A recent survey found more than half of retirees and those still saving for retirement greatly underestimate the out-of-pocket tab.
Estimating how much one needs to have saved up in order to retire can be difficult. But among the most important--and most overlooked--aspects of retirement planning is health-care costs, which can have a dramatic impact on a retiree's financial picture.
Past research has also shown that people don't understand the Medicare program and think it will cover more than the 60% of health-care costs than it does. Many of our respondents underestimated the costs of premiums for Medicare Parts B and D and for supplemental coverage. It also seems most people don't fully grasp how much health-care costs, including the portion they will have to pay out-of-pocket, are increasing.
women respondents projected 50% lower lifetime expenditures ($30,000 median estimate of lifetime retiree spending) than their male counterparts ($60,000 median estimates) despite experts' estimates that the typical woman will spend 50% more over her retirement on health-care costs than the typical man.
Perhaps even more importantly, we think that retirees need to be careful when selecting supplemental health coverage--a policy that fills in the Medicare gaps, which 90% of retirees have--that it protects them against catastrophic spending, even if they need to spend a bit more upfront.
Saving for retirement? Then better plan on higher Healtcare costs than you think you will need. Medicare, Obamacare, etc isn't going to cover all your costs.