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Retire Better: Want healthcare in retirement? You’re going to need a bigger bank account

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Got an extra $315,000 lying around? Most folks don’t even come close. 

That’s a problem, a big problem, because that’s how much a couple aged 65 and retiring this year can expect to spend on healthcare over the rest of their lives. That’s according to Fidelity Investments, the Boston-based asset-management giant, which issues its much-anticipated figure each year. 

That’s $315,000 beyond what Medicare will cover. 

There’s a lot to unpack here. First is the $315,000 figure itself. It’s up 5% from a year ago. In absolute terms, that’s a ton: an extra 15 grand from last year’s $300,000 estimate. But in relative terms, it’s less than the current inflation rate, which is now beyond 8%. I was figuring Fidelity’s estimate would be even higher this year. So that’s good news, sort of. But it’s cold comfort for anyone struggling to cope with surging food and energy prices. Incidentally, if you are a “senior single,” Fidelity’s $315,000 figure is pretty much split in half. A 65-year man will need $150,000 but since women tend to live a bit longer, they’ll need $165,000.

Read: These are the Best New Ideas in Retirement

Fidelity’s study also highlights a glaring and dangerous gap between expectation and reality. For example, its survey reveals that folks think they’ll only have to spend $41,000 on healthcare during retirement. It’s these kinds of wildly-off assumptions that feed into inadequate retirement planning. Sadly, some folks will never realize, until it’s too late, that the true price tag is seven times higher.

Speaking of reality, median house retirement savings among Americans aged 45 to 54 is $100,000. Median means half have less than this. For Americans aged 55 to 64, the median is $134,000. And it’s only marginally better for folks between 65 to 74: $164,000. This data, provided by NerdWallet, strongly suggests that millions of Americans, tens of millions won’t have nearly enough for healthcare. The numbers are woefullyinadequate. 

Read: How retirement coaches are training people to make one of life’s trickiest transitions

Here’s where someone reading this will post a comment or send me an email saying the figures are all wrong, and there’s no way they’ll have to spend $315,000 on healthcare. Like the guy who told me recently that in the first five years since retiring at age 66, he’s only spent a few hundred bucks a year out of pocket on healthcare. Therefore, he’s confident he won’t be spending much in the future. 

This reminds me of my old Ford SUV, which for the first few years didn’t require much maintenance. But then, as years of wear and tear took their toll, costs went up as things broke down. I put a lot more dough into it over the last few years than in the first few. 

It’s the same with our bodies: As we get older, costs go up as things break down. A study by the National Institutes of Health, for example, points out that healthcare spending for Americans aged 85+ (a rapidly-growing slice of the population, by the way) is double that of those aged 75-84. It’s triple that of the 65-74 group, where that guy is. I hope for that guy’s sake he’s right, but the data suggest he’s eventually in for some sticker shock. 

What will all this likely spending go for, anyway? A look at even the most modest healthcare expenses helps tell the story. For example, retirees need to remember that “original Medicare” (Medicare Parts A and B) typically doesn’t pay for hearing aids, which can cost thousands of dollars. Nor does Medicare cover eye exams, eyeglasses or contact lenses. “You pay 100%,” the government says. And your teeth? “You won’t be covered for most routine dental services.” So if you want healthy eyes, ears, and teeth, don’t come running to Uncle Sam for help. 

And those are the relatively inexpensive things. The big ticket stuff —hospital stays, long-term care and more—that’s where the real costs can kick in. Depending on a variety of factors—what state you live in, what kind of private insurance you might have and more—it can add up fast. You might even say that the gargantuan cost of out of pocket healthcare could wind up costing you an arm and a leg.

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