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Retirement Budgeting… Think Realistically and Don’t Forget Your Meds


If you are someone old enough to be thinking about retirement budgeting, think realistically…and don’t forget your meds.


I find many pre-retirees assume that their post-retirement medical expenses will go down, since they no longer have to pay for health insurance.

Medicare to the rescue, right?

Well, if that’s you, hold your horses, Roy Rogers. You need to check your assumptions.

“Many Americans believe that Medicare will cover most or all of their health care costs in retirement. This is simply untrue.” So says Ron Mastrogiovanni, CEO of HealthView Services.

He continues with this grave prediction, “Over their course of time,” Mastrogiovanni says, “retirees will need to use their entire Social Security benefit just to pay for health care.”

HealthView’s Retirement Health Care Cost Index shows that 66-year-old couples retiring in 2017 will require on average 59% of their pre-tax Social Security benefits to pay for their total health care costs during retirement. Not surprisingly, the index concludes that healthcare will likely be the biggest expense for retirees.

What kinds of medical expenses is HealthView referring to? Medicare premiums (parts B and D), any premiums for Medicare supplement policies, dental insurance, out of pocket costs for hospitals, doctors, dentists, hearing or vision, prescription drugs or tests.

Please note that HealthView is not even taking into account the one out of four retirees who will need nursing home care during their lifetime.

And the problem is made worse over time when considering that Social Security benefits have historically risen about 2% per year, when health care inflation runs 5% to 7% per year.

So the first thing to realize is that you should probably have a pretty healthy line item in your retirement budget for medical costs (of all kinds).

Corollary to that is to not count on spending all your Social Security benefits on weekend fishing trips (much less groceries!).

I suggest you reach out to a financial planner with experience working with pre-retirees. Ask her to create a model for your retirement lifestyle. You’ll probably need some guidance as to realistic items to include.

Also, you might offer to take a few recently retired friends to coffee (they’ll be glad to go if you offer to pay!) and ask them what surprised them most about expenses incurred in retirement.

With both this formal (financial planner) and informal (retired friends) research under your belt, go back to your planner and ask her to give you a realistic assessment of when you can retire.

You may nor may not like what you hear – but now is the best time to get that new

Byron is a Certified Financial Planner and Managing Director of the Planning Group at Argent Advisors, Inc.
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