Budgeting for healthcare costs within your retirement plan is not only smart, but it helps to ensure that your savings are not depleted by an unexpected or extended illness. Costs associated with providing healthcare and maintaining health insurance are rising at rates well above inflation. Employers, overwhelmed by these rising costs, are modifying healthcare benefits and individuals are shouldering more of the burden.1
Estimated Healthcare Costs
Fidelity estimates that an average 65-year-old should plan for at least $551 monthly or $6,631 annually in healthcare expenses. The itemized expenses below were estimated using Fidelity's Health Care Cost Calculator.
Note: You may select other Medigap levels of coverage, which could increase or decrease monthly expenses.
| Type of Expense | Annual Cost | Monthly Cost |
|---|---|---|
| Medicare A Premium | $0 | $0 |
| Medicare A Deductible | $231 | $19 |
| Medicare A Co-Pay | $51 | $4 |
| Medicare A Skilled Care | $77 | $6 |
| Medicare B Premium | $1062 | $89 |
| Medicare B Deductible | $83 | $7 |
| Medicare B Co-Pay | $902 | $75 |
| Other misc. | $293 | $24 |
| Dental/Vision/Hearing | $388 | $32 |
| Medicare Supplement (Medigap) F2 | $2,244 | $187 |
| Prescriptions (Medicare Part D)3 | $1,300 | $108 |
| Total: | $6,631 | $551 |
Estimated Long-Term Care Expenses
The possibility that you or a family member could require long-term care increases as you age.4 The range of long-term care expenses can rapidly deplete your finances if you're not prepared.
| Average National Cost5 | ||
|---|---|---|
| Home care service | $25.32 per hour | |
| Assisted living facility | $32,294 | |
| Nursing home facility | $70,912 |
See how long-term care insurance can help protect you and your family against financial distress when someone requires assistance to get through their daily activities.
Get the Most for Your Healthcare Dollars
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Find the right healthcare plan for yourself.
When considering healthcare options, do your homework. Determine what your current needs are and what your needs could be in the future, then find a plan that helps to meet those needs. Don't be tempted to choose a plan based solely on price, as the lowest-cost option may not be the best value in the long run and it may not cover your needs. If you are currently covered by a health plan, read your benefits book - you may be able to discover ways to save dollars simply by familiarizing yourself with all the facets of your plan. -
Stay healthy.
Staying healthy is one of the simplest and most cost-effective ways to avoid unnecessary healthcare expenses. Getting the most for your healthcare dollars can be as simple as making a plan to eat right, maintaining an appropriate weight level, and exercising at least 30 minutes daily. By following a simple diet and exercise plan, you'll reduce your likelihood of developing certain diseases and illnesses, and you'll potentially avoid the cost of unnecessary medical visits.
For information on healthy living, healthcare services, and current health-related topics, visit WebMD.
Keep in mind that starting your retirement saving as early as possible is the best strategy for attaining your future retirement goals. Even in light of healthcare costs, the more you save early on will leave you in a better financial position during retirement.
- "Current Trends and Future Outlook for Retiree Health Benefits: Findings from the Kaiser/Hewitt 2004 Survey on Retiree Health Benefits," December 2004.
- You may select another level of Medicare Supplement (Medigap) coverage that will either increase or decrease your monthly expense.
- Medicare Part D is a new addition to the Medicare coverage commencing January 2006. Many insurers offer this insurance coverage with deductibles ranging from $0 to $250 annually, substantial co-payments and premiums from $15 to $70 or more monthly. See www.medicare.gov for more info.
- AARP Public Policy Institute, "Becoming Disabled After Age 65: the Expected Lifetime Costs of Independent Living," June 2005.
- Genworth Financial, Inc., "Yearly Long Term Care Costs Move Above $70,000 in 2006, According to Annual Benchmark Study by Genworth Financial."
- See frequently asked questions about healthcare.
- Find out about long-term care insurance.
- If you have a Workplace Savings Plan with Fidelity, go to NetBenefits > Savings & Retirement to access the Retirement Health Care Calculator.
Employers Cover Less
As medical advances help people live longer, the need for healthcare over a longer period of time increases, yet employer-sponsored coverage is down. Large firms (200+ employees) offering retiree health benefits have decreased from 66% in 1988 to just 36% of firms in 2004.5
