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Paying for health care is hard on many Americans, but costs are especially high in retirement.
That’s according to recent analysis by Fidelity Investments, released this week, which found a 65-year-old couple retiring this year will need about $260,000 to cover their health care.
“The estimate applies to retirees with traditional Medicare insurance coverage,” Fidelity said in a press release, “and provides a general idea of monthly expenses associated with Medicare premiums, Medicare co-payments and deductibles, and prescription drug out-of-pocket expenses.”
It assumes the average life expectancies of 85 for a man and 87 for a woman.
The cost of covering healthcare in retirement is up 6% over last year’s estimate of $245,000, Fidelity said. It’s also their highest estimate since they began running the numbers in 2012.
“In recent years, the health care industry has experienced a period of historically low spending levels, due to a range of factors including a period of slow economic growth,” said Adam Stavisky, senior vice president of Fidelity Benefits Consulting.
However, long-term care expenses, which are based on a number of factors, could also throw a monkey wrench in retirees’ finances. As Fidelity noted, these costs are only covered by Medicare in certain circumstances, and a 65-year-old couple would need $130,000, plus savings for medical expenses, to insure against long-term care costs. (Keep in mind, this is assuming the couple is in good health and purchased a policy with an $8,000 monthly maximum benefit, with three years of benefits, and an inflation adjuster of 3% per year.)
According to one report by the Kaiser Foundation, Medicare beneficiaries spent $4,734 out-of-pocket on average in 2010; when hospitalized two or more times, those costs soared to $6,216. So how is a retiree to save on Medicare? Fortunately, there are ways to get around the problem. Credit.com asked Nate Purpura, vice president of Consumer Affairs with eHealth, a health insurance provider in San Francisco, how it’s done.
Remember, combining the tips above with a rock-solid financial plan will keep you ahead of the game when it’s time to retire. To see how any debt is affecting your finances, you can view two of your free credit scores, updated every 14 days, on Credit.com. Carrying debt? See how long it will take to pay it off with our lifetime cost of debt calculator.
Image: Susan Chiang
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