When preparing for retirement, it’s important to understand just how immense medical costs can be. If you don’t have a good grasp — and a new study suggests most people do not — hospital bills, medications and more could derail your golden years.
A recent survey of American adults found that people underestimate retirement medical costs by a significant amount. Almost 40 percent of respondents estimated that a couple would shell out between $50,000 and $100,000 on medical costs during retirement. Unfortunately, the same survey found that an average retired couple will spend between about $295,000 on health care expenses during their golden years. That’s a huge gap. It’s even bigger when you consider that the $295,000 is just an estimate. It could be less, but it could be more.
In coming up with that $295,000 number, the researchers assumed you’d be enrolled in Medicare A, B and D, which covers hospital stays, outpatient services and prescriptions, respectively. The $295,000 estimate also does not include dental costs or long-term care. In other words, there’s a good chance you’ll spend more than $295,000 on medical costs during retirement.
The best way to deal with this discrepancy in thinking? Get proactive. Increase your savings rate if you can. If it’s available to you, you should also consider opening a Health Savings Account (HSA). As USA Today notes, an HSA can be beneficial because it allows you to invest pre-tax dollars and make tax-free withdrawals for qualifying medical expenses. Save more for medical costs than you think you’ll need. Chances are you’ll thank yourself for doing it.