You don’t have to go much further than a visit to your local supermarket to see how much more expensive things are than they used to be. While many people talk about inflation during election season, it’s something that has an impact on everyone, day in and day out. Additionally, data collected by Peterson-KFF reveals that healthcare costs have more than doubled since 2000, even when accounting for inflation.
While there’s a growing cohort among voting blocks to address this concern, and the doubling rate is slowing down, signs still point to rising costs being a factor for seniors today and into the future. This raises several questions about why costs are rising, how they can impact your retirement plans, and what resources are available to protect your health and finances in the future.
Why Costs Are Rising
There are various factors that can cause medical expenses to continue rising. An important one is the fact that people are generally living longer (excluding the recent drop in life expectancy during the pandemic, as recorded by the Centers for Disease Control and Prevention). This means that conditions such as cancer and dementia, which are both more common as we age and typically are costlier to treat, are increasingly regular occurrences.
Another factor is that the medical insurance industry is remarkably complex, involving multiple parties for every transaction and necessitating both insurers and hospitals to regularly increase their administrative staff. These new staff don’t directly provide medical care, but their salaries and expenses still have to be paid.
How This May Impact Your Retirement Plans
Though it’s impossible to predict the future with exacting precision, you can still consider the likely factors. If you’re comparing your needs today, anticipate that your costs may double around 20 years from now. Planning for retirement means putting away even more than you expect. Fortunately, you may be able to retain insurance coverage that can offset many of those costs, so a bit of “overpreparing” could put you in a more comfortable position if you can avoid those anticipated costs in reality.
The medical care you may need will potentially depend on your family history and your personal experiences. For example, if you smoked regularly during your youth, you might expect to pay more for insurance and encounter more expensive illnesses related to complications from having smoked. On the other hand, if you’ve lived an active life and avoided smoking or drinking, your general healthcare needs may be less expensive to maintain during retirement.
Further, the decision to seek in-home medical care or assisted living in a community can also impact your plans. These potential expenses can be large, so it’s essential to build up a nest egg for the uncertain but likely expenses that may come with aging and increased dependency.
Resources for Contingency Planning
When you’re planning for retirement and want to prepare for these potential medical costs, the most important factors are knowledge and flexibility.
Increasing Your Knowledge
As the saying goes, an ounce of prevention is worth a pound of cure. Make sure that you’re visiting your primary care physician regularly for checkups and to investigate any changes in your body. Catching an illness early can save money, and it may also be easier to cure or treat earlier on. Additionally, you can speak with licensed experts in the insurance field to review the best coverage for your needs. Your current insurance carrier may have agents who can advise you on how to save money while maintaining the coverage you’ll need.
Increasing Your Flexibility
Your existing retirement plan should already preserve your options when you’re not working, such as by having a combination of regular income and healthy savings in various accounts. As you approach retirement, do what you can to build up those reserves. You might also consider splitting the difference by adding some freelance or gig work to generate a bit of extra income without sacrificing too much time.
Your retirement should be a time of relaxation. Though medical expenses and treatments are common sources of stress, a bit of anticipation and planning can provide the extra coverage you need and protect your savings for the length of your retirement. With regular checkups and proper financial management, you can account for increased expenses and feel more secure about the future.
Resource Links
“Life Expectancy in the U.S. Dropped for the Second Year in a Row in 2021” via the Centers for Disease Control and Prevention
“How Has U.S. Spending on Healthcare Changed Over Time?” via Health System Tracker
“6 Reasons Healthcare Is So Expensive in the U.S.” via Investopedia