How much Money Will You Need for Your Post-Retirement Health Care Needs?

August 23, 2016

Most people worry about the crucial costs they have to bear after retirement. The topmost concern is the health care costs. A recent estimate has revealed that the Americans who are retiring this year need at least $260,000 to pay for the post-retirement health care costs. A major chunk of these savings would probably go towards the premiums. The rest would be spent on expenses not covered by policies such as dental problems or home aids.

The Post Retirement Health Care Estimate is Suited for Whom?

The estimate of the need to have at least $260,000 to cover the post-retirement health care

costs was offered by Fidelity. It was calculated by keeping in mind various factors such as it assumes that both the spouses are at 65 years of age. This estimate is best suited for people who have traditional Medicare insurance coverage. It considers deductibles, premiums, co-payments and out of pocket costs of drugs.

How is the money spent?

If a person has $260,000, about one-third of it would be spent on paying the premium for Medicare part B that deals with doctor services and outpatient care. It will also be spent on part D that covers prescription drugs. It is pertinent to add here that the premium for part B is related to inflation and it can be more for high-income beneficiaries and new retirees. On the other hand, the premiums for Part D are set by the provider and can vary by your location and plan type.

Another major chunk of your savings would be spent on the health-related services that are not covered by Medicare. It involves vision, dental and hearing costs. It also includes stuff like assisted living, health aids, nursing home visits, etc. Some people prefer to buy long-term insurance if they expect to need that kind of help later on in their lives.

The Extra Amount

Fidelity has also estimated that a 65-year-old couple retiring this year would need to have about $130,000 as an extra amount for the post-retirement health care so that the long-term care expenses could be covered. This amount was calculated by assuming that the couple is in good health and opts for a policy that gives three years of benefits with an $8,000 monthly maximum that automatically adjusts for inflation of about 3% on a yearly basis.