Keep retirement health care costs in mind
Not everyone has a chance to save for retirement, but it is something almost everyone should be doing. One very important thing to remember is that health care costs in retirement will likely keep going up.
Rising health care costs
The costs of health care, both out-of-pocket and subsidized, are expected to keep going up. The extent to which these costs will go up will depend on a variety of factors, but expectations are that they will continue to go up. This year alone, out-of-pocket medical expenses for retired couples will go up to around $10,750 per year. Couples retiring this year are expected to spend somewhere in the range of $240,000 per year on their out of pocket medical expenses during their full retirement. In the last year, these costs have been going up an average of 4 percent a year.
Actual retirement savings
On average, Americans who are thinking about retirement costs are only budgeting $5,621 per year of their retirement for health care costs. This is a number in line with cost of living increases but not medical cost inflation. This difference in costs is what is leading to a “retirement” for many people that still includes some kind of working. Unless you have an employer who will continue health coverage after retirement, you may find yourself paying much more for medical care than you may have in the past. Though Medicare may continue as it currently is, taking a bet on the future of Medicare may not be a safe option.
Long term care insurance
In addition to strictly medical coverage, long-term care coverage is also a factor in retirement savings. Long-term care is not strictly a medical cost, though medical costs are a part of long-term care. The average life expectancy of Americans is going up, and the reality is that many people will not be able to live entirely on their own as they age. Long-term care insurance stands in place to defray some of the expenses of long-term care. In all retirement savings calculations, you should consider carefully that you will need to pay medical costs and possibly long-term care costs. A general purpose savings or retirement account can be effective in paying these costs, but you need to consider those costs in deciding how much to save.