Next Avenue Logo

Women: Get Real About Retirement Health Costs

Research reveals that most women woefully underestimate these potential expenses. Here are seven ways to brace against the big bills.

By Kerry Hannon

Chances are you have no idea how much your health care will cost when you retire. I don’t. Trying to conjure up a reliable estimate gives me brain freeze.
But if you’re not including a ballpark figure in your retirement savings calculations, you could be setting yourself up for a sickening financial surprise. That’s especially true for women, because we live three years longer than men on average, which puts added pressure on us to make our money last.
(MORE: Three Things Women Should Know About Health Reform)
“It is extremely important that health care costs are factored into retirement savings strategies today so that retirees can be prepared to pay their medical bills throughout retirement,” Brad Kimler, executive vice president of Fidelity’s Benefits Consulting business, noted in May, when his company issued its annual retiree health cost projections.
Women Need to Face Reality
Women, it turns out, underestimate their future health care costs far more than men, according to a recent study by Professor Allison Hoffman of the UCLA School of Law and Professor Howell Jackson of Harvard Law School.
When the researchers asked 1,700 near-retirees and retirees how much they expect their out-of-pocket health expenses to total in the future, the projections from female participants were 50 percent lower than the estimates of their male counterparts. But medical experts estimate that the typical woman will actually spend 50 percent more for health care in retirement than the typical man.
Lowballing Long-Term Care Costs
Last week, Nationwide Financial found that boomers greatly underestimate the cost of long-term care, too — a potentially huge health care outlay for retirees and an expense women are more likely to incur than men.
Americans 50 and older underestimate the annual costs of long-term care by more than three times the actual expense, according to the Nationwide survey. They expect long-term care costs to run $78,923 annually. But by 2030, the year the last boomers will retire, the cost of a nursing home will reach $265,000 a year, according to Nationwide.
And the U.S. Department of Health and Human Services estimates 70 percent of Americans over 65 will need long-term care during their lifetime.
(MORE: Employers Penalizing Spouses for Health Insurance)
Medicare Has Big Gaps You Must Fill
If you’re thinking that Medicare will foot your health care and long-term care bills, think again.
Medicare pays for only about 60 percent of retiree health care costs — and no one knows how much it’ll cover in the future. And Medicare doesn’t reimburse for long-term care expenses.
Yes, you can buy supplemental insurance to cover some expenses that Medicare won’t, but these policies can be expensive and still leave you with gaps.
Medicare beneficiaries, on average, spend about 16 percent of their income on out-of-pocket health care costs; some shell out as much as 33 percent of income. These outlays include premiums for Medicare and Medigap, doctor visits and supplies, prescriptions, dental care and hospital visits.
And I’m not even including long-term care costs. They make up an additional 19 percent of income for the average Medicare beneficiary.
$220,000 in Health Costs for a Retired Couple
The bottom line? A 65-year-old couple retiring this year will need about $220,000 to cover medical expenses in retirement, according to the latest tally by Fidelity Benefits Consulting. (That estimate doesn’t include nursing home costs and assumes the retirees have traditional Medicare, not a Medicare managed-care plan.)
The only glimmer of good news is that the $220,000 figure is down 8 percent from last year. Fidelity attributes the drop to, among other things, retirees cutting back on medical care due to the economy and slower growth in Medicare’s payments to doctors and other health providers.
(MORE: 4 Mistakes to Avoid When Enrolling in Medicare)
But don’t throw up your hands and please don’t skip doctor’s appointments or avoid medical procedures just to keep your health care costs down.
7 Ways Women Can Prepare for Future Health Costs
Instead, here are seven ways to get a grip on your health expenses in retirement:
1. Be certain to budget for health costs, including long-term care. Women, in particular, need to earmark savings for rising long-term care bills.
As Reuters’ Linda Stern recently noted, Genworth – the leading long-term care insurer – has begun charging women more than men for new policies it sells in 31 states. Other insurers are expected to follow.

