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How to Plan for Medical Costs in Retirement | Retiring in 2021

Planning for Retirement text ove rimage of two seniors relaxing on boat

Posted on July 26, 2021 by Kyle Walton

With healthcare costs on the rise, planning for healthcare costs in retirement is becoming increasingly important.

As many people are aware, healthcare costs can be one of the biggest expenses when it comes to providing for yourself in retirement. According to trusted sources, a 65-year-old couple retiring in 2021 may require approximately $300,000 in savings to ensure their healthcare needs are paid for. This number may even fluctuate depending on where you retire, when you retire, and how long you live.

Unfortunately, this number doesn’t even include the additional annual costs associated with long-term care. In 2020, long-term healthcare carried a median cost of $105,852 for needs like private room nursing home care.

The bottom line is, the cost of medical insurance in retirement can be overwhelming. Despite many older Americans working and saving for retirement over the course of their entire adult lives, it can still be a challenge to financially prepare for everything.

For this reason, it is incredibly important to adequately plan for the average costs of healthcare after retirement.

If you have questions about how you can better afford medical costs in retirement, don’t hesitate to call (800) 950-0608 to further explore your options today.

How do healthcare costs fit into a healthy retirement budget?

When considering the retirement of you or your loved ones, it can be helpful to take a big picture look at your overall retirement budget. This budget depends heavily on two factors: how much income you will have in retirement and the total costs of your living expenses, including healthcare expenses.

Social Security benefits are one form of potential income to consider. The maximum monthly benefit of social security is $3,011 for those who retire at 65. Some expenses to consider include cost of living (food, transportation costs, etc.), which for Americans 65 or older, amounts to about $4,328 on average.

With these statistics in mind, it shouldn’t come as much of a surprise that some professional financial sources estimate that only 51 percent of adults over the age of 60 believe they are financially prepared for retirement. Though it often comes as a surprise to many, Social Security is not meant to fully sustain an individual after retirement. Rather, its benefits are designed simply to supplement retirement savings.

This is especially important to keep in mind when considering that you will also need to adequately budget for healthcare expenses. Exactly how much retirement income should be budgeted specifically for medical costs mostly depends on an individual’s age and general healthiness.

“The healthier we are going into retirement typically means that less money will be allocated toward health care expenses,” says Chris Schaefer, head of the retirement plan practice at MV Financial. “The other side of that coin is that with a healthier lifestyle, life expectancy will be longer and, therefore, retirees need to plan for a longer time in retirement.”

If all of this information seems frightening, it doesn’t have to be. You may be pleasantly surprised to know that there are in fact many ways to adequately prepare for medical costs in retirement. Taking a deeper dive into more comprehensive Medicare coverage is one such option.

How advanced Medicare coverage may be able to help you with post-retirement healthcare costs.

Enrolling in Medicare can make a generally positive impact when it comes to retirement healthcare affordability, but Original Medicare Parts A and B (which you are automatically eligible to enroll in beginning at age 65) does not cover every healthcare need you may require.

For example, Original Medicare plans do not typically cover dental, vision, or hearing care, but some Medicare Advantage (Medicare Part C) plans do. In addition, Medicare Part D is another coverage option that can help you pay for prescription drug costs.

Keep in mind that certain Medicare plans will require you to budget for deductibles, premiums, and other out-of-pocket costs that may be associated with your chosen plan.

The current standard deductible for Medicare Part A is $1,484, while the annual deductible for Medicare Part B is currently $203. The standard monthly premium for Medicare Part B is $148.50. Remember that some Medicare beneficiaries will pay more based on their plan.

Medicare Part C and Medicare Part D plans are offered by private insurance companies, and their deductibles, premiums, and other out-of-pocket costs depend on several factors including your income and what types of care your plan covers.

Interested in tailoring your post-retirement healthcare coverage to your specific needs? Reach out to one of our licensed agents to discuss your options or use our free plan comparison tool today!

Senior retired man is planting inside his glasshouse for happy retirement relaxing lifestyle.

What should I keep in mind about medical costs when saving for retirement?

If you or your loved one is getting close to retirement age, it’s important to keep in mind all the expenses you will need to afford, especially as it pertains to medical costs and Medicare insurance benefit expenses.

It’s never too early to start planning for retirement, and the more time you have to properly prepare a budget that works for you based on all your needs, the better off you will be when the time comes.

For additional questions or concerns involving Medicare or the possibility of expanded Medicare coverage plans that may be available in your area, feel free to contact us by email or by phone today.

About the Author

Kyle Walton

Kyle is a professional writer with several years of experience helping to inform the public on many diverse topics and industries, including healthcare. He is a Kutztown University graduate, Class of 2017.

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