“Ask Phil, by UnitedHealthcare”: The Reality of Health Care Costs in Retirement and How You Can Prepare

After years of relentless increases in health care costs, people have become all too aware of what a large chunk of their retirement savings may be needed for health expenses.

The question we’ll tackle today is how to plan for these expenses, so you can feel more financially prepared in your later years.

Fidelity, the big retirement investment firm, issues an annual snapshot of retiree health spending. expenses. Its 2017 report put a price sticker of $275,000 for out-of-pocket health care spending for an average 65-year-old couple, up $15,000 from its 2016 projection. Healthview Services pegs the number much higher at nearly $405,000. And these figures, while sobering, may even be far, far less than what you will actually spend.

For starters, these estimates do not include long-term care costs, which will be needed at some point by more than two-thirds of older Americans. Medicare does not cover long-term care, which easily can cost $100,000 a year or more.

Further, costs for women likely will be higher, according to a recent report on retirement health care needs. “These cost increases are particularly challenging for women, who face higher lifetime care costs due to a life expectancy that is two-plus years longer than men,” the report says. “These additional years are significant, resulting in costs that are typically one third higher than for men overall.”

More to the point, averages barely tell the story of how a single serious health condition can often wipe out a household’s lifetime savings. Failure to plan for this possibility can expose you to a catastrophic financial event. The landscape of personal bankruptcy filings is dominated by families unable to pay their medical bills.

To help you get an idea of your future out-of-pocket health spending, AARP has developed a Health Care Costs Calculator. I took it for a spin and am still reeling.

During my first lap around the track, I entered my and my wife’s ages and projected that each of us would live to the age of 95. Because health costs rise in old age, putting a high number on life expectancy is a safe way to produce worst-case health spending projections. Still, the results weren’t so bad: Total estimated health costs exceeded $500,000 but more than $325,000 of these were covered by Medicare, leaving us with out-of-pocket costs just north of $180,000.

Next, the tool asked me about our health conditions. No one was looking, so I was honest! I have rheumatoid arthritis and high blood pressure, and both my wife and I have added some pounds over the years. When I put these variables into the tool and took a second spin, the numbers were truly alarming: More than $1,050,000 in total health costs, of which $735,000 was insured and more than $315,000 was not.


AARP, to its credit, did not leave me in the lurch here, but provided tips on how I could avoid this future. For us, the answer is easy: lose the weight, which in my case is also likely to lower my blood pressure. If we did this, the tool said, we could lower our total costs to $870,000, with $600,000 of these being insured and $270,000 coming out of our own pockets.

This is still a big number. I hope your results are better, but my greater hope is that you take the time to learn about your future health expenses. There is no way to build a financial plan for retirement without building some informed projections of your future health spending.

Steps to improve your current and future health are hardly a mystery, and I’m not going to dwell on them here. If you’d rather master the TV remote than build a regular diet and exercise routine, that’s your right.

Much the same can be said of developing good financial health in your later years. If you need any tips here, my go-to source is the Center for Retirement Research at Boston College. It can provide you solid information on how much money you will need, and on how to build and execute a feasible plan to reach your financial goals.

Among the recommendations from the Center and others, a central theme that resonates with me is that you need to turn time into your ally, not the enemy.

Work longer if you can. This will boost your savings, raise the level of any pension or Social Security benefits, and reduce the number of years that your retirement savings must cover.

Downsize your household and your spending footprints as soon as you can and on your own terms. Don’t wait for financial stresses to force you into these changes. This also can boost retirement savings and they will last for extra years if your annual spending is reduced.

Set aside money for health expenses. I hope you are building household spending budgets for current and future time periods. Include possible health spending in these plans, using estimates from Fidelity, AARP, or other sources. If you need these funds, they will be available. If not, you can further boost your savings or, if you’re like me, treat yourself with a special vacation trip or home improvement project.

Lastly, if you have your own ideas for healthy retirement finances, please share them with me at askphilbyuhc@gmail.com.

Journalist Phil Moeller is an expert on retirement and aging. He writes the “Ask Phil” column for the PBS NewsHour, is the author of “Get What’s Yours for Medicare: Maximize Your Coverage, Minimize Your Costs,” and is the co-author of the updated edition of The New York Times bestseller “How to Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security.” You can follow him on Twitter (@PhilMoeller) or reach him via e-mail: AskPhilByUHC@gmail.com.