Health Care Costs in Retirement: The Reality

Are you prepared for the astonishing costs of health care in your retirement years? Health care costs are some of the highest most variable expenses you could face in retirement. As people budget their retirement income, many fail to plan for their health care expenses, making inadequate estimates.

In addition, poor health can lead to additional expenses for home care, assisted living, and in later stages, nursing home care.

Before using our calculator to create your estimates for health care costs, consider these three major factors.

1.      Longevity – People Are Living Longer

Good news – people are living longer! The only downside is health care expenses continue to increase as we age. Though we don’t know the day or the hour we’ll pass away, we can plan for the best case scenario of living a long, enjoyable life.

The average life expectancy for a man is 82 years and 85 years for a woman. However, if your family members are known for living longer, estimate yourself living a long life as you plan your health care expenses in retirement. This may also be a good indicator when planning for long term care expenses.

2.      Long Term Care Expenses for Assistance with Personal Care

Don’t forget to include long term care expenses for late-life health and personal care in your retirement plan estimates. Depending on where you live or where you plan to retire, the cost of home care, assisted living, and nursing home care can vary.

In California, the 2016 average cost of home care is nearly $57,000 per year. Assisted living is over $48,000 per year and nursing home care ranks at over $113,000 per year. Does your retirement plan account for these expenses? What if you need personal care for 2, 3, 5 or even 10 years?

Also, these rates reflect today’s cost of care. What will it cost 20-40 years from now when you need care?

3.      Inflation Increasing Over Time

The cost of health care today will not be the same as the cost of care tomorrow. You must plan for both health care and long term care rates to rise each year with inflation.

Health care estimates a 6% increase over the next 10 years. Long term care estimates a 1% increase for home health care and a 4% increase for assisted living and nursing home care over the next five years.

Important Factors to Consider

Geography

Where will you live when you retire? The cost for these services will vary if you’re deciding between Florida or North Dakota. Keep in mind your desired retirement location as you plan for your health care and late-life expenses.

Lifestyle

Interested in an assisted living facility with a view overlooking a pristine golf course? No problem. You can have that and more for a price.

Consider your lifestyle now and the level of care or services you’d like to receive when you’re retired. Plan ahead by setting aside enough money to be comfortable.

Is your retirement plan ready? Get an instant quote for Long Term Care insurance today to close the gaps in late-life care estimates.

LTC Consumer is an independent, free online service to help consumers understand what long term care insurance is, how it works, and how to evaluate coverage options. Our mission is to provide an educational, no-pressure resource for learning about long term care planning, with the opportunity to speak with specialists who can help them.