Health Care Expenses: The Retirement Goal You Cannot Ignore

If asked to describe your ideal retirement, you may talk about things you want to do — travel, pursue hobbies, volunteer and so on. And you may be figuring these costs into your retirement income planning, along with other expenses, such as housing and transportation.

But one cost that is easy to overlook is health care — which could actually prove to be one of your biggest liabilities during your retirement years.

So just how much should you set aside? More than you might imagine. According information provided by Fidelity Investments, half of pre-retirees surveyed (48% of people age 55 to 64) think they will need $50,000 for health care in retirement.¹ Yet recent Fidelity research also projects that a 65-year-old couple retiring and enrolling in Medicare in 2014 will need $220,000, in today’s dollars, to cover medical costs.²  

This estimate includes a variety of expenses — ranging from deductibles, copays and out-of-pocket expenses for doctor visits and prescriptions – to expenses Medicare does not cover, such as dental care, hearing aids and eyeglasses. It is also important to note this estimate does NOT include long-term care.

No one wants to think about being incapacitated by a health problem later in life. Yet 70 percent of Americans who reach the age of 65 will need some form of long-term care for an average of three years, according to 2015 estimates from the Centers for Medicare & Medicaid Services.³

According to the Genworth 2015 Cost of Care Survey, the median rate nationwide for a private room in a nursing home is $91,250 annually. Which means your retirement assets – and possibly the financial legacy you wish to provide for loved ones – could be significantly reduced, should you require long-term care.

These are all reasons why it may be prudent to prepare today for future health care costs. Whether you are currently retired, near retirement or you are in the early- to mid-stages of your career.

Your retirement years can be active and invigorating – everything you hope and plan for throughout your life. To address your retirement health care funding needs, and to learn about strategies and solutions available, contact your RBC Wealth Management financial advisor or use the advisor locator tool to find an advisor near you.

1 Source: Fidelity Investments® Retirement Savings Assessment Study, 2014.

2 Source: Fidelity Benefits Consulting, 2014.

3 Source: 2015 Medicare & You, National Medicare Handbook, Centers for Medicare & Medicaid Services, 2014.

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