Most of us are unable to jump right into “retirement.” It’s a word that sounds good to our ears, but the truth is that it requires long-term planning and a healthy level of savings.
A lot of Americans are being proactive with building their nest eggs, but there is one crucial thing that most workers forget to do: plan for healthcare costs during their golden years.
According to data from the Empower Institute and Brightwork Partners, 12% of working adults are taking steps to address or plan for medical expenses in retirement. However, more than half of Americans admit that they do not know what medical care will cost.
To retire with real financial security, one has to start planning before retirement.
How much does a retiree spend on healthcare?
The amount depends on some factors, the most important: one’s actual health. The latest projections reveal that the average 65-year-old male today will spend roughly $189,687 on medical care throughout retirement, while the average 65-year-old woman will spend $214,565. The difference stems from the fact that women tend to live longer, and therefore, typically require more care in their lifetime.
The reason why both numbers are so high is that Medicare only covers a portion of the total healthcare cost. There are some services as such as dental, vision, and hearing that the program won’t include.
What is the breakdown of the costs?
A senior will pay a premium for Medicare Part B, which covers preventive care and diagnostics, and Part D, which includes prescriptions. Furthermore, the services that Medicare does cover typically come with a copayment, not to mention a deductible. Moreover, unless one opts for a Medicare Advantage plan, there’s technically no limit as to what someone might spend on healthcare in a single year.
Approximately 70% of seniors will need long-term care in their lifetime, and the associated costs could be staggering. For example, the average nursing home stay costs $85,775 per year for a shared room and $97,455 per year for a private one. Even assisted living facilities are costly. They average $45,000, or more per year.
How to save for future costs?
Currently, workers under 50 years old can contribute up to $18,500 a year to a 401(k), or $5,500 a year to an IRA. If a person is 50 or older, these limits increase to $24,500 and $6,500, respectively.
Another great option is a Reverse Mortgage. If a senior is 62 years or older and owns their home, this program allows him or her to gain access to tax-free cash based on the value of their home. One of the requirements of the program is to pay off the mortgage payment, and the remaining funds are for the borrower to keep. Imagine the extra financial cushioning this could provide to help with Medicare costs.
RMA specializes in assisting seniors with the Reverse Mortgage. We take great pride in knowing that many of the seniors we’ve helped used the funds to help with Medicare, or to afford a healthier lifestyle, in general. If you are a senior or knows someone who would be a great candidate for the Reverse Mortgage, please give us a call at 1-800-420-5515.