Health Care Blues
When I work on retirement planning for my clients, they rarely consider their health costs in retirement. Since most employees are covered by an employer plan and are only charged a small percentage of the true costs, well, they think this will continue forever.
As of this writing, Medicare and Medicaid are available to seniors but it is not cheap and the costs to individuals continue to rise.
A recent study by the Employee Benefit Research Institute found that a 65 year old man, who retires this year, will need $68,000 to $173,000 in current savings to have a 50-50 chance of covering health premiums and out of pocket costs in retirement. If he wants a 90% chance, then, the amount of savings needed jumps to $134,000 to $378,000. The variance depends on whether a former employer subsidizes health costs in retirement.
The cost outlook is worse for women because they tend to live longer and need more health care. A 65 year old- woman who retires this year will need between $98,000 to $242,000 in savings for a 50-50 chance and $164,000 to $450,000 in savings for a 90% chance.
The study found that health care costs in retirement rose 9% for men and 16% for women over the past year.
These estimates do not include savings needed for long term care or for basic living. As I have stressed with my clients, you need to begin planning now. Remember these two items (health and long term care) are in addition to normal living expense.
Start today or you know the outcome… discipline or regret.