Have you thought about the expenses you might have once you retire? Some expenses might be lower, especially if the house is paid off and the kids have grown and flown the nest. But others could be higher. No matter how healthy you are, your health care costs could be significant during retirement.
A Healthy Understanding
To get an idea of what you might have to spend on health care during retirement, consider what current retirees are spending. According to a recent report,* in 2020 the average total out-of-pocket health care spending was $6,695 for the 65- to 74-year-old age group. For the same age group, spending on health insurance premiums alone was $4,897 — or 73% of the total. These costs could increase by the time you retire.
If you’re counting on Medicare to cover all of your health care expenses, you may be in for an unpleasant surprise. First, if you plan to retire early, know that Medicare coverage generally doesn’t start until age 65. Second, Medicare is not designed to cover all retiree health care costs. Many retirees purchase supplemental insurance for health care expenses that Medicare doesn’t cover. So, your retirement health care expenses could include Medicare premiums, supplemental insurance premiums, and out-of-pocket expenses.
A Healthy Habit
One way to prepare for future health care expenses is to save more in your retirement plan account. The more you can set aside now, the easier it may be for you to handle your health care costs during retirement. Working with a financial professional to ensure you have a financial plan in place and sufficient retirement savings for future healthcare expenses can help you be more comfortable in retirement.
* Consumer Expenditure Survey, 2020, U.S. Bureau of Labor Statistics