Don’t Let Health Care Costs Derail Your Retirement

Health care costs for retirees are at an all-time high. Here’s what you can do now to be financially prepared.

Soon-to-be retirees can expect to spend more than $377,000 on health care in retirement, according to HealthView Services’ 2016 Retirement Health Care Costs Data Report.

Retiring in 10 years? Then you can expect to put 88 percent of your lifetime pretax Social Security benefits toward health care costs (compared to the 57 percent that retirees pay today).

Growing health care costs mean that it’s more important than ever to factor these costs into your retirement planning.  Here is some preliminary information for you to consider:

If you plan to retire at age 65 or later

Planning at this age is easier because your costs are more fixed, thanks to Medicare eligibility. To get an idea of what Medicare coverage you would sign up for once you retire, and what that coverage would cost, visit medicare.gov.

Keep in mind that changes to Medicare are likely on the horizon. However, looking at your Medicare plan options now, and estimating your monthly costs, is a smart move. Once you have that ballpark number, then you can consider this expense as you plan for your retirement.

If you plan to retire before 65

If you’re giving up a 9-to-5 job before your 65th birthday, you’ll need to get coverage until you become Medicare eligible.

Some employers allow you to stay on your current insurance plan after you stop working, while others offer health insurance for their retirees. Talk to your HR department now about your future coverage options and what your financial contribution would be.

If your employer doesn’t offer additional insurance, you’ll need to buy it on the health care exchange. Numbers vary per state, but currently, my clients to expect to pay about $1,000 a month per couple.

What all this means for you

Retirement planning has always been important but it’s even more critical to now to be aware of all the expenses you will face.  Better to plan ahead before you retire than to be caught by surprise at higher than anticipated expenses after you retire.