When you think of retirement, you likely picture having the funds to cover your day-to-day lifestyle, along with the ability to enjoy the bucket list trips and hobbies you’ve worked so hard for. However, it’s easy to overlook the prescriptions, procedures, and premiums that may arise with age—especially if you’ve been fortunate to enjoy good health.
Medicare Costs
Perhaps the cost of healthcare is overlooked because many assume Medicare will fully cover health-related expenses after age 65. While Medicare is designed to support retirees, it is far from “free” healthcare. Medicare is divided into several parts:
- Part A represents hospital insurance and typically has no premium for most individuals, as it is funded through payroll taxes paid during working years.
- Part B represents medical insurance, with a current standard premium of $202.90 per month for individuals in the lowest income bracket.
- Part C represents Medicare Advantage plans, with costs that vary.
- Part D represents prescription drug coverage, with costs that also vary.
In addition to premiums, retirees are responsible for deductibles—currently set at $1,736 for Part A and $283 for Part B, as applicable—along with coinsurance and other out-of-pocket costs. While Medicare helps reduce the risk of major financial strain, it still introduces expenses that must be accounted for in a retirement plan.
The Hidden Costs
It's important to note that several common healthcare needs are not covered under Medicare such as:
- Dental
- Vision
- Hearing
With the likelihood of needing these services increasing with age, it's important to make a plan for how they will be addressed and covered. While these costs are often somewhat predictable, others are less so.
The more significant “hidden” costs tend to arise later in life and can be far less predictable:
- Long-term care (the most significant)
- Home health assistance
- Increased prescription needs
- Surgeries
The challenge is that by the time these needs become apparent, planning options may be limited. In fact, according to the Employee Benefit Research Institute, a couple retiring at age 65 today may need between $315,000 and $366,000 to cover healthcare expenses throughout retirement.
Long-Term Care
While many variables influence healthcare costs, long-term care deserves particular attention. According to CareScout, assisted living or nursing home care can range from $6,000 to $11,000 per month. Even in-home nursing care can cost $2,000 or more per month.
When paired with the reality that approximately 70% of adults age 65 will require some form of long-term care during their lifetime, as well as about 20% needing care for more than five years, this becomes a highly relevant planning consideration.
Ways Retirees Can Prepare
Fortunately, there are proactive steps that can help address these potential costs. Thoughtful Medicare planning, evaluating long-term care insurance options, maximizing Health Savings Accounts (HSAs), and building a dedicated healthcare budget are all strategies that can provide greater confidence and flexibility.
The most effective retirement plans account for both expected and unexpected expenses. With the right approach, it is possible to cover daily needs, prepare for future uncertainties, and maintain the freedom to enjoy retirement with purpose.
If you’d like to learn more about working with one of our advisors, we invite you to connect with our team by completing our Discovery Questionnaire to schedule a 30-minute introductory call. We would welcome the opportunity to discuss your legacy, values, and goals to determine whether Harvest Point® is a good fit to help you achieve them.
Sources:
Employee Benefit Research Institute
CareScout