Prepare for Medical Costs in Retirement

How much money do you think that you need to retire? There are many assumptions involved in answering that question, but one issue is the greatest of all: How much money will you need for your health care costs?

Fidelity projects that a 65-year old couple who retired in 2016 should expect an average cost of $260,000 over 20 years, and that excludes any nursing home costs.

Too often, seniors are worried about medical expenses draining their funds and forcing them to become a burden to their families. Unfortunately, too many seniors have not discussed the issue with their families – or anyone – in order to formulate a plan.

According to a recent survey released by Nationwide Mutual Insurance Company, 56 percent of affluent respondents selected not having enough money to cover unplanned medical expenses as their top retirement fear. You can reasonably assume that less affluent respondents (75 percent) are even more concerned about medical costs (assuming they haven't given up hope completely).

Just over half (51 percent) of respondents are concerned about being a burden to their family in their old age and 62 percent would prefer death to life in a nursing home, but these issues are not being communicated. The survey found that 45% have not discussed health care plans in retirement with anyone, 50 percent haven't discussed the subject with their spouse, and 81 percent have not discussed the issue with their children.

Many respondents do not want to worry their children or other family members by discussing the unpleasant possibilities – and perhaps they do not want to consider the options themselves. Still, ignoring the potential for devastating health care costs is not going to make the issue go away.

The issue may take on even greater importance under the new administration. The solvency of the Medicare trust fund has been improved through some aspects of the Affordable Care Act (ACA, aka Obamacare), but those gains may be reversed in whatever replaces the ACA.

President Trump has vowed not to reduce Medicare benefits, but that is somewhat at odds with the Republican Congress and their plans to alter Medicare. House Speaker Paul Ryan has previously discussed plans for "premium support" – in essence, a set amount of funds from the government to cover medical costs. There's no guarantee that those funds would sufficiently cover future costs.

Current costs are not fully covered, either. Medicare Part B, the program covering lab tests and visits to physicians, only pays for 80 percent of approved charges. Add on the skyrocketing cost of prescription drugs and the issue is even more pronounced. An AARP study found that in 2015, prices for brand-name drugs that are commonly used by seniors rose almost 130 times more than the inflation rate.

What can you do to reduce your concerns about retirement health care costs? Start by using the free MoneyTips Retirement Planner to help you calculate how much income you will need for retirement.

The second step is to communicate with your family. Don't make your loved ones guess about your plans and preferences. As unpleasant as it may be, make your concerns known to your family, and certainly with your spouse.

Next, contact one of our professionals to help you plan your retirement costs. A certified financial planner or similarly qualified advisor can help you with options for long-term care and prepare a financial plan that allows you to fund those options. Consider whether the cost of long-term care insurance gives you sufficient peace of mind to warrant the expense.

Finally, make sure that you are taking preemptive action against poor health in retirement. Eating right and exercising regularly can lay the foundation for improved health. Take advantage of your covered medical visits, and get the proper screenings for any diseases that warrant extra attention due to family history or medical precursors.

You can't account for every possible condition, but you can increase your chances of a happy and healthy retirement. Don't leave your retirement health care costs to chance. Let the free MoneyTips Retirement Planner help you calculate when you can retire without jeopardizing your lifestyle.