When preparing for retirement, it's crucial to consider how your spending habits will change as a senior. This will enable you to make a more accurate assessment of how large your nest egg needs to be.

Unfortunately, far too many future retirees end up underestimating how much they'll need for one of their largest expenses -- or even forgetting about these costs altogether. You can't afford to let that happen to you, so be sure you take this huge expense into account. 

Doctor and patient talking.

Image source: Getty Images.

Don't forget to save for this necessity 

The one crucial expense to take into account when anticipating your retirement spending is the cost of medical services.

Yes, Medicare provides coverage to seniors aged 65 and over. But, that doesn't mean receiving healthcare services won't come at a price. Medicare excludes things like hearing aids, vision care, dental care, and long-term care. And there are large gaps in the prescription coverage it provides. There are also premiums to pay for Medicare services, as well as 20% coinsurance costs for routine care covered by Medicare Part B.

Many seniors choose to buy supplemental insurance coverage that goes beyond what Medicare offers. This could come in the form of a Medigap policy that supplements traditional Medicare or a Medicare Advantage policy that acts as a substitute to traditional Medicare. But both Medicare Advantage and Medigap policies have premium costs of their own, as well as copays with most plans. 

The reality is, because of all of the out-of-pocket costs seniors face -- and the fact most retirees tend to use more medical services than young people -- healthcare will probably be one of your biggest retirement expenses. And chances are good that you're underestimating just how much you'll need to cover it. 

The Employee Benefit Research Institute actually prepares annual estimates for how much retirees will pay for medical services. According to its data, in 2020, a 65-year old man in 2020 would need around $73,000 in savings, while a 65-year-old woman would need $95,000 in savings to have a 50% chance of being able to cover out-of-pocket expenses including Medicare premiums and the median cost of prescription drugs. In order to have a 90% chance of covering these essential costs, a senior man would need $130,000 and a woman $146,000. 

As shocking as these numbers are, things get even worse for those who rely on a lot of medication. A senior couple with prescription drug use in the 90th percentile would need $325,000 saved to have a 90% chance of being able to afford their medical costs in retirement. That amount would eat up a good chunk of most people's nest eggs -- and costs are only likely to go up in the future due to high inflation in the healthcare industry. 

Being prepared for these expenses is crucial, because getting essential medical services is vital to living a healthy, comfortable retirement. When you set your retirement savings goals, assuming that you'll need six figures to cover medical care alone will help you to ensure that you're investing enough for a secure future.