In fact, according to Health View Insights, the average lifetime cost for health premiums for a 65-year old healthy couple retiring in 2015 would be $266,589. Take into account dental, vision, co-pays and out of pocket expenses and that number could rise to $394,954.
That’s a lot of money. And planning ahead for that level of expense likely seems unachievable. Afterall, most retirees do not have that kind of cash in their savings.
Broken down annually, it’s a little more manageable, ranging from $3,000 to $10,000, according to a Bank of America Merrill Lynch survey. Either way, it is smart to start budgeting for your health care costs in retirement as soon as possible.
First, consider your current costs and coverage needs. Then, look to the future and make educated guesses about the plan you will purchase.
Understand your current coverage
Be sure to factor inflation into your budget, too. Experts assume 6 to 8 percent increases in health care costs each year.
Many people receive health care coverage from their employer and also personally make a contribution to the premium and out-of-pocket payment. These costs – both what you and your employer incur – can help determine your future costs.
After thinking through the costs, think about what coverage is an absolute must in your book.
What services do you use on a regular basis? Which services can you do without? No one has a crystal ball into their health care future, but your current health condition tells you a lot about what you might expect in the coming years – keeping in mind, of course, that as we age, we tend to visit the doctor more often.
Explore your retirement health care options
After you take a closer look at your current health care coverage, investigate the health care options available to you during retirement, starting with Medicare. You’re eligible for Medicare once you turn 65. And, since it deviates from employer or individual health plans, many find it confusing. If you’ve taken the time to be an educated consumer, learning all about HMOs and PPOs, now you have to pull out your health care dictionary again and focus on Part A, Part B and Medicare Advantage.
Here’s a quick Medicare guide:
- Original Medicare– Includes Part A (hospital insurance) and Part B(medical insurance for doctor visits and more) is available for purchase through the government. Prescription drug coverage is available if you purchase Part D. You’ll pay a monthly premium for Part B and D.
- Medigaphelps pay for some or all of the out-of-pocket costs, such as co-payments, coinsurance and deductibles, that Original Medicare doesn’t cover. Because Medigap is supplemental to Original Medicare, you pay a separate monthly premium, as well as your Part B premium.
- Medicare Advantage –Part C, includes all of the coverage you get with Original Medicare (Parts A and B) and more. Doctor visits, hospitalization and often prescription drugs are combined in a single plan. These plans often offer extras like a fitness membership and dental benefits. A Medicare Advantage plan will feel most similar to your employer coverage since you will deal directly with the insurance company.
Your healthy future
No matter when you plan to retire, it’s always a good idea to start budgeting now, so you know your options and can plan for your long-term health care costs.
For more information about Medicare coverage, visit medicare.gov, where you can compare plans based on monthly premiums, deductibles, drug copayments, health benefits, and more. It may also be helpful to work directly with an insurance company or talk to an agent about your future health care needs.
To see more tips on saving for retirement, visit our Retirement Starter.
