Soaring Health Care Costs and Your Retirement

soaring healthcare costsI’ve spent a lot of time documenting the problems with Social Security, pensions, and other retirement systems.  But there’s one threat that could easily eclipse ALL of those issues — soaring healthcare costs!

Every year, Fidelity takes a look at how much a typical 65-year-old couple will spend on out-of-pocket healthcare costs during retirement.

  • The good news is that this year saw a rare year-over-year drop in the overall projected cost.
  • The bad news is the number was still $220,000!

And the overall trend is still up, up, and UP! –  What’s more, this is assuming you have traditional Medicare coverage.  Plus it does NOT include costs associated with nursing-home care.

And that’s where things get REALLY scary!

Unless you’re essentially destitute and qualify for Medicaid — or you’ve already purchased long-term care insurance — medical treatment outside a hospital is going to be your cost to bear in retirement.  The total outlay depends on a number of factors, including your local area.  But according to a recent article in Forbes, a semi-private nursing home costs $93,440 a year in Miami.

A private room? That would run you $116,000 a year!

So when you combine that type of annual expense with the other regular out-of-pocket healthcare costs, a couple’s million-dollar nest egg would disappear in less than seven years with just one spouse requiring long-term care.

Look, I’m not trying to depress you here.  However, the reality is that 70% of us will need long-term care services at some point in our lives … and sometimes it happens sooner than we think.  In fact, 40% of the Americans in long-term care are between the ages of 16 and 64.

So here are four things to start thinking about now:

  1. Check to see what type of coverage you might already have from an existing health plan provided by your employer (or former employer, if currently retired.)
  2. If you haven’t already looked into long-term care insurance, do so now. The bad news is that it isn’t cheap … especially if you’re already at retirement age. But it may still make sense given your personal situation.
  3. Start thinking about how you can protect existing assets before they get drained by future healthcare costs. I’ll discuss some of these steps in future articles but they include getting real estate out of your name and offloading excess cash and investments to heirs many years before long-term care becomes likely.
  4. If you haven’t had a chance to save up enough money to cover your future out-of-pocket medical expenses … or you simply want to continue growing a portion of your nest egg at a pace that will keep up with skyrocketing health care costs … consider more aggressive approaches that can help you do so quickly and easily.

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