When you create your retirement plan, and look at how much you expect to spend on food and shelter, greens fees, cruises and restaurants, what do you estimate you’ll spend on medical and healthcare services?
Every year, the Milliman insurance industry consulting firm issues a report that estimates the average cost of health insurance and copays across the population of Americans. The most recent study looked at couples who are assumed to live to age 88 and 90, respectively, and takes into account premiums and out-of-pocket expenses for a Medicare Part D plan and Medicare Supplement Plan G, assuming that medical costs overall will rise 4.9% a year.
The result? A healthy 65-year-old couple retiring in 2020 would be projected to spend $351,000 in today’s dollars on healthcare over their lifetime; $535,000 in future dollars. A healthy 45-year-old couple would be projected to spend $505,000 in today’s dollars—$1.4 million in future dollars.
It is important to note that this is an average, which means for people who experience significant health conditions, the numbers will be higher. And for people who manage to stay healthy until the day they die in their sleep without requiring extensive medical care or hospitalization, the costs could be much lower. But the average expenses—34% of a couple’s Social Security benefits in their early years of retirement—might come as a shock to some people and should cause some to revisit their retirement spending assumptions.
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