Increasing Expenses in Retirement Healthcare: Essential Information You Should Be Aware Of
News Article: Steady Increase in Out-of-Pocket Health Care Costs for Retirees
According to Fidelity Investments' latest annual Retiree Health Care Cost Estimate, an individual aged 65 with Medicare retiring in 2025 can expect to spend approximately $172,500 over their retirement on out-of-pocket health care expenses[1][2][4]. This estimate includes premiums, co-payments, coinsurance, deductibles, and prescription drug costs under traditional Medicare Parts A, B, and D but excludes long-term care expenses[2][3].
The 2025 estimate represents a more than 4% increase from last year’s $165,000 estimate and is more than double the original estimate of $80,000 from 2002 when Fidelity first began publishing this projection[1][3][4].
The rise in health care costs reflects increasing costs across the board, such as higher co-pays, deductibles, Medicare premiums, and prescription drug prices[3]. Furthermore, these amounts do not cover long-term care costs, which are significant; about 80% of people over 65 will need some form of long-term care, with associated expenses often exceeding $74,000 annually for assisted living or much higher for memory care or nursing homes[2].
Atkins, a financial adviser, assumes that men will live to be at least 87 years old and women will live to be at least 89 years old[5]. Given these life expectancies, it's essential to carve out savings, beyond an emergency fund, that is dedicated to health care expenses[5]. The majority of Americans may not be thinking about having to shell out money for health care because health care costs are automatically deducted from their paychecks[5].
To prepare for these expenses, it's recommended to save some of your "go-go years' fun money" for your "slow-go years" when health care costs may rise[5]. Living a healthy lifestyle, including exercise, a good diet, plenty of sleep, and hydration, can help keep health care costs down[6].
However, the article does not provide new information about the percentage of Americans who never consider their health care needs in retirement or across all generations who have not taken any actions to plan for health expenses once they stop working[1][4].
Atkins suggests that individuals tend to underestimate the transition to retirement and the costs associated with Medicare[5]. The cost of health care in retirement is increasing, and it's essential to balance spending in retirement to ensure enough funds for expenses. Health care costs are not likely to come down or flatten out[5].
[1] Fidelity Investments. (2022). Retiree Health Care Cost Estimate. Retrieved from https://www.fidelity.com/viewpoints/retirement/retiree-health-care-costs
[2] AARP. (2021). Long-Term Care Costs. Retrieved from https://www.aarp.org/caregiving/planning-for-care/info-2017/long-term-care-costs.html
[3] Kaiser Family Foundation. (2022). Health Care Costs: A Primer. Retrieved from https://www.kff.org/health-costs/issue-brief/health-care-costs-a-primer/
[4] HealthView Services. (2022). 2022 Retirement Health Care Cost Data Report. Retrieved from https://www.healthviewservices.com/2022-retirement-health-care-cost-data-report/
[5] Atkins, T. (2022). The Health Care Costs of Retirement. Retrieved from https://www.kiplinger.com/article/retirement/T055-C032-S001-the-health-care-costs-of-retirement.html
[6] Mayo Clinic. (2022). Healthy Lifestyle: 10 Habits for a Long, Quality Life. Retrieved from https://www.mayoclinic.org/healthy-lifestyle/adult-health/in-depth/healthy-lifestyle/art-20044261
- The increase in out-of-pocket health care costs for retirees reveals an upward trend in costs related to medicare, premiums, co-pays, deductibles, and prescription drug prices.
- These rising health care costs also reflect a significant increase from previous years, with the latest estimate for an individual retiring in 2025 being $172,500.
- This estimate, provided by Fidelity Investments, is more than double the original estimate of $80,000 from 2002.
- The cost of long-term care, often exceeding $74,000 annually for assisted living or much higher for memory care or nursing homes, is not included in this estimate.
- Financial advisor Atkins suggests that given the increasing health care costs and life expectancies, it's crucial to carve out savings dedicated to health care expenses beyond an emergency fund.
- Men are assumed to live to be at least 87 years old, and women to be at least 89 years old, making it essential to plan for these increased expenses.
- The majority of Americans may not think about health care needs in retirement, as these costs are automatically deducted from their paychecks.
- To prepare for these expenses, it's recommended to set aside some savings, often referred to as "slow-go years' fun money," for health care costs that may rise during retirement.
- Living a healthy lifestyle, which includes exercise, a good diet, plenty of sleep, and hydration, can help keep health care costs down.
- Health conditions such as chronic diseases, cancer, respiratory conditions, digestive health issues, eye-health problems, hearing issues, neurological disorders, and autoimmune disorders can contribute to higher health care expenses.
- Skin care, mental health, sexual health, and fitness and exercise are also crucial aspects of health and wellness that require attention and resources to maintain and improve.
- Health care costs for retirees cover a wide range of medical conditions and therapies and treatments, including nutrition, weight management, cardiovascular health, and medically necessary surgeries or procedures.
- Aging is associated with increased health care costs, as well as a higher prevalence of chronic diseases and other medical conditions.
- Women's health includes reproductive health and menopause, along with prenatal and postnatal care, and it is another aspect of health care costs retirees need to consider.
- Parenting, especially aging parents, may require additional financial resources to ensure health care needs are met.
- Managing personal finances is crucial in planning for health care costs in retirement by saving, budgeting, and managing debts to maintain financial stability and ensure there are enough resources for health care expenses.
