How Will Rising Healthcare Costs Affect My Retirement?

(2 Minute Read)

The rising cost of healthcare, coupled with an ever-increasing\ human life expectancy, has many retirees and their caregivers concerned about healthcare costs during retirement. How much can you rely on Medicare, what are the costs of a nursing home, and how much money will you really need to save? This post should provide some answers.


There’s a common belief among seniors that Medicare and Medicaid will cover all their healthcare costs during retirement, but this is increasingly rarer in today’s market. As costs of treatment rise for providers and insurers, the person being treated is often asked to pay a higher percentage of costs through coinsurance, which is part of all Medicare coverage. Medicare Part B, which covers doctor’s visits, and Medicare Part D, which covers prescription drugs, both require monthly premium payments. All segments of federal insurance have deductibles and copays, even for urgent care. Medicare also doesn’t cover vision, dental, or aural health needs (like hearing aids). While out-of-pocket costs will fluctuate based on your overall health going into retirement, today’s seniors in the best of health spend an average of $5000 annually on healthcare. That number is only going to increase over time.

Long-Term Care

The biggest gap in the Medicare safety net is that it doesn’t cover the cost of some common forms of long-term care, like nursing home or hospice stays. Under Medicare, you do have some residential options, like assisted living or subsidized senior housing, but as individuals age, they usually find themselves in need of full-time care. While no one anticipates ending up in those situations, most retirees will spend two to three years in a nursing home. In a state like Indiana, costs can range from $120-$316 per day, depending on the kind of facility you choose and if your room is shared or private. This range is relatively static across the continental US, except for New England, where minimum costs spike to over $200 a day even for a shared room. In Hawaii and Alaska costs are also much higher, sometimes as much as $700 a day. Even at the low end, a one-year stay in a nursing home costs over $40,000. If you’re not even close to needing this kind of care, it’s likely this cost will increase significantly before you join one of these communities.

Social Security and Savings

For today’s retirees, covering the premiums associated with Medicare coverage uses about 8% of Social Security’s annual benefits. Out-of-pocket health expenses could require as much as an additional 67%–and in ten years, it’s projected that out-of-pocket care could cost as much as 90% of a person’s Social Security benefits. What’s left to live on? Without savings, seniors could find themselves stressing more about money in their golden years than they did in their youth. If you’re in a position to begin planning and saving in advance, start now! Saving a few hundred dollars a month now will make a difference in five or ten years. But if you’re already on the threshold of retirement with limited resources at your disposal, you could also consider a life settlement, especially if your life insurance premium is just one more cost to bear. Visit our calculator today to see if we can help you establish a nest egg.