Retirement Planning and Medical Expenses


How much should you include for medical expenses in your retirement planning?

A recent study by Fidelity estimates that a couple age 65 who retired in 2012 will need $240,000 to cover medical expenses.

Have you factored these costs into your planning? Not only should you do so, you may want to factor in even higher costs. Here’s why: Fidelity assumed the husband has a 17-year life expectancy and the wife 20 years. The researchers considered cost-sharing under Medicare, however, they excluded other expenses, such as over-the-counter medications, dental services and long-term care.

When Fidelity conducted a similar study in 2002, the amount a couple needed to cover retirement medical expenses was $160,000. This represents a 50 percent increase in shortly after 10 years. The researchers’ assumptions in this care are conservative, considering the female was expected to live to 85.

As a financial planner, I generally recommend you plan out longer than your life expectancy to ensure you do not run out of money at an older age. You should figure in even higher costs as proposed changes to Medicare include means testing, the likely possibility of an increased eligibility age, waiting periods and the need to use concierge medicine.

Historically, medical expenses have increased at a much faster rate than inflation, so in your planning, and for all the reasons above, you may want to factor in still higher costs. If you have a financial professional or financial services company you rely on, they often offer tools and tips for calculating retirement medical expenses.

Disclaimer: The views expressed in this article are the opinions of the author and should not be interpreted as individualized investment advice. Investment objectives, risk tolerances and the financial situation of individual investors may vary. Please consult your financial and tax advisers before investing.

Susan Carr-Templeton

About Susan Carr-Templeton

Susan Templeton is the founder of Stafford Wells Advisors, a wealth management firm serving individuals, families and businesses and advising workplace retirement plans. Stafford Wells was founded in 2008 with the mission of delivering independent, complete, unbiased investment and planning advice, free of any conflicts of interest. Susan Templeton has more than 20 years experience in investment management. She received her B.S.B.A. degree in marketing from the University of Denver and her M.B.A. from the University of Chicago. Susan is a trustee for the Advocate Foundation where she chair’s the Planned Giving Committee and is a member of the Investment Committee. Susan serves on the investment committee for the Visiting Nurse Association (Chicago) and is a former trustee of the Village of Oak Brook Police Pension Plan.