Health Insurance Navigator

By Lisa Zamosky

The fact that health care costs are a major concern for millions of Americans is hardly news. Yet, a new survey finds that many of today’s middle-income retirees are nonetheless caught off guard by health care expenses once they stop working.

The survey, conducted by Bankers Life and Casualty Company Center for a Secure Retirement, involved 300 retirees between the ages of 55 and 75. Their household incomes ranged between $25,000 and $75,000.

When asked the question: “What Costs More in Retirement than You Thought it Would?” the most frequent answer was health care. The list of the top six expenses that were higher than what retirees expected were:

• Health care costs – 55%
• Groceries – 41%
• Auto costs – 38%
• Prescription drug costs – 33%
• Utility costs – 22%
• Entertainment – 20%

Housing, gas, and taxes were also among the list of expenses that took retirees by surprise.

Whopping Price Tag

It’s interesting that the survey breaks health care costs out separately from prescription drug costs. The two expenses are typically viewed together under the umbrella of overall medical expenses. Combining these two cost centers highlights just how large a financial burden health care can be in retirement.

In fact, Fidelity Investments estimates that a 65-year-old couple retiring in 2012 can expect to spend a minimum of $240,000 on health care during retirement, even with Medicare benefits helping to pay the bills.

Planning for the Future

While the survey found that 23% of those who responded were surprised to find they felt better after retirement, 18% dealt with unexpected health issues. It’s impossible to know what the future holds when it comes to our health. However, there are steps we can take to offset costs that arise as we age.

Choosing our Medicare plans wisely – not always an easy task, given the complicated nature of the system – is critically important to one’s financial life in retirement.

Planning for long-term care needs, as I discuss in this earlier post, can help offset very high medical costs when more extensive care, such as that provided in nursing homes, is needed. Most people don’t realize that Medicare does not pay for the cost of long-term nursing care.

Being smart about how you use your health insurance and taking care to avoid common, costly mistakes can make an enormous difference in your out-of-pocket medical costs.

And, of course, it never hurts to use more of your free time in retirement to increase the amount of exercise you get and to eat healthy – two things that go a long way toward keeping ill health at bay.

Share your insights: Have you been caught off guard by health care costs after retirement? If so, how did you handle it?