A Healthy Retirement

CNN’s Paul Steinhauser’s recently published article discusses a national poll conducted this month that shows “Most Americans like their health care coverage but are not happy with the overall cost of health care.”

If you are a baby boomer like me. You may agree that the cost of your health care is high today. But have you thought about your health care costs when you retire?

Your health care costs in retirement will likely be the most significant expense you face.

Let’s take an example of a healthy couple who are both 57 years of age. The healthy male (John) will likely live to 85 years of age and the healthy female (Mary) will likely live to 89. They plan to retire at age 67. John and Mary will be fully insured with Medicare part A, B, D and supplemental insurance designed to complement Medicare. Their out of pocket health care expenses during the course of their retirement will be approximately $587,000. In order to cover this expense, they will need $322,699 at the point of retirement growing at 5% per year to cover their out of pocket health care expenses.

Let look at some of John and Mary’s annual healthcare expenses:

Age  Estimated annual health care costs

67 – $9,570
75 – $21,480
85 – $47,690

Financial institutions need to further educate brokers and financial planners on health care in retirement. Consumers must be made aware of the impact that health care expenses will have on their lifestyles in retirement. A small increase in retirement savings can make a big difference but consumers need to be aware of the reality of their expenses in retirement.