One of the most challenging aspects of retirement planning is estimating healthcare costs. A wealth advisor can assist you with this task, develop a strategy to cover them and guarantee that you don’t outlive your savings.
Medical care costs are expected to increase at an annual rate of more than five percent, so it’s essential that you plan for these rising expenses ahead of time – ideally well before retirement.
Age
Aging involves a multitude of biological changes that impair one’s capacity to perform tasks, increase the likelihood of illness and even cause death. These modifications are neither linear nor consistent in nature.
At the same time, ageing provides older individuals with new opportunities to engage in activities and contribute in ways they may not have done before. It’s a period of life where individuals have the chance to explore all sorts of things – from taking on new challenges to building meaningful connections.
Though retirement planning may look different for everyone, there are some common themes that can guide you. These include:
Health Status
A retiree’s health status can dictate the amount of healthcare they must budget for in retirement. They may need to cover prescription drugs, dental work, vision and hearing services, long-term care needs that aren’t covered by Medicare, as well as other costs not covered by insurance.
Health-care costs are not fixed and often rise over time as more retirees utilize medical services. While this trend is expected to continue, it can significantly reduce your retirement income for living expenses.
Retirees can manage their healthcare expenses by making lifestyle adjustments and following doctor’s orders. This will reduce or eliminate out-of-pocket expenses, but they should also consider purchasing supplemental or Medigap coverage to fill any gaps in coverage.
Pre-Retirement
Healthcare costs are a major concern for retirees. Medicare covers some costs, but not all. Depending on your age and health status, you may need additional coverage for prescription drugs, long-term care expenses, dental services and overseas travel.
According to a study by Vanguard and Mercer, 65-year-old couples can expect their healthcare costs to total $315,000 throughout retirement by 2022.
Costs can seem overwhelming, but if you break them down and estimate how much money you’ll need each year to cover them, it becomes less intimidating.
In many cases, you may also receive income from Social Security or a pension that could help cover some of your healthcare costs. It’s wise to start saving for retirement healthcare expenses as early as possible.
Post-Retirement Health Expenses
Health care expenses are often a source of worry for retirees. Unfortunately, many individuals fail to incorporate them into their retirement planning and may not have enough money saved for such costs.
An EBRI report states that health care spending accounts for 15 percent of retirees’ overall spending by age 75. While it can be challenging to forecast your future healthcare requirements, it’s essential that you do your research and make informed decisions before retiring.
Out-of-pocket medical costs are determined by factors such as income, age, health status, location, Medicare or supplemental plans and life expectancy. Furthermore, they tend to rise more rapidly than other expenses due to inflation.
