Health care costs can be one of the most significant expenses you’ll face in retirement. Fortunately, there are some things you can control – like when you retire, where you live, and what type of health plan you choose. But you’ll have less control over other factors, such as your health status and how long you will live.
Those are the main drivers of healthcare spending in retirement. For example, an analysis of Medicare claims data showed that the average health care spending for healthy retirees with just a single chronic condition is about $2,400 per year – but that amount more than doubles for those with 2-3 chronic conditions and then jumps 6X for the small subset of people with 4 or more conditions. And if you live longer than the average life expectancy, you’ll need even more assets to cover your health care costs.
Inflation is also an important factor in the long-term growth of healthcare Go to the source costs. The recent high rate of inflation is partly driven by accelerating short-term healthcare trends, such as higher prescription drug prices and greater utilization of medical services. However, underlying market forces, such as improving healthcare insurance competition and a steady increase in private Medicare Advantage plan enrollment, are driving lower overall premiums and richer benefit plans for enrollees.
As a result, the typical annual healthcare cost of a typical retiree is not as scary as many people fear. A joint study by Vanguard and Mercer Health and Benefits found that the median female retiree spends just over $5,200 per year throughout her retired years on healthcare-related costs (excluding long-term care).
That’s a substantial sum, but it’s not nearly as much as the tens of thousands of dollars or more you might need to pay if you live a very long life. That’s why it’s vital to work with your financial professional to develop a strategy to meet your lifetime health care needs.
Retirees with Chronic Conditions
Managing chronic conditions is an important component of successful health care management and can help reduce the risk of costly hospitalizations. A new service that some Medicare Advantage providers offer is called “chronic care management.” This is a team of health care professionals who will work with your primary care provider to develop and coordinate a treatment plan for your chronic condition.
Using this approach, providers can monitor your progress, review your medications and treatments, and adjust them as needed. The goal is to keep you as healthy as possible for as long as you’re alive – and to reduce the cost of your healthcare.