“Decimate” is a very interesting word. In the early 1500s, according to OxfordDictionaries.com, decimation (an earlier version of decimate) referred to tithing—paying a tenth of your income to an organization that was usually religious in nature. By the end of the 1600s, “An English Dictionary defined [decimate] as both ‘to tythe or take the [tenth]’ and ‘also punishing every tenth man.’” More recently, decimate has been defined as destroying a large portion of something or drastically reducing the strength or effectiveness of something.
When it comes to retirement, the great decimator could be healthcare costs. The Employee Benefits Research Institute (EBRI) estimated that, in 2013, men needed $65,000 and women needed $86,000 to have a fifty-fifty chance of covering healthcare expenses during retirement. At least, that’s how much they needed to pay for Medigap premiums, Medicare Part B premiums, Medicare Part D premiums, and out-of-pocket expenses.
Of course, if they wanted better odds, people had to save more. Let’s say a person wanted a 90 percent chance of having enough money to pay the healthcare costs listed above. In that case, a man needed $122,000 and a woman $139,000. A married couple (both with drug expenses in the 90th percentile) needed $360,000 in savings. EBRI Notes said, “Individuals can expect to pay a greater share of their costs out-of-pocket in the future because of the combination of the financial condition of the Medicare program and cutbacks to employment-based retiree health programs.”
Of course, it’s important to note that these targets don’t include any expenses associated with early retirement or long-term care costs. A new study estimates that a couple retiring at age 62 will pay about $17,000 in out-of-pocket expenses each year until they become eligible for Medicare. No matter when they retire, 70 percent of Americans eventually need long-term care services and support, according to LongTermCare.gov. The cost of long-term care depends on the services required, but it is not insignificant. One survey estimated that the average cost of care for one year in a private nursing facility was about $96,000 in 2014.
Putting sound financial strategies in place can help prevent healthcare expenses from decimating your retirement. Don’t let Healthcare costs decimate your retirement plan.
Weekly Focus – Think About It
“People who think they know everything are a great annoyance to those of us who do.”
— Isaac Asimov, American author and biochemistry professor