The most fun aspect of planning for retirement is figuring out how much to spend on dental and medical expenses.
Budgeting for travel, entertainment, and other activities is the funnest part, but food and housing are automatic. With health and dental costs, you’re thinking of potentially costly, joyless, and documenting the natural decline of your body in old age.
With longer lifespans and a strained health care system, it is imperative to include medical and dental costs in your retirement budget. But how much should you plan to spend on out-of-pocket expenses not covered by state medical insurance?
I asked my financial planners and advisors this question LinkedIn page I recently got a refreshing and specific answer worth sharing.
Sheldon Craig, a certified financial planner (CFP), said $300 a month for a couple. Also he said CFP’s Steve Bridges is $4,000 a year per couple, depending on the situation. Meanwhile, CFP’s Zael Milansky suggests looking at your current health-related bills if you don’t have insurance and adding 10. percent.
Graham Mayes, chief investment strategist and partner at Exponent Investment Management, said he recently met with several clients to find out their exact costs. He found that most people have to set aside $4,800 to $5,300 a year to cover out-of-pocket costs for health-related problems.
CFP Rona Birenbaum said in a recent conversation that retirees who don’t have a health insurance plan may want to budget $5,000 to $7,000 a year for health-related expenses. I was. “Health care and dental care are grossly underestimated by most retirees and seniors,” she said.
The starting point for an effective retirement plan is figuring out how much money you’ll need after retirement. Health-related spending is among the hardest to calculate for anyone who has worked for an employer with benefits that cover at least part of the cost of dental care, prescriptions, glasses, chiropractic care, physical therapy, etc. There is a possibility that
When your workplace benefits are deducted from your paycheck and you only pay deductibles or copays when filling prescriptions or paying for dental care, it’s easy to have a cursory idea of the cost of health care. Also, many of your health-related expenses are likely to be lower when you’re working than when you’re retired.
The biggest savings when you’re done working is not having to save money for retirement. The biggest new costs can easily be related to healthcare.
Fortunately, a small number of retirees continue to benefit from workplace health and dental insurance. According to Mercer Canada, a human resources and pensions consulting firm, about 20% of companies with more than 500 employees now offer benefits to retirees, according to a database of workplace health plans.
In most cases, there is a premium to pay and a deductible, but Mercer’s view is that these plans are superior to the medical coverage available to retirees and others from life and health insurance companies. is.
These plans cost around $400 to $450 a month for retired couples, with copays likely to be added at billing, Birenbaum said. She also noted limited insurance coverage, especially when it comes to dental care. “These policy calculations don’t always make a lot of sense,” she said.
Some planners pointed to inflation as a big factor in estimating how much they will spend on health care out of pocket in retirement. The cost of dental care has increased in the range of 7% to 11% year-on-year.
If your financial planner has already planned your retirement finances, read your plans to account for the thousands of dollars you are likely to spend on dental and medical expenses not covered by your state plan. Want to see if there are any? If these costs aren’t specifically spelled out, ask your planner to rewrite them.
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