Unexpected Healthcare Costs Could Torpedo Your Retirement

The question of how much you need to save up for your retirement is a difficult one to answer. There are a number of factors that go into figuring the total, and many people end up drastically underestimating at least one of them, if not more. When that happens, their funds can be depleted sooner than expected, leaving them without enough to live on.

One of the biggest pitfalls to retirement saving is healthcare costs. It’s an important expense, which tends to cost more as you get older. Yet most Americans are afraid to talk about it, or take an honest look at how big a piece of their nest egg it will take.

Not Fully Covered

One of the reason the healthcare issue is dismissed so readily is because people figure that their insurance will cover most of those expenses. When you turn 65, you qualify for Medicare, which can help you out with prescription medications, routine doctor visits, and more.

However, Medicare doesn’t cover everything. For example, it will pay for only 80% of things like doctor visits and lab work. The rest is on you. This is OK for routine checkups and the like, as you know approximately how much you’ll have to pay out of pocket and budget for it. What if an emergency comes up, though?

Seeing a specialist, having a battery of tests done, and undergoing a necessary procedure are all things can cost you a lot of money. Even though you’re only responsible for a small part of it, it can still take a large chunk out of your savings, particularly if it happens unexpectedly. The average amount that a retired couple could expect to pay in healthcare costs over 20 years increased 6% from 2015 to 2016, to $260,000. Is that budgeted into your savings?

Long Term Care

Even more difficult to talk about than regular healthcare expenses is the possibility of long term care. As you get older, you’ll continue to deteriorate, both mentally and physically. It may reach the point, someday, where your family can no longer care for you properly, and you need to be moved to a nursing home or similar type of care facility.

No one wants to think about it, but it’s important to discuss it with your loved ones for a number of reasons, not the least of which is figuring out how it will be paid for. The median cost of a private room in a nursing home is over $92,000 per year. Even a shared room is over $82,000, and the cost of both is rising. Medicare pays for a very small portion of this, but the longer you stay, the more of the financial burden falls to you. After three months of care, it becomes entirely your own responsibility.

What can you do about these unexpected healthcare costs? The first step is to talk about it. First, discuss it with your family members, who need to know what to do when disaster strikes. Then speak with a financial expert and determine how much you should put away for such eventualities and what the best way is of saving it.

Everyone wants to believe that these types of medical emergencies can’t or won’t happen to them. However, in the end, you never know what’s going to happen, so you need to be prepared. It’s better to discuss it upfront and come up with a solid plan to pay for it, than to be caught off guard and have it completely deplete your retirement fund.