4 big expenses you could face in retirement

Mar 30, 2022, 4:00 AM | Updated: 6:17 am

Retirement planning is part savings, part guessing game. While many of your day-to-day expenses will remain the same, there are big-ticket categories that can take a large bite out of your savings. The more you can plan, the better prepared you’ll be to weather the costs.

Here are four expenses to keep in mind as you prepare for retirement:

1. HEALTH CARE

The average 65-year-old retired couple will need about $300,000 in after-tax savings to handle health care costs in retirement, according to a 2021 report from Fidelity. Fidelity is a NerdWallet partner. “And that’s just for regular health care,” says Michelle Gessner, a certified financial planner in Houston. “That’s not even counting unexpected chronic illness care.”

Your specific costs will depend on where you live, how long you live and your overall health. Taking care of your health and adequately managing conditions like Type 2 diabetes can help keep costs lower.

The other health care surprise is that Medicare premiums are higher if your income is above a certain level. For example, if you’re married filing jointly with a modified adjusted gross income over $182,000 in 2020, you’ll pay at least 40% more for your Medicare Part B monthly premiums. In 2022, the standard premium costs about $4,000 a year for a couple.

“It really creeps up,” says Laurie Burkhardt , a CFP in Boston. “And it’s easy, believe it or not, to get to that income level when you are at the age where you’re taking required distributions from your IRA.”

2. LONG-TERM CARE

Seniors who live to 80 have about a 1-in-4 chance of needing long-term care. And it’s not cheap: An assisted living facility costs $4,500 a month, on average. And while a home health aide averages about $27 per hour, the costs add up.

“That’s pretty reasonable if you only need a few hours of care per week,” says Patti Black, a CFP in Birmingham, Alabama. “That math becomes unworkable, the more care you need.”

Certified financial planners can help clients project costs for a few years of long-term care to ensure their savings can handle it. “I talk with clients about whether long-term care insurance should be part of their financial plan to transfer some or all of this risk,” Black says.

3. DENTAL CARE

The average senior on Medicare using dental services paid nearly $900 a year out of pocket, according to the Kaiser Family Foundation. And 1 in 5 Medicare beneficiaries spent more than $1,000.

Original Medicare doesn’t cover most traditional dental care, and 47% of Medicare beneficiaries go without any dental insurance. But gum disease, tooth loss and oral cancer are all greater concerns for seniors, and finding comprehensive dental insurance can be difficult.

“Dental procedures can be a really rude awakening,” Burkhardt says. “I’m going through it right now with my husband, who is retired and is getting a dental implant. He’s been shocked at how much the out of pocket is.”

4. PRESCRIPTION DRUGS

Since 2015, at least 1 million enrollees per year in Medicare Part D have had drug costs high enough to exceed the catastrophic coverage threshold, which is $7,050 in 2022. If you have a condition that requires specialty tier drugs — such as cancer, multiple sclerosis or hepatitis C — your out-of-pocket costs can be exceptionally high. Once you hit the catastrophic threshold, you’ll pay either a small coinsurance or copay for drugs , but there’s no cap on out-of-pocket spending under Medicare Part D; it can add up if your drug is expensive.

“My dad has rheumatoid arthritis, and his drugs cost $6,000 per month,” says Tess Zigo, a CFP in Palm Harbor, Florida. “What retiree has $6,000 a month just for drugs?”

WHAT TO DO

A financial planner specializing in retirement needs can stress test your financial plan for health events and other expenses. If there are gaps in your coverage, they can help you with strategies to address unexpected costs, such as considering long-term care insurance or a hybrid policy that combines life insurance with a long-term care rider.

Getting the right insurance, from Medicare Supplement plans to dental and drug coverage, is also essential.

“If the coverage is correct, then those catastrophic expenses aren’t so bad,” says Dennis Nolte, a CFP in Winter Park, Florida.

A good insurance broker can help you weigh your options, and a Medicare consultant — or a call to your State Health Insurance Assistance Program or SHIP — can answer your questions about the best Medicare coverage for your needs.

