Retirees Should Prepare For Healthcare Sticker Shock

Posted by Richard on April 13, 2023

Retirees now live longer and often enjoy a higher quality of life than in decades past. However, longer lifespans make financial security, especially in retirement, all the more essential. Whether you’re young and still planning, or are approaching retirement age, you’ll want to take financial planning seriously.

Research conducted by the Employee Benefit Research Institute has found that Medicare Advantage plans, often called Medicare Part C or MA plans, have the lowest savings targets on average. Still, keep in mind that individual needs can vary wildly. Even with Medicare Advantage plans, you’ll need considerable savings set aside.

For a single man enrolled in a Medicare Advantage plan who has median drug expenditures and health care usage, he’ll have just a 50 percent chance of covering his health care requirements if he has just $56,000 set aside. Bump that up to $96,000, and he’s got a 90 percent chance of receiving adequate coverage. Women need to set aside more. A woman with $67,000 set aside will have only a 50 percent chance of meeting her health care spending requirements. To reach 90 percent, she’ll need $113,000.

Remember that these numbers are averages. If you live in an area with particularly high cost of living, you might need more. If you live in a low-cost area, you might need less.
Retirees also need to remember that Medicare plans have cost-sharing provisions, such as deductibles and copays. So-called Medigap plans can cover out-of-pocket costs, thus reducing risk. However, there are a variety of plans on the market, each providing different coverage.

A study conducted by Paychex found that roughly one in six retirees are considering un-retiring and jumping back into the workforce. The Bureau of Labor Statistics has found that workforce participation for those aged 64 to 74 is now at roughly 25 percent.