Health Care in Retirement: How Much Will It Cost?

Health care in retirement is very essential because this is the age where you will face more health problems as compared to those years where you had been working. Thus, it becomes of utmost importance that you revaluate and decide that how will you pay for health costs after retirement.

Evaluate the Cost

Heath care costs after retirement depend on certain factors like how much health care will be needed, the time for which it will be needed and the level of savings and investments. You need to make an estimate of the amount of money that will be needed in the first year, the expected rate of inflation, the rate of return on investments and the time horizon. For example if the first year costs will be $ 7,500 and the rate of inflation is 8 percent and the rate of interest is 7 percent, then for a retirement that will last 25 years from now, you will be needing around $210,000 to cover your healthcare costs. The figures will vary from person to person, but this way you will know how much money you should keep aside to cover all healthcare related expenses.

What Is Available and How Much Do You Need?

Federal Government provides facilities to senior citizens (above 65 years) through programs like Medicare; however, Medicare does not cover all expenses, just some basic ones. Records show that for 20 years, the cost of medical expenses has been 20 percent more than the rate of inflation. For the year that ended in 2009, retiree medical expenses increased by 50 percent since 2002. For this you need to be realistic and evaluate your health and see the family medical history. After reviewing all the benefits that you will get at that age you should decide on the amount that you will need after retirement and take adequate steps to invest accordingly. The health insurance benefits cease after one retires and very few companies give post retirement health benefits.

Available Options

You also need to keep in mind the alternatives that are available like the health insurance, assets and cash reserves that can be liquefied.  Medicare does not pay for all medical expenses and thus, t lot of put of pocket expenses are involved. Around $240,000 is needed by a couple who retired in 2009 to cover the out of pocket medical expenses. You certainly need to plan for these. Some costs that are not taken care of by the government plan are dental care and eyeglasses, which are bound to exist in old age. Thus one needs to set aside cash reserves and investments to cater to the heath care costs.


Studies show that a healthy couple can need to spend up to $570,000 post retirement out of their pockets including the cost of nursing homecare and insurance premium. The best thing to do is to have a separate bank account where you can contribute a fixed amount on a regular basis. A Health Savings Account is one such option available to all where a pre-tax contribution up to $6150. It is essential to save money in these accounts to have an amount which will fend for all those expenses that will not be taken care of by other plans available.

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