versus out-of-pocket costs regarding different Medicare coverage options.
• Include prescription drug plans in the cost comparison.
• Open a savings account to pay for out-of-pocket health care expenses and replenish the funds each year as needed.

This article originally appeared on GOBankingRates.com : Healthcare Costs To Work Into Your Retirement Budget