Thinking about healthcare costs during retirement can be quite stressful. Recent reports have shown that the average American household spends a large fraction of their income on healthcare. The numbers can be very intimidating, especially to someone heading up for retirement.
Estimate of healthcare costs
Fidelity Investments, a company offering multinational finances, has released estimates of the healthcare costs for a couple retiring in the year 2018. According to the estimate, a couple aged 65 or above and retired will require nearly $280,000 to cover their healthcare costs. Additionally, single men and women entering retirement will be needing $133,000 and $147,000 respectively.
The estimates take into account factors like healthcare premiums, additional out-of-pocket costs, and provisions that facilitate cost-sharing. The estimate does not include the cost of over-the-counter medications, dental, and vision care. It also does not account for employer-sponsored health insurances.
The costs can vary depending upon the area and the current status of health.
The estimate has increased slightly as compared to the previous year when the costs were estimated at $275,000. The increase of 2 percent is marginal. The major reason for this is that the costs for drugs are manageable for now.
Actuarial data has shown that people are now living longer which means that one can expect healthcare costs to be even higher in line with the additional healthcare expenses.
The senior vice president of Fidelity Investments has said that for someone who is planning on retirement, it is not safe to bank on the hope that healthcare costs will only have moderate increases every year. Hope Manion states that healthcare costs will continue to be difficult to save up for.
Planning for healthcare after retirement
It is important to have a good plan in place.
Experts say that the first step is to not focus on the figure of $280,000 as it can result in well-justified panic. Instead, it is important to understand the fact that the figure is only the estimate for an average American.
Consumers who are in a relatively good state of health, are free from genetic disorders, and living a healthy lifestyle can expect lower healthcare costs. A good healthcare plan is an added advantage.
The most important thing to focus on is that $280,00 is an overall estimate or a lump sum. The cash flow is more important than the overall costs.