Exactly How Much Will Health Care Cost You in Retirement?
Putting a price tag on retiree healthcare may be an inexact science given the many variables involved. That said, there are some standard elements of cost that can be estimated and planned for in advance.
What Keeps You Up at Night?
Many individuals nearing or already in retirement worry about what ifs that could threaten their financial stability – and healthcare ranks high.
Top Financial Concerns
- Changes to Social Security 76%
- Healthcare Expenses 69%
- Above Average Inflation 68%
- Running Out of Money 60%
- Having Enough Money for Basic Expenses 50%
Lifetime Retiree Healthcare Costs: A Snapshot
Couple (age), Premiums, Out-of-Pocket, Total
65, $281,847, $82,099, $363,94
55, $300,548, $87,265, $387,813
45, $321,517, $93,299, $414,816
Paying the Tab
While the percentage of baby boomers with retirement account balances in the upper range swelled considerably in 2018, these totals still fall below the amount some experts say is needed for health care costs alone.
Amount Saved for Retirement
2017, 2018
Less than $100,000
39%, 38%
$100,000 to $250,000
29%, 19%
$250,000 or more
32%, 43%
Plan now for how you'll pay for healthcare in retirement. Here’s how baby boomers ranked the importance of expected sources of income:
Major Sources of Income & Importance
- Social Security 69%
- Employer pension 28%
- Defined contribution plan [e.g., 401(k)] 22%
- Personal investments (other than workplace retirement or IRA) 22%
- IRA 21%
- Personal savings 20%
The Bottom Line
Healthcare costs are expected to continue rising faster than both U.S. inflation and Social Security cost of living adjustments (COLAs), claiming an ever-larger portion of retirees' income. That's why planning for these costs should be a central component of any retirement readiness strategy. As you look ahead to your later years, be sure to allocate a portion of your retirement budget to healthcare.
Sources:
Insured Retirement Institute, “Boomer Expectations for Retirement 2018,” April 2018.
Healthview Services, “2018 Retirement Healthcare Costs Data Report”© October 2018.
