How Much Will Healthcare Cost in Retirement? The Answer May Shock You … or mostly not

Retirement planning must consider health care related spending, but do so realistically. What you must plan for are the ongoing monthly premiums which are highly dependent on your income. Ignore the scary numbers such as in the article quoted below.

What the average retiree will spend on healthcare

The amount you end up spending on healthcare throughout retirement will depend heavily on the specific state of your health and the Medicare choices you make. But in its latest analysis, HealthView Services reports that a healthy 65-year-old couple retiring in 2021 will spend a total of $662,156 on medical bills during retirement. This projection assumes that the typical couple in this boat will live until ages 87 (male) and 89 (female). It also notes that the average couple will spend 68% of its Social Security benefits on healthcare.

If that $662,156 figure is spread out over a 23-year retirement, on average, that still leaves the typical couple to spend an alarming $28,789 a year, or $2,399 a month on healthcare. And that’s something all seniors will need to prepare for.

Source: How Much Will Healthcare Cost in Retirement? The Answer May Shock You. | The Motley Fool

Now let’s look closer at these numbers from Healthview Services

They are not healthcare costs or medical bills at all. They are mostly premiums and mostly inflated due to IRMAA income based premiums for Medicare. And, they are not what the average retiree will spend. Of course, these are projected inflation adjusted numbers, but incomes will also be inflation adjusted over the next 23-years.

In addition, the status of a retirees health has little to do with the amount they will spend in retirement…because between basic Medicare and supplemental coverage there are little or no out-of-pocket costs. The exception may be those taking multiple and very expensive medications, which is not the norm. But even with Part D, spending is limited; few beneficiaries reach the catastrophic level.

In addition, a large number of beneficiaries are enrolled in a Medicare Advantage plan that typically eliminates all out of pocket costs, often with low or no monthly premium and in some cases a reimbursement for all or a portion of the Part B premium. 93% of those on Medicare have a least one choice of a plan with no premium. As of 2020, there were more than 24 million Americans in a MA plan, about 36 percent of all Medicare beneficiaries. The government expects enrollment to grow to 26 million in 2021.

FOCUS ON THE MONTHLY EXPENSES, THAT’S WHAT MATTERS

Today the great majority of Medicare beneficiaries pay the standard Part B premium plus supplemental coverage. That comes to about $378.00 per month or $104,328 over 23 years (not adjusted for inflation). Individuals with an income (MAGI) of less than or equal to $87,000 and married couples with a MAGI of $174,000 or less pay the standard Medicare Parts B and D premiums.

Consider a couple today that has high income adjusted premiums, earning over $300,000 in retirement. Their premiums for all coverage will run about $19,468 a year, That’s $447,764 over 23 years, but what you will pay each month is what will affect your standard of living.

3 comments

  1. Health View does mention that their study resulted in a range of spend – “… When considering the variety of factors detailed above, most 65-year-old couples retiring in 2021 will spend between $156,208 and $1,022,997 on their lifetime retirement healthcare expenses. …”

    As I have highlighted in prior posts, the median couple today does not incur significant long term care support services (LTSS) – however, as the boomers age, and as longevity improves, projections are that 70+% will incur some LTSS.

    The best analysis I have encountered, and I have looked at this intensively, suggests someone retiring in 2021 should expect to spend between $6,000 – $7,000 a year (twice that for a couple). See: Sudipto Banerjee, A New Way to Calculate Retirement Health Care Costs, T. Rowe Price, February 2020, Accessed 6/18/20 at: https://www.troweprice.com/content/dam/fai/Collections/DC%20Resources/a-new-way-to-calculate-retirement-health-care-costs/ANewWaytoCalculateHealthCareCosts.pdf

    Liked by 1 person

    1. There is no way to project healthcare costs, because everyone is different. But, my wife and I are in great shape, financially speaking as far as healthcare expense is concerned. I am retired military, turning 65 in Jan 2021. So, my wife and I are covered by Medicare and Tricare for Life, so I will have zero out of pocket costs for doctors visit and all services covered under Medicare part B. Medicare pays 80% and then Tricare for Life picks up the 20% not covered by Medicare. As for Part A, everything is covered until you exceed 151 days in the hospital. Home healthcare is covered 100%. So, my wife and I will pay $71,280 in Medicare Part B premiums over the next 20 years, that will be inflation adjusted, with the held harmless part B premium increase protection. I think serving in the USAF for 20 years, is the best decision I made as a 20 year old. Since my 1995 Retirement from the USAF, I have received $447,000 in retirement benefits. The only thing I have spent money on healthcare for 2020 is $400 in office visit co-pays for my wife, her meds 2 low cost prescriptions are filled for free at military pharmacies, then billed to Tricare insurance. I have incurred zero medical costs to Tricare insurance for myself 23 of the last 25 years. My blood work numbers have not changed any in the last 20 years. I do a physical every 5 years, unless I have a health issue, I do not do to the doctor. I had a colonoscopy at age 63 and the doctor said see you in 10 years. I will be doing my 5 year physical in spring of 2021.

      Liked by 1 person

  2. This kind of “CRAP” is just more fearmongering and “click bait”, in the age of the internet. It is just like the articles that I used to read about it costing hundreds of thousands of dollars to raise a child to age 18. I raised 4 children to age 18, from 1980 to 2009, on just $431,000 total income, during those years. I can tell you, very little of that income went directly to my children. The question you need to ask yourself is, what is the agenda, of the people writing these kind of articles? IE- With all the expenses that retirees face, Medicare, Social Security, and retirement savings is not enough. We need to increase benefits now and in the future or grandma and grandpa are going to be eating dog food.

    My wife and I are 65 and if we live to age 90 our total income from Social Security and my USAF pension will be $841,200 not adjusted for inflation. And the writer of this article thinks, we will be spending anywhere close to $662,156 on healthcare. = Lies, Damned Lies and Statistics.

    Liked by 1 person

Leave a Reply to JRATT Cancel reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s