Don’t freak out about health care costs in retirement

Don’t freak out about health care costs in retirement
December 30 01:00 2015

Planning for retirement is tough. Figuring out how much money you’ll need for health care is even tougher.

More than half of people over 50 recently surveyed by Nationwide said they were “terrified” of the uncertainty.

Health care will likely be your biggest expense during the golden years. It’s obviously a tough number to nail down and one that will vary by person, but there are estimates out there. A 65-year-old, healthy couple can expect to spend $266,600 over the course of their retirement on Medicare premiums alone, according to HealthView Services. An estimate from Fidelity is a little less: $245,000. Neither include out-of-pocket expenses or long-term care costs.
No matter how you break it down, health care costs in retirement are expected to keep going up. Fidelity’s tally rose 11% in the past year.

“At our age, health care is at the top of our list of concerns — especially when you think about the fact that we’re on a fixed income,” said Gene Ratchford, 70, who lives with his wife Sandra, also 70, in North Carolina.

Health care takes up the biggest chunk of their budget after the mortgage payment. It cost them nearly $12,000 during 2015, according to his meticulously kept spreadsheet. That includes everything from premiums and co-pays, to prescription drugs — and the gas used driving to doctors’ offices.

The previous year, the Ratchfords spent $17,500. Why so much more? New hearing aids cost them about $6,000 and the premium for their supplemental Medicare plan jumped by about $19 a month.

“The uncertainty creates a lot of anxiety for people. If you’re freaking out, you’re not alone,” said John Carter, the president of Nationwide’s retirement plans business.

You don’t have to feel completely in the dark, though. Here are some things to keep in mind.

Medicare premiums are the biggest budget buster

Most people don’t pay a premium for Medicare Part A, which covers hospital visits. But you will pay monthly premiums for Part B (doctor services and outpatient care), Part D (prescription drugs), and supplemental coverage which may pick up the cost for deductibles, co-pays and medications. These could be taken straight out of your Social Security check…

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