How Medical Costs Can Sink Retirement (And What To Do)

How Medical Costs Can Sink Retirement (And What To Do)
DarkoStojanovic / Pixabay

Retirees spend more than a third of their Social Security benefits on out-of-pocket medical costs on average, according to a new study by the Center for Retirement Research at Boston College. Financial security expert Pamela Yellen, a two-time New York Times best-selling author, comments:

Don’t Let Out-Of-Pocket Costs Leave You Destitute

Get The Full Ray Dalio Series in PDF

Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q4 hedge fund letters, conference, scoops etc

Did you know…

Corsair Capital Profits From Goldman Sachs’ SPACs [Exclusive]

Cubic Corporation Chris Hohn favorite hedge fundsCorsair Capital, the event-driven long-short equity hedge fund, gained 6.6% net during the second quarter, bringing its year-to-date performance to 17.5%. Q2 2021 hedge fund letters, conferences and more According to a copy of the hedge fund's second-quarter letter to investors, a copy of which of ValueWalk has been able to review, the largest contributor Read More

  • A 65-year-old couple retiring now will need $280,000 to cover out-of-pocket healthcare costs in retirement, according to a 2018 Fidelity study.
  • Those numbers don’t include costs of nursing home or home health care that can range from $40,000 a year for a home health aide to over $89,000 a year for a semi-private room in a nursing home, according to the Genworth 2018 Cost of Care Survey.
  • At least 70 percent of people over age 65 will require long-term care services, and more than 40 percent will need nursing home care, according to the U.S. Department of Health and Human Services.

“Based on the average cost of a nursing home room and the average length of stay – which is 2.8 years – you would need over $250,000 to cover a single stay,” Pamela says. “Many people don’t realize that Medicare does not pay your long-term care expenses, which are now increasing at nearly three times the U.S. rate of inflation.”

Out-of-pocket healthcare expenses and costs for long-term care now total over a half million dollars – almost four times more than the typical couple nearing retirement has saved in their combined retirement accounts, according to the latest Federal Reserve Survey of Consumer Finances.

Most people and financial planners budget little or nothing for these expenses. Pamela calls them “the single biggest risk you face in outliving your money.

“Ignoring the reality of these expenses doesn’t make them go away. But there are several steps you can take to avoid being blindsided by this very real risk.”

  • Increase the amount you save each year by at least 1-2 percent. You won’t feel the pinch, but you’ll be surprised by how much your savings will grow.
  • When calculating how much you’ll need in retirement, use the currently recommended savings withdrawal rate of 2.8 percent, and assume you’ll live to at least age 95.
  • Save where your money is guaranteed to grow, even when markets are crashing. Pamela advocates the Bank On Yourself safe wealth-building method that’s posted positive returns for more than 160 years. This method includes specialized plans for people age 60 and older that cover long-term care benefits and home health care.

“Are you realistically on track to have enough saved to truly be able to live comfortably and have enough savings to cover healthcare and long-term care costs in retirement? The sad truth is that if you’re like the vast majority of folks, the answer is ‘no.’”

About the Author:

Pamela Yellen is founder of Bank On Yourself, a financial investigator, and the author of two New York Times best-selling books, including her latest, "The Bank On Yourself Revolution: Fire Your Banker, Bypass Wall Street, and Take Control of Your Own Financial Future." Pamela investigated more than 450 financial strategies seeking an alternative to the risk and volatility of stocks and other investments, which led her to a time-tested, predictable method of growing wealth now used by more than 500,000 Americans. Visit

No posts to display