The real risk to your retirement – health care costs.

2014

Still think you can retire on much less than your pre-retirement income?👀

Forget it unless you have a nice stash of cash in addition to your retirement income savings.

Not only do you need to cover all your regular living expense bills as they increase each year, you need to have enough money to add to your savings, you heard right; save while you are retired. That’s because your stash of savings can fast be depleted for various large expenses, health care among them and the most certain. Estimates range to about $250,000 in out-of-pocket costs for health care during retirement and much higher if you are hit with long-term care expenses.

Let’s start with the basics; Medicare Part B and D premiums, premiums for supplemental coverage, out-of-pocket costs, dental expenses, vision care, hearing care. If you had similar expenses while working and depleted savings to pay for them (or used credit cards), why do you think it will be any different after age 65? If your income is not sufficient to carry these unexpected costs from current income and you use some savings, you must replace those savings or risk catastrophe in the years ahead. Health care costs are income ignorant. Whether you are living on $30,000 or $300,000, your out-of-pocket costs can be the same; your ability to cope quite different.

Half of Medicare beneficiaries have below $77,500 in personal savings, according to the nonprofit Medicare Rights Center. How long do you think this amount will last if serious illness strikes (or other non-medical emergencies hit), especially if it occurs in the early years of retirement?

At a minimum when determining your retirement income needs, figure in your health insurance premiums, including Medicare and your maximum out-of-pocket costs for all health care each year. If you don’t spend it, great, stick it in the bank. If you do, at least it won’t draw from your savings because you included it in day-to-day expenses.

Can’t make the numbers work, those extra expenses don’t fit your retirement budget? Then you should ask yourself if you are financially ready to retire.

Now, if you have a really large savings account, like $250,000 or more (not counting retirement income savings) perhaps you can ignore all this.😀

Unfortunately, most people aren’t that well positioned.