How much will I need to retire?

It’s no secret that Americans are struggling with rising medical costs. Nevertheless, many people may continue to underestimate the true cost of health care. If you’re planning for your retirement, it’s important to have a realistic view of your expected medical costs. It’s equally important to understand what is and is not included in these estimates.

The Latest Projection

Fidelity recently released its projections for the health care costs today’s retirees can expect. According to their figures, a 65-year-old couple retiring now will face $280,000 in health care and medical costs over the course of their retirement. This is a 2 percent increase compared to the projection for couples retiring in 2017, and it’s a whopping 75 percent increase compared to what couples retiring in 2002 needed.

If you think that Medicare will help reduce this cost, think again. The projection assumes that both individuals are eligible for Medicare. This means that couples with Medicare can expect to pay $280,000 on premiums, copays, deductibles and other out-of-pocket expenses.

What’s Not Included

The projections sound bad enough, but it gets even worse when you realize what’s not included. As MarketWatch has pointed out, Fidelity’s projections don’t include the cost of long-term care. Long-term care is not considered medical care, even though medical conditions can lead to its necessity.

Long-term care refers to assistance with the personal care tasks associated with daily life, such as eating, bathing and getting dressed. According to the long-term care website maintained by the U.S. Department of Health and Human Services, there is an almost 70 percent chance that a person turning 65 today will need long-term care services at some point. In 20 percent of cases, long-term care will be needed for more than five years.

Medicare does not generally provide coverage for long-term care. Although short-term care may be covered if it is combined with skilled medical care, long-term, non-skilled help is not covered.

Long-term care can be incredibly expensive. A month in a semi-private room at a nursing home can cost $6,844 on average. A home health aide will charge $20.50 per hour on average.

How to Prepare

When budgeting for retirement, make sure you’re including accurate estimations of your medical and long-term care costs. Here are a few more things you can do to prepare:

  • Look into long-term care insurance. Because so many people need long-term care at some point, maintaining this coverage is often a smart idea.
  • Compare your Medicare, Medicare Advantage and Medicare Supplement Plan options carefully. Pick the plan that’s best for your situation.
  • Talk to a financial advisor about savings options, such as opening a Health Savings Account before you retire.
  • If you cannot afford you medical or long-term care expenses, see if you qualify for your state’s Medicaid program, which provides assistance to low-income individuals.