And that’s just for a 20-year retirement. Consider that if you retire at 65, you could live another 30+ years. You’ll also have to factor in inflation. For example, a $100 medical charge would be $180.61 after 20 years (with an average inflation rate of 3%) or $242.73 after 30 years.
That could be why only 14% of retirees are “very confident” and 41% are “somewhat confident” they will be able to afford long-term care, according to a report by the Transamerica Center for Retirement Studies. It also found three-in-10 retirees don’t have plans in place if their health declines — including 18% who say they don’t have any plans for long-term care.
While this may sound daunting, there are strategies that can help you map out your health savings plan.
Doing the math
First off, you can get a general idea of your annual costs by adding your potential monthly premiums for Medicare, deductibles, private insurance premiums (if applicable) and any recurring medical expenses that aren’t covered by Medicare or private insurance. You can start by considering each of the following:
Medicare Part A: Most people receive Medicare Part A (hospital insurance) without paying a premium if they paid Medicare taxes during their working years (if not, you’ll pay a monthly premium of up to $505). Plus, in 2024, there’s a $1,632 deductible per benefit period. This insurance covers most hospital, home health and hospice care.
Medicare Part B: Medicare Part B (medical insurance) covers things like physician services, medical equipment, outpatient hospital services and some home health services. The standard premium in 2024 is $174.70, but you could also pay an income-related monthly adjustment amount (up to $594) depending on your individual tax return amount from 2022. The Part B deductible for 2024 is $240.
Medicare Part D: Your monthly premium for Part D, which covers prescription drug costs, will depend on your plan, location and provider (you can compare coverage options before deciding). But there’s also a monthly adjustment amount based on your yearly income from two years prior, in 2022. If you filed an individual return of $103,000 or less (or a joint return of $206,000 or less), you won’t pay a monthly adjustment. After that, the adjustment ranges from an additional $12.90 to $81 on top of your premium.
Alternatively, you can opt for a Medicare Advantage Plan (Part C), which can combine the coverage of Part A, B and D.
Being aware of your total — and adjusting for inflation — can give you an idea of how much you should be saving and where you might be falling short.
