Are You Saving Enough to Cover These Retirement Expenses?

When it comes to retirement planning, there is often a big discrepancy between how much money people think they need and how much they actually need.

And so, year after year, investors fund their retirement accounts based on how much they can afford to save now, rather than really understanding how much they may need in the future. 

Retirement expenses vary depending on an individual’s tax situation during retirement, transportation needs, household expenses, and healthcare costs. 

The focus of this article will be on the various healthcare expenses and how much you should expect to spend during retirement.  

Healthcare Costs

retirement expenses

If you think most of your healthcare costs will be covered by Medicare, think again. 

Most retirees will need a lot more to cover out-of-pocket expenses and supplemental coverage.

According to HealthView Insights: 2021 Retirement Healthcare Costs Data Report

  • An average, healthy 65-year-old couple retiring in 2021 will spend $662,156 on their healthcare costs throughout retirement.
  • Healthcare expenses will continue their historical trend of inflating at 2 – 2.5 times the rate of U.S. inflation. ƒ
  • Lifetime health costs for most couples retiring in 2021 can range from $156,208 to $1,022,997.¹ 

Take a moment to let these numbers sink in. 

Now, your individual healthcare expenses will vary depending on how healthy you are, how long you live, how and where you retire, how you pay for medical expenses, among other factors. 

But one thing is for sure: healthcare expenses are only going to rise. 

So, are you saving enough for retirement NOW to cover the unknown? 

Medicare Expenses

retirement expenses

Many people assume Medicare is all they need for health insurance. 

Here’s why this is not the case…

  • Medicare isn’t really free. You may have to pay a monthly premium based on income. 
  • The most basic Medicare plan does not cover certain out-of-pocket costs such as deductibles, copayments, and supplemental insurance.
  • Medicare doesn’t cover dental, vision, or hearing aids.
  • Unless you opt for Medicare Part D, medications are not included in your plan.
  • If you retire early, you will need another form of health insurance since Medicare doesn’t kick in until 65 years of age.

The HealthView Insights 2021 report states, “Retirees in the highest Medicare IRMAA threshold will pay an additional $430 each month for Parts B and D premiums based on their modified adjusted gross income.”²

In addition, in the 2020s, “Medicare Part B premiums will inflate by an average of 5.9% per year, Part D by 4.9%, and dental premiums and out-of-pocket spending by 4.5%.”³  

While you can’t predict the exact amount you’ll spend on healthcare during retirement, you can ensure you’re saving enough today to cover your expenses later.

Long-Term Care

retirement expenses

People are living longer. And, as a result, more retirees are requiring long-term care. 

The U.S. Department of Health and Human Services estimates, “Someone turning age 65 today has almost a 70% chance of needing some type of long-term care services and supports in their remaining years.” 

Long-term care is not cheap. Far from it. 

Genworth, a long-term care insurer, recently published the Cost of Care Survey, conducted by CareScout®. 

According to the report, “From 2004 to 2020, the cost for facility and in-home care services has risen on average from 1.88% – 3.80% per year. That’s an increase of $797 annually for home care and up to $2,542 annually for a private room in a nursing home.”

The Cost of Care Survey also reported…

  • A private room in a nursing home in 2020 averages $105,850 annually.
  • An assisted living facility in 2020 averages $51,600 annually.
  • A home care health aid in 2020 averages $54,912 annually.⁶

If you aren’t researching these costs and factoring them (and inflation) into your retirement savings plan now, you may end up being a financial burden on your family. 

Or worse, end up in a state facility or another facility where you don’t want to be – all because you didn’t plan properly. It may sound harsh, but, sadly, it’s a reality for some retirees. 

Key Takeaway

retirement expenses

Healthcare expenses will vary depending on your situation during retirement, as will additional costs such as taxes, transportation needs, and household expenses. 

Even if your expenses are on the low end during retirement, it’s still a chunk of change you’ll need to have available. 

If you currently have a 401(k) or IRA (or both), and you don’t have a retirement plan in place that factors in these expenses, it’s time to get one in place. 

From there, you can make contribution adjustments to ensure you’re on track. 

We recommend seeking professional help with your retirement planning. A professional can guide you and also find other unexpected expenses you need to plan for. 

Before you reach out for help, check out our guide on how to understand The Different Types of Licenses Financial Advisors Have and What They Mean to You .

 personal finance tips for third quarter

Send Me The Guide!

Sources: 

  1. https://hvsfinancial.com/wp-content/uploads/2020/12/2021-Retirement-HC-Costs-Report-op-final.pdf 
  2. https://hvsfinancial.com/wp-content/uploads/2020/12/2021-Retirement-HC-Costs-Report-op-final.pdf 
  3. https://hvsfinancial.com/wp-content/uploads/2020/12/2021-Retirement-HC-Costs-Report-op-final.pdf 
  4. https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html
  5. https://www.genworth.com/aging-and-you/finances/cost-of-care/cost-of-care-trends-and-insights.html
  6. https://www.genworth.com/aging-and-you/finances/cost-of-care/cost-of-care-trends-and-insights.html
0 0 votes
Article Rating

401(k) Maneuver™ is offered by Royal Fund Management, LLC, which is registered as an investment adviser with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. Royal Fund Management, LLC, is not affiliated with or endorsed by NASDAQ.

All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals, and economic conditions may materially alter the performance of your portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's investment portfolio. There are no assurances that a client’s portfolio will match or outperform any particular benchmark. Asset allocation and diversification do not ensure or guarantee better performance and cannot eliminate the risk of investment losses. Projections are based on assumptions that may not come to pass.

Images and photographs are included for the sole purpose of visually enhancing the website. None of them are photographs of current or former clients. They should not be construed as an endorsement or testimonial from any of the persons in the photograph.

All third-party trademarks, including logos and icons, referenced in this website and our content, are the property of their respective owners. Unless otherwise indicated, the use of third-party trademarks herein does not imply or indicate any relationship, sponsorship, or endorsement between 401(k) Maneuver and the owners of those trademarks. Any reference inside this website or content to third-party trademarks is to identify the corresponding third-party goods and/or services.

0
Would love your thoughts, please comment.x
()
x

Select a Date from the Calendar below

UPDATE YOUR 401(k) ACCOUNT

Select a Date from the Calendar below

UPDATE YOUR 401(k) ACCOUNT

Have questions? Need help?

Book Your Complimentary

15-Minute 401(k) Strategy Session


logo

Looking for tips that might maximize your retirement
savings and help you be a better steward of your money?

Subscribe to our 401(k) Blog

The go-to-source for your retirement investing and saving tips

5 401(k) Accounts Mistakes that May Negatively Affect Retirement Income

Download Your Copy Today

*Your privacy is important to us. We do not rent, sell or share your information.


Why Account Balancing & Allocation May Affect 401(k) Performance

Download Your Copy Today


*Your privacy is important to us. We do not rent, sell or share your information.


The 5 Top Costly 401(k) Rollover Pitfalls

Download Your Copy Today

*Your privacy is important to us. We do not rent, sell or share your information.

Make the Best Decision for Retirement:
Understanding the Different Types of
Financial Advisor Licenses

Download Your Copy Today

*Your privacy is important to us. We do not rent, sell or share your information.


How Popular Advice On Target Date Funds May Be
Working To Undermine Your 401(k) Retirement Savings

Download Your Copy Today

*Your privacy is important to us. We do not rent, sell or share your information.


3 Things That May Supercharge Your Future
401K Performance...Even In a Down Economy

Download Your Copy Today

*Your privacy is important to us. We do not rent, sell or share your information.