_________________________________________________

This article was provided to The Associated Press by the personal finance website NerdWallet. Kate Ashford is a writer at NerdWallet. Email: [email protected]

RELATED LINKS:

NerdWallet: What is Medicare, and what does it cover? https://bit.ly/nerdwallet-what-is-medicare-and-what-does-it-cover

State Health Insurance Assistance Program https://www.shiphelp.org/

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Associated Press

Labour conference starts with focus on ‘immoral’ tax cuts

LONDON (AP) — Britain’s opposition Labour Party opened its annual conference Sunday, with leaders attacking the “immoral” tax-cutting of the new Conservative government. The event, this year taking place in the northern city of Liverpool, kicked off two days after the U.K government, under new Prime Minister Liz Truss, said it would scrap a 45% […]
4 hours ago
Police officers detain a demonstrator during a protest against a partial mobilization in Moscow, Ru...
Associated Press

Winter’s approach sets clock ticking for Ukraine, Russia

KYIV, Ukraine (AP) — The onset of autumnal weather, with rains making fields too muddy for tanks, is beginning to cloud Ukraine’s efforts to take back more Russian-held territory before winter freezes the battlefields, a Washington-based think tank said Sunday. Russia, meanwhile, pressed on with its call-up of hundreds of thousands of men to throw […]
4 hours ago
In this photo released by Saudi Press Agency, SPA, Saudi Crown Prince Mohammed bin Salman, right, s...
Associated Press

German leader continues Gulf tour with stops in UAE, Qatar

BERLIN (AP) — German Chancellor Olaf Scholz planted a tree at a mangrove park in the United Arab Emirates on Sunday, a token nod to environmentalism during a two-day visit to the Gulf region focused mainly on securing new fossil fuel supplies and forging fresh alliances against Russia. Germany is trying to wean itself off […]
4 hours ago
A baker stacks loaves of Egyptian traditional "baladi" flatbread outside a bakery, in the Old Cairo...
Associated Press

Poverty and inflation: Egypt’s economy hit by global turmoil

DUBAI, United Arab Emirates (AP) — Stores are selling winter clothes from last season in the middle of summer. Repair shops lack spare parts for appliances. There’s a waiting list to buy a new car. Egypt, a country of more than 103 million people, is running low on foreign currency needed to buy essentials like […]
1 day ago
This satellite image provided by the National Oceanic and Atmospheric Administration shows Tropical...
Associated Press

Florida monitors a growing Tropical Storm Ian in Caribbean

TALLAHASSEE, Fla. (AP) — Authorities and residents in Florida were keeping a cautious eye on Tropical Storm Ian as it rumbled through the Caribbean on Sunday, expected to continue gaining strength and become a major hurricane in the coming days on a forecast track toward the state. Gov. Ron DeSantis declared a state of emergency […]
1 day ago
A Carolina dog waits for his owner to vote at a polling station in Rome, Sunday, Sept. 25, 2022. It...
Associated Press

Italians vote in election that could take far-right to power

ROME (AP) — Italians voted Sunday in an election that could move the country’s politics sharply toward the right during a critical time for Europe, with war in Ukraine fueling skyrocketing energy bills and testing the West’s resolve to stand united against Russian aggression. Polls opened at 7 a.m. (0500GMT) and by noon turnout was […]
1 day ago

Sponsored Articles

...
Sanderson Ford

Don’t let rising fuel prices stop you from traveling Arizona this summer

There's no better time to get out on the open road and see what the beautiful state of Arizona has to offer. But if the cost of gas is putting a cloud over your summer vacation plans, let Sanderson Ford help with their wide-range selection of electric vehicles.
...
Dr. Richard Carmona

Great news: Children under 5 can now get COVID-19 vaccine

After more than two years of battle with an invisible killer, we can now vaccinate the youngest among us against COVID-19. This is great news.
...
Day & Night Air Conditioning, Heating and Plumbing

Most plumbing problems can be fixed with regular maintenance

Instead of waiting for a problem to happen, experts suggest getting a head start on your plumbing maintenance.
4 big expenses you could face in retirement