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How Much Could Healthcare Cost You in Retirement? The Amount Will Shock You

By Christy Bieber – Jun 20, 2020 at 7:46AM

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If you aren't prepared for these huge costs, you could have a big problem!

When planning for retirement, fewer than one-third of Americans are taking the costs of healthcare into account. Sadly, if you're not among the minority of people considering how you'll cover your medical expenses in your later years, you could find yourself facing dire financial consequences as healthcare could cost you a fortune.

Just how big of a fortune? A new study from Employee Benefit Research Institute (EBRI) shows how big the price tag might be -- and it will shock you. 

Doctor talking to older male patient.

Image source: Getty Images.

How much will you need for healthcare costs as a retiree? 

Employee Benefit Research Institute analyzed how much out-of-pocket spending would add up to for healthcare costs in retirement, including spending on Medicare premiums and prescription drugs. Here's what they found for 2020:

  • A 65-year-old man would need $130,000 to have a 90% chance of having enough savings to cover medical care costs in retirement. 
  • A 65-year-old woman would need $146,000 
  • A senior couple would need $325,000 

These startling numbers are actually a big reduction from the amount retirees were estimated to need in 2019. In fact, the projected sum declined by 10% compared with last year. That change happened because EBRI altered which Medigap plan was used in their calculations and because the Medicare Trustees reduced projected costs for Medicare Part D prescription drug coverage. 

But even though EBRI is projecting lower out-of-pocket costs than last year, these numbers are still huge. And they don't even take into account one of the most significant medical expenses seniors are likely to incur when they reach retirement: The costs of long-term care.

As many as 70% of seniors will need some type of it in their lifetimes, and the average annual cost could top $100,000 for those who opt for a private room in a nursing home. If you add these costs to the amount of out-of-pocket spending a typical senior will have to pay for routine care, the amount is truly staggering.

Make sure you're prepared to cover your medical expenses in your senior years

Coming up with hundreds of thousands of dollars for medical care isn't something that will be easy for anyone. But it's downright impossible if you haven't expected to incur these costs or haven't prepared to cover them. 

That's why you need to take medical expenses into account when you're setting your retirement savings goals and work toward building a dedicated account for healthcare as a senior. If you're eligible for a health savings account, the tax benefits make it the ideal vehicle to save. But even if you can't put money into an HSA, it's a good idea to have a fund earmarked specifically for your medical needs. 

If you end up healthy as a retiree, you can spend the money on things that are more fun or can pass it onto your loved ones. But if the worst happens and your care costs are high, your extra savings will ensure that you never have to worry about how to pay the bills as you cope with health concerns. 

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