​Health care costs must be factored into retirement planning

By Cathy Weatherford

Insured Retirement Institute (IRI)


For many, retirement planning conjures thoughts about 401(k) plans, investments and tax rates. Some will meticulously research the “best” places to retire, giving ample consideration to their desired lifestyle and cost of living. But few consider one of the biggest costs in retirement and a potential hazard to their retirement aspirations: their health.

Health care costs are a universal financial risk for most Americans, given the need for medical and long-term care services in retirement. Yet, too few properly prepare to meet these expenses during their post-working years. Increased longevity and the ever-increasing costs of health care combine to create a dilemma for the 79 million baby boomers in or nearing retirement. Without recognizing the extent to which health care costs may create a financial burden, understanding the extent to which Medicare can help and adjusting retirement plans, Americans may find themselves underprepared for retirement.

Boomers’ savings for retirement already appear inadequate. According to research by the Insured Retirement Institute (IRI), only 34 percent of boomers believe they will have enough money to take care of their medical expenses during retirement. Increasing out-of-pocket expenses and premiums will only add to the uncertainty. IRI and HealthView Services estimate the cumulative health care expenses for a healthy 65-year-old man in 2011 was $370,000 and for his female counterpart, $417,000. In 2013, 47 percent of boomers aged 50–55 had less than $100,000 saved for retirement, revealing a substantial shortfall for a sizeable portion of the population nearing retirement age.

The first step toward planning for rising medical costs in retirement is to understand what one can expect from Medicare. While widely known, Medicare remains misunderstood by many Americans. Solely relying on Medicare to cover all your medical expenses through your retirement years will leave you unprepared.

Knowing what sort of assistance Medicare can provide will make a big difference in retirement planning. To help explain Medicare and more steps consumers can take to ensure a financially sound retirement, IRI and the National Retirement Planning Coalition have released a fact sheet on the costs of health care in retirement. The coalition, a group of prominent education, consumer advocacy and financial services organizations, intends for the fact sheet
to be used as an introduction to Medicare and the costs of health care in retirement.