Sticker Shock

Talk about sticker shock. A new report from Fidelity suggests the average couple retiring this year will need $260,000 to cover health care costs in retirement!

From CNN Money:

The estimate applies to those with traditional Medicare insurance coverage and considers premiums, co-payments, deductibles, and out-of-pocket drug costs. It assumes that both spouses are 65 years old.

About one-third of the total $260,000 cost is for something everyone has to pay no matter how healthy you are: premiums for Medicare Part B (doctor services and outpatient care) and Part D (prescription drugs).

The graphic below, courtesy of Bloomberg, shows the rise of estimated health care costs for retirees since 2002.

bloomberg

According to a related story on Bloomberg.com, “For many Americans, $260,000 may seem an impossible amount to save on top of other retirement expenses, but financial planners say several strategies can help.”

  • First, get the right Medicare supplemental insurance policies. The program is complicated, and retirees may need help from an expert or an organization such as AARP to get it right.
  • Second, save for health care in a tax-efficient way. If your employer provides a high-deductible health insurance policy, you’re eligible for a health savings account.
  • Third, consider creative strategies to maximize income late in life, when health-care costs tend to rise. By waiting until they’re 70 to take Social Security benefits, retirees reap bigger benefits.

Despite those tips, The Fiscal Times wrote, “Americans remain concerned about how they will pay health care expenses in retirement. Three out of five cited this as a worry in a separate survey from Edward Jones.

“Healthcare expenses can be difficult to project, especially when you are decades away from retirement,” said Scott Thoma, principal and investment strategist for Edward Jones, in a statement. “Unexpected conditions and medical expenses that manifest later in life pose a great threat not only to physical and mental health, but also to the financial well-being of both the care receiver and the caregiver. That’s why it is critical to start preparing early.”

Arizona is one of the country’s most popular spots for people to retire, so this new report will affect many people in our state. Share your thoughts and suggestions on what retirees can do to make sure they can continue to afford the health care they need. Working with our partners to find solutions to today’s key health care issues will help us one day reach our goal of making Arizona the Healthiest State in the Nation!

 

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