Four big expenses you should plan for before retiring

Part savings and part guessing is part of retirement planning. Although many of your daily expenses will not change, there are some big-ticket items that could take a lot out of your savings.

Four big expenses you should plan for before retiring

You'll be better equipped to handle the unexpected costs if you plan ahead.

These are the four things you should remember when planning for retirement.

1. Health care

According to Fidelity's 2021 report, the average retired couple aged 65 years old will need $300,000. Fidelity partners with NerdWallet. Michelle Gessner is a Houston-based certified financial planner. "That doesn't even include unexpected chronic illness care."

The cost of your specific services will vary depending on where you live, the length of your life and how healthy you are. Costs can be reduced by taking care of your health, managing Type 2 diabetes and properly looking after your body.

Another health care surprise is the fact that Medicare premiums can be higher if you earn more than a certain income level. If you are married and have a modified adjusted gross income of over $182,000, your Medicare Part B monthly premiums will be at least 40% higher. The standard premium for a couple will cost $4,000 per year in 2022.

Laurie Burkhardt, a CFP from Boston, says that it really creeps up. "And it's very easy to reach that income level when your IRA allows you to take required distributions."

2. Long-term care

Long-term care is only a possibility for seniors who live past 80 years. It's expensive: On average, an assisted living facility costs $4500 per month. Even though a home health aide costs on average $27 an hour, it adds up.

Patti Black, a CFP from Birmingham, Alabama, said that this is reasonable if you only require a few hours per week. The more care you require, the harder it becomes to do math.

Certified financial planners can help clients plan for long-term care costs over a few years to make sure their savings are sufficient. Black stated, "I talk to clients about whether long term care insurance should be a part of their financial plans to transfer some or all this risk."

3. Dental care

According to the Kaiser Family Foundation, the average senior who uses Medicare for dental services spent nearly $900 per year out of pocket. One in five Medicare beneficiaries spent more that $1,000.

Original Medicare does not cover traditional dental care. 47% of Medicare beneficiaries do not have any dental insurance. Seniors have greater concerns about oral cancer, gum disease, tooth decay, and tooth loss. Finding comprehensive dental insurance can prove difficult.

Burkhardt stated that dental procedures can be quite a rude awakening. My husband is also going through the process and will be getting a dental crown. He was shocked at the cost of out-of-pocket.

4. Prescription drugs

In 2015, Medicare Part D has seen at least 1,000,000 enrollees have drug costs that were high enough to surpass the catastrophic coverage threshold of $7,050 in 2022. Your out-of-pocket expenses can rise if you have a condition that requires specialty drugs, such as multiple sclerosis, cancer, or hepatitis C. You'll have to pay a small coinsurance, copay, or copayment for drugs once you reach the catastrophic threshold. However, there is no limit on out-of pocket spending under Medicare Part D. This can be costly if you need expensive drugs.

Tess Zigo, CFP in Palm Harbor Florida, stated that her father has rheumatoid and his medications cost $6,000 per monthly. "What retired person has $6,000 per month for drugs?"

What should you do?

A financial advisor who specializes in retirement planning can stress-test your financial plan for potential health issues and other expenses. They can help you find solutions to unexpected costs if your coverage is lacking.

It is essential to have the right insurance.

Dennis Nolte from Winter Park, Florida, said that if the coverage is correct then catastrophic expenses don't seem so terrible.

A good broker can help you evaluate your options. You can also call your State Health Insurance Assistance Program (SHIP) to get answers to your questions about Medicare coverage.


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