Education >> Retirement Planning

Uh-Oh!

Get ready to spend a fortune on health care costs in retirement

If you think Medicare will take care of all your medical expenses in retirement, you’re wrong.

Men who retired last year at age 65 will spend $65,000 to $109,000 on health insurance premiums and out-of-pocket health care expenses, according to a study released by the Employee Benefits Research Institute in December — and that’s assuming all they want is a 50% chance of having enough money. If you’re that retiree and you want to be 90% certain that you’ll have enough cash, you’ll need $124,000 to $211,000.

The statistics are even worse for women due to their longer longevity. If you’re female and you retired at age 65 in 2010, you’ll need $88,000 to $146,000 for a 50% chance of having enough money, and $143,000 to $242,000 for a 90% chance.

If you’re married, add it up: You and your spouse combined will need as much as $388,000 in retirement just for medical expenses. That includes co-payments, insurance premiums and other nonreimbursed medical expenses. It doesn’t include the cost of long-term care.

Why so much? The reason, EBRI determined, is that Medicare covers just 64% of health care costs. Private insurance and other government programs cover 22%, and the rest — 14% — is paid directly by you.

What can you do? Simple: Save. Save until it hurts. Then save some more.

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