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Health care costs in retirement average $140,000

Written by Diane Archer

Arielle O’Shea reports in Forbes that a couple who retires this year should expect to spend $280,000 on health care costs over the rest of their lifetime. Put differently, individual out-of-pocket health care costs in retirement now average $140,000. Not only is the amount extraordinary, but people’s 401(k) savings typically will not even cover their full health care costs.

A person’s average 401(k) savings is $102,900, not even three-quarters (73.5 percent) of the estimated amount they will need to pay for health care in retirement. To help with retirement expenses, some people are pushing back their retirement date. The Employee Benefits Research Institute says that nearly one in four Americans are now saying they will not retire until age 70. A later retirement means lower health care expenses, more earned income and, usually, more earnings on your savings.

That said, more than half of people surveyed by Fidelity Investments (56 percent) said that they had retired earlier than expected. If you retire before 65, you will likely have higher health care costs.

Forbes advises that it is never too soon to plan ahead for health care costs and find ways to lower them. You should question your doctors’ orders and ensure you are not getting costly tests you do not need. Doctors are known to overprescribe tests and medicines. Always make sure you need the services and prescription drugs your doctor is recommending. You should find out whether you can change your diet and behavior to avoid taking prescription drugs.

Also make sure that the doctors you see are in your health plan’s network.  If you are enrolled in traditional Medicare, you should not have to worry. Almost all doctors take Medicare. But, to keep costs down, you should make sure your doctors take assignment–that means that they accept Medicare’s approved rate as payment in full. If you are enrolled in a Medicare Advantage plan, you need to confirm you are seeing network doctors, especially if you are hospitalized. Many doctors in in-network hospitals who treat you may be out of network. And, make sure that any tests are sent to an in-network lab.

Find out which preventive care services Medicare covers and talk to your doctor about whether you need them. Check out what the US Preventive Services Task Force has to say about them as well. Some tests may not be recommended. Keep in mind that your doctor may not know about Medicare-covered preventive services.

If you have questions, Medicare offers free state health insurance assistance programs or SHIPs in every state. The SHIPs can guide you to free local resources and help you navigate Medicare.

You might also want to have a written financial plan so you are best able to budget for your needs.
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1 Comment

  • I spend $2100 per year on my Medicare Supplement and Part D, $1600 on Medicare Part B and $1800 on prescription co-pay. In 25 years it will be $140,000. Glad to be healthy. Will it bust me? I don’t think so. It comes out of my monthly budget and not my retirement savings which continues to grow. So the number is certainly correct, and it certainly moves me to control the budget.

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