What is One of the Highest Expenditures in Retirement?
- November 6, 2023
- Financial Planning, Healthcare and Medicare
One of the highest expenditures in retirement is healthcare. Finding ways to optimize your spending on healthcare can help protect your retirement finances in the long run. In 1960, healthcare spending as a percentage of U.S. GDP was only 5%. In 2021, spending hit 18.3% of U.S. GDP, almost quadrupling spending over 60 years.1
The average retiree aged 65 is going to spend close to $315,000 on their healthcare over the rest of his or her lifetime.2 That does include costs such as Medicare premiums, prescription drugs and other out-of-pocket expenses. However, that number does not include any long-term care costs like an assisted living facility or home health care services.
You do need to financially prepare for the potential need for long-term care. 7 out of 10 people aged 65 or older are going to need some form of long-term care.3 Long-term care is defined as the care you may need if you are unable to perform daily activities on your own. That means things like eating, bathing, dressing, transferring and using the bathroom. There are a variety of ways to pay for long-term care and a financial planner can discuss the best options for you as you age.
The reality is you do not have to write a lump sum check to cover healthcare costs when you retire. You need to incorporate health care costs into your monthly and annual budgets. Healthcare is often a very important spending category that is forgotten. Building healthcare costs into your retirement income plan is critically important as you approach retirement and as you live through what should be the best years of your life.