New York (AP) — Retirement Plans are some savings, some guessing games. Much of your daily expenses remain the same, but there are high-value categories that can take a big bite from your savings. The more plans you have, the more you are ready to survive the costs.
Here are four costs to keep in mind when preparing for retirement:
1. Healthcare
According to a 2021 report from Fidelity, the average 65-year-old retired couple needs about $ 300,000 in post-tax savings to handle retirement medical costs. Fidelity is a partner of Nerd Wallet. “And it’s just for regular health care,” says Michel Gesner, Houston’s official financial planner. “It doesn’t even count the care of unexpected chronic illnesses.”
Your specific cost depends on where you live, how long you live, and your overall health. By paying attention to your health and properly managing conditions such as type 2 diabetes, you can keep costs low.
Another health care surprise is that Medicare premiums will be higher if your income exceeds a certain level. For example, if you are jointly married to adjusted total income in excess of $ 182,000 in 2020, you will pay at least 40% more than Medicare Apartment B’s monthly premium. In 2022, the standard premium will be about $ 4,000 a year for couples.
“It really creeps up,” says Laurie Burkhardt, CFP in Boston. “And, believe it or not, it’s easy to reach that income level when you’re old enough to receive the required distributions from the IRA.”
2. Long-term care
Elderly people living up to the age of 80 have a one-quarter chance of needing long-term care. And it’s not cheap: supported living facilities cost an average of $ 4,500 per month. Home care assistants average about $ 27 per hour, but the costs add up.
“If you only need a few hours of care a week, that’s pretty reasonable,” says Patti Black, CFP in Birmingham, Alabama. “The math becomes infeasible and requires more attention.”
Certified financial planners can help clients anticipate the cost of long-term care for several years and allow their savings to handle it. “I talk to clients about whether long-term care insurance should be part of their financial plan to transfer some or all of this risk,” says Black.
3. Dental care
According to the Kaiser Family Foundation, the average elderly person in Medicare who uses dental services pays nearly $ 900 a year at their own expense. And one in five Medicare beneficiaries spent more than $ 1,000.
The original Medicare does not cover most traditional dentistry, and 47% of Medicare beneficiaries do not have dental insurance. However, periodontal disease, tooth loss, and oral cancer are all greater concerns for the elderly and it can be difficult to find comprehensive dental insurance.
“Dental treatment can be a really rude awakening,” says Burkhardt. “I’m now experiencing it with his husband who is retired and getting a dental implant. He was shocked at how much he was out of his pocket.”
4. Prescription drugs
Since 2015, at least one million Medicare Apartment D registrants annually have high drug costs high enough to exceed the catastrophic coverage threshold of $ 7,050 in 2022. If you have a condition that requires a special tier drug, such as cancer or multiple sclerosis, or hepatitis C — out-of-pocket costs can be very high. When you reach a catastrophic threshold, you will have to pay either a small amount of co-insurance or a drug out-of-pocket, but Medicare Apartment D has no upper limit on out-of-pocket costs. If your medicine is expensive, it can be summed up.
“My dad has rheumatoid arthritis and his medicine costs $ 6,000 a month,” says Tess Zigo, CFP in Palm Harbor, Florida. “Which retirees have $ 6,000 a month just for drugs?”
What should I do
Financial planners who specialize in post-retirement needs can stress-test their financial plans for health events and other costs. If there are gaps in coverage, it can help you develop strategies to deal with unexpected costs, such as long-term care insurance or hybrid insurance that combines life and long-term care insurance.
From Medicare supplement plans to dental and drug coverage, getting proper insurance is also essential.
“If the coverage is correct, these catastrophic costs aren’t too bad,” says Dennis Norte, CFP in Winter Park, Florida.
A good insurance broker can help you consider your options, and a Medicare consultant (or your state health insurance support program or call SHIP) can answer questions about Medicare coverage that best fits your needs.
By Kate Ashford of Nerd Wallet for Associated Press