Education Update: The Cost of Healthcare and Elder Care in Retirement

January 24, 2018

When preparing for retirement, imagining the new lifestyle that awaits you can be exciting. From travel to family time to relaxation, a fulfilling retirement looks different to each individual. Preparing for the quality of life you desire goes beyond simply ensuring you can support your daily costs and fulfill your dreams. You should address two other looming financial responsibilities: health care and elder care.

Read more to learn about how retirement planning is changing and what you need to know to stay prepared for your golden years.

We Are Living Longer

Thanks to medical advances, campaigns to create more awareness of healthy living, and other factors, retirees are living longer than ever before. In 1970, 10.3% of the total population (20.9 million people) lived to be 65 years old or older. By 2000, that number jumped to 12.4% (34.9 million people).[i] The trend continues. On average, a man turning 65 years old today can expect to live to 84.3 years old; meanwhile, on average, women turning 65 years old today can expect to live until 86.6.[ii]

Many people will have an even longer lifespan: About one of every four 65-year-olds today will live to be more than 90; and one of 10 can expect to live past 95 years old.[iii] If you’re in good health, you need to prepare for your longer lifespan and the associated medical costs that come with older age.

Healthcare and Long-Term Care Costs Are Rising

Not only are we living longer but our healthcare costs are also increasing. Today’s average 65-year-old couple can expect to pay $260,000 (before inflation) on healthcare costs during retirement. This cost doesn’t include your long-term care financial needs.[iv]

Here are some other essential facts:

  • Retirees spend nearly a third on average of their Social Security benefits on out-of-pocket medical expenses.[v]
  • The average cost for non-medical home care is $20 per hour.[vi]
  • A health aide charges $20.50 an hour.[vii]
  • It costs $6,844 per month for a semi-private room and $7,698 per month for a private room in a nursing home.[viii]
  • Today’s average annual cost for assisted living care is $43,539.[ix]

Generally, a retiree’s Medicare and employer-sponsored insurance do not cover long-term care costs. Because of this, understanding the financial gap you have in your planning is critical.

Retirement Savings Shortfalls Are Hurting Us

While many people are making strides in preparing for retirement, we may not be saving enough money. The median 45-year-old male’s projected savings shortfall for retirement at 65 is $212,256; meanwhile, the median 45-year-old female’s projected savings shortfall is $268,404.[x]

In addition, many individuals are not putting enough money away into health savings accounts (HSAs). The average HSA account balance for people 65 years and older is $5,016.[xi] People are not fully preparing themselves for retirement. You should take an honest look if you have a retirement savings shortfall so you can create a strategy now to fill that gap.

Overall, these costs are just a snapshot of key retirement healthcare expenses to plan for. Factors such as your unique lifestyle, current health, and financial profile will guide how you need to prepare financially for health-related costs throughout your retirement. We’re ready to help you live comfortably in your golden years, so instead of worrying you can focus on enjoying life to its fullest. To start the conversation, please feel free to contact us at any time.