Coronavirus drives retirees to spend ‘much more’ on this expense than anticipated
Fidelity said typical 65-year-old retiring couple would need $285,000
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The coronavirus pandemic has brought health care to light in more ways than one.
In addition to making Americans hyper-aware of hygiene and cleanliness, it’s highlighted a growing trend among older Americans of overspending on medical expenses.
Roughly 40 percent of retirees said they’re spending more on health and dental care than they thought would when they first left the workforce. That’s according to the Employee Benefit Research Institute's 2020 Retirement Confidence Survey, which also noted that of the respondents spending more than anticipated, 13 percent are spending “much more.”
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While the average amount retirees spend on health care can be hard to predict, data from finical firm Fidelity said the typical 65-year-old woman retiring in 2019 would need $150,000, while her male counterpart would need $135,000. For a couple, that’s $285,000.
And that can a big chunk of retirement savings, especially considering nearly 40 percent of Americans ages 50 to 59 had less than $50,000 saved for retirement, according to data from a 2020 TD Ameritrade report. What’s more, some adults juggling health expenses and saving for retirement may not have a steady stream of income to keep them afloat.
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The unemployment rate among those ages 55 and older has jumped from 3.3 percent in late March to a striking 13.6 percent in April, the Bureau of Labor Statistics reported.
In a report, The Motley Fool personal finance reporter Kailey Hagen said a good way to ensure your medical bills don't drain your savings is to build the cost of health care into your retirement plan, keeping in mind that health costs typically rise as you age.
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Health care inflation will be about 4.9 percent annually, according to HealthView Services.
Any more you are able to put away, you may consider stashing in a health savings account, which reduces your taxable income on the year and allows you to withdraw at any time.
Some adults will be able to collect Social Security benefits if they’re at least 62 years old.