Think Small: Tackling Healthcare Costs In Retirement

Why It Matters:
  • A 65-year-old couple retiring in 2019 can expect to spend $285,000 on health care in retirement.1
  • While big projections like this can feel overwhelming, it’s important to think small.
  • Know your family history and keep both Wealth + Health℠ in mind.

Ryan Besch tkc.profilePicture Written by: Ryan Besch | Transamerica
Nov. 06, 2019

5 Min readClock Icon

Those approaching retirement face many decisions: Where to live, how to stay fit, access to health care, and future sources of income. One of the biggest obstacles on the road to your ideal future could be future healthcare costs.

A 65-year-old couple retiring in 2019 can expect to spend $285,000 in healthcare costs throughout retirement1, but don’t wave the white flag just yet. Keep in mind — no one pays the entirety of their healthcare expenses as a lump sum, and nailing down an “average” for something as fluid as healthcare costs is next to impossible.

A clearer picture

Instead of focusing on an ugly lump sum, it helps to break things down to two key elements: premiums and out-of-pocket costs. Premiums, much like paying rent or your cable bill, stay flat every month and are often paid from monthly income. So in retirement this money could come from an annuity, a hobby you’ve monetized, dividends, a pension, Social Security, etc.

Now, on to the bigger price tag: out-of-pocket costs. These are the charges that often catch us off guard — emergency dental work, an ambulance ride, a longer-than-anticipated hospital stay, etc. Since these costs are harder to plan for, it may help to pad your savings when you can, set aside any leftover health savings account (HSA) money, or open a dedicated emergency account just for this purpose. Better to be safe than sorry.

Keeping premiums and out-of-pocket costs separate in your healthcare-funding strategy may bring some peace of mind to your retirement vision.

Know your history

Not all health conditions are created equal, especially when it comes to cost. Knowing your family health history can give you a leg up on what to prepare for, physically and financially. Let’s take a quick look at three common (and costly) ailments.

1) Heart disease

Responsible for over 366,000 deaths each year, heart disease is still the number one killer among Americans.2 Direct and indirect costs of total cardiovascular diseases and stroke are estimated to total more than $329.7 billion.2

The upside: Small steps today can lead to big changes tomorrow. To maintain a healthy heart, the American Heart Association recommends sticking to Life’s Simple 7: Get active, eat better, lose weight, control cholesterol, manage blood pressure, reduce blood sugar, and stop smoking.3

2) Alzheimer’s disease

Alzheimer’s and other forms of dementia can have a huge impact on not only an individual’s finances, but also those of their caregivers. Individual caregivers spend over $7,000 of their own money each year to provide care for loved ones.4

The upside: Research advancements are transforming the way scientists and physicians understand the disease. The earlier someone can be diagnosed, the earlier they can begin health measures to preserve their existing cognitive function for as long as possible.5

3) Cancer

A cancer diagnosis can turn anybody’s world upside down. While there were 1.7 million new cancer cases estimated in 2018, at least 42% of newly diagnosed cancers in the U.S. are potentially avoidable.6

The upside: According to the American Cancer Society, you can reduce your risk of cancer by making healthy choices like eating right, staying active, and avoiding all forms of tobacco. It’s also important to follow recommended screening guidelines, which can help detect certain cancers early.7

Positive steps

It’s easy to picture retirement as a series of tradeoffs between living the dream and wealth preservation: save more here to splurge there, dedicate a line of your budget to the bucket list, work part time to support your favorite nonprofit, etc. The truth is, you can downsize your home, you can cut down on travel and entertainment, but you can never eliminate healthcare costs.

But what about those of us who are able to steer clear of costly conditions, medications, and procedures later in life?

I’m reminded of Bea, the sweet Italian woman who lived next door when I was in grade school. She was in her 70s, recently widowed, and seemed to enjoy carb-loading my family with homemade pasta every week. My sister and I helped her with chores after school, so we had a good thing going. Fast-forward three decades later: Bea is now 97 and lives in a community home. She takes zero medications, gets regular visits from my mom, and recently bowled a 300 in a Wii bowling tournament at the center. My mom asked Bea what her secret is — she says a daily walk, lots of garlic, and a glass of red wine with dinner to “put the night in.”

While Bea’s advice may not work for everyone, her story sheds light on an important truth: Planning for healthcare costs is a two-part equation. Financially, let’s consider how to best manage the core components (premiums and out-of-pocket costs) instead of fretting about astronomical projections. And two, prioritizing your long-term health — before and throughout retirement — could pay dividends. After all, the cheapest medical bill is the one you never get.

Things to Consider:

  • Understand your family health history and the potential cost of common conditions.
  • Consider how you’ll handle future premiums and out-of-pocket costs as separate expenses.
  • Talk to your financial professional for more ideas on preparing for healthcare costs.

1 “Retiree Health Care Cost Estimate,” Fidelity, 2019

2 American Heart Association, 2018

3 “Life’s Simple 7,” American Heart Association, 2018

4 “Surprising Out-of-Pocket Costs for Caregivers,” AARP, 2019

5 “Alzheimer’s Disease Facts and Figures,” Alzheimer’s Association, 2018

6 “Cancer Facts and Figures,” American Cancer Society, 2018

7 “Stay Healthy,” American Cancer Society, 2019



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