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For most Americans in 2019, the idea of retirement is associated more with a sense of anxiety than the promise of relaxation it once inspired. Have I saved enough? When should I stop working? Will I have a guaranteed source of income? And more than ever before, how can I plan for the rising costs of healthcare?

These are all valid questions that need answers, but the stressors around future medical expenses and the cost of insurance coverage, in particular, have never been more pressing.

We are living longer, healthcare costs are rising faster than general inflation, government coverage and subsidies are less, and we won’t have the same employer and union-based benefits that our parents’ generation enjoyed. According to a 2019 Fidelity Benefits Consulting estimate, the average cost for healthcare after the age 65 will be $285,000 per couple.[i] But our own internal estimates find that the costs will likely be much higher, and possibly even double, depending on your income levels in determining Medicare coverage.

Many pre-retirees believe that Medicare will cover all of your health care costs in retirement, but that isn’t the case. Medicare only covers 60% of medical expenses, and whether you expect it or not, healthcare premiums and out of pocket medical payments will account for a significant percentage of yearly expenses throughout your retirement. There are numerous factors that will determine how much of an expense you’ll face, including when and where you’ll retire, how healthy you are, how long you’ll live, and above all, how much taxable income you bring in. 

On average, it is estimated that a largely healthy couple will spend between 8k-12k/year on healthcare after Medicare. If an unforeseen accident or illness arises, those costs are likely to spike exponentially. According to government findings, 70% of individuals will require an extended period of long-term care at some point over the age of 65.[ii]  Everyone thinking about retirement should look up the Medicare Modified Adjusted Gross Income (MAGI) to see what bracket they fall into in terms of premium payments for Medicare Part B.   

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