The Medical Bills That Hit Retirees Hardest

(This article appeared previously on MarketWatch.com.)

If you’re trying to estimate healthcare expenses in retirement, a new report from the Kaiser Family Foundation highlights some important numbers.

Medical bills in later life can put even the sturdiest of nest eggs at risk. A study released in June by Fidelity Benefits Consulting estimated that a 65-year-old couple retiring in 2014 will need an average of $220,000 (in today’s dollars) to cover medical expenses throughout retirement. What’s more, that figure doesn’t account for over-the-counter medications, most dental services and long-term care.

Kaiser’s report, How Much Is Enough, looks at out-of-pocket spending among Medicare beneficiaries. Specifically, it “explores which types of services account for a relatively large share of out-of-pocket spending, which groups of beneficiaries are especially hard hit by high out-of-pocket costs for services and premiums and trends in out-of-pocket spending on services and premiums.”

Among the highlights:

Good health matters. In short, staying fit in later life saves you money. According to Kaiser, average out-of-pocket spending on services by beneficiaries in poor self-reported health was 2.5 times greater than among beneficiaries who said they were in excellent health.

Some groups of retirees spend more than others. Certain groups — including older women, individuals in long-term-care facilities, those with Alzheimer’s disease and Medicare beneficiaries who were hospitalized — are most likely to wind up in the category of “high out-of-pocket spenders.” Average total out-of-pocket spending was $11,530 among the top quartile of Medicare beneficiaries — and $19,236 among the top decile.

Glenn Ruffenach edits The Wall Street Journal’s guide to planning and living the new retirement. Reach him at [email protected].

By MarketWatch