Stern says that under what’s known as “differential pricing," single women can expect to pay 25 to 40 percent more than single men for the same policy.
2. Find a financial pro to help you estimate health costs in retirement and beef up your savings. In an earlier Next Avenue blog post, I noted that many women have rocky relationships with financial advisers because they often find the money pros disrespectful and condescending. But that just means you need to locate one who speaks your language.
In my opinion, an adviser should have the Certified Financial Planner designation awarded by the nonprofit Certified Financial Planner Board of Standards. Three national groups of planners offer searchable databases: the National Association of Personal Financial Advisors, the Financial Planning Association and the Certified Financial Planner Board of Standards.

3. Build a good-sized emergency fund — and don’t let it dissipate. This is the basic building block of any financial plan. When it comes to future medical costs, an emergency fund is imperative. If possible, I recommend that women in their 50s and 60s salt away an amount equal to at least a year’s worth of expenses.
Yet only 43 percent of women – and just 58 percent of women age 55 to 64 – have any kind of emergency fund, according to a study by Financial Finesse, a financial education firm in El Segundo, Calif.
Steve Vernon, a consulting research scholar at the Stanford Center on Longevity who frequently writes for Next Avenue, recently recommended in his CBS MoneyWatch blog that you “maintain an emergency cash cushion to cover deductibles, copayments and lost wages.” For a serious medical condition, Vernon said, the amount you’ll need can run into thousands of dollars.
4. Open a health savings account. This nifty, tax-advantaged financial tool, which works in conjunction with a health insurance policy, can help you put money away toward future health costs and keep those expenses down.
With a health savings account, you contribute pretax earnings to a tax-deferred investment account then make tax-free withdrawals for medical expenses. You’ll pay a small annual fee of about $40 for a health savings account from a no-load mutual fund company, like Vanguard or Fidelity.
You can contribute up to $3,250 to a health savings account for individual coverage in 2013 (a maximum of $4,250 if you’re 55 or older). For families, the limit on contributions is $6,450; $7,450 if you’re 55 or older.
You can find a list of insurers offering these plans at
5. Work part-time in retirement, if you can. I wrote in my book Great Jobs for Everyone 50+: Finding Work That Keeps You Happy and Healthy ... and Pays the Bills, that continuing to bring in a paycheck will be good for your health and your wealth.
Now there’s more evidence backing this up.
The Institute of Economic Affairs, a think tank in London, just published a study saying that full-time retirement results in a “drastic decline in health” (mental and physical). According to the report, when you don’t work in retirement, you increase the chances of suffering from clinical depression by 40 percent and suffering from a physical condition by 60 percent.
6. Bone up on the Affordable Care Act (aka Obamacare). The new law will prevent insurers from charging women higher health insurance premiums than men starting in 2014. And it’s likely to help uninsured women buy affordable insurance through health care exchanges.
The Obama administration’s new website,, lays out how the new law will work. But it won’t have specific insurance plans or their costs until later this summer.
7. Get healthy and stay that way. The best way to keep your future medical bills at bay is to remain physically fit throughout your retirement years.
You don’t have to be able to run a superfast mile or bench-press your weight. But you do need to stay in shape and eat healthy.
Developing and sustaining good physical habits will pay dividends in your later years. They’ll allow you to spend more time in retirement with friends and family, not physicians.

Photogtaph of Kerry Hannon
Kerry Hannon is the author of Great Pajama Jobs: Your Complete Guide to Working From Home. She has covered personal finance, retirement and careers for The New York Times, Forbes, Money, U.S. News & World Report and USA Today, among others. She is the author of more than a dozen books including Never Too Old to Get Rich: The Entrepreneur's Guide to Starting a Business Mid-Life, Money Confidence: Really Smart Financial Moves for Newly Single Women and What's Next? Finding Your Passion and Your Dream Job in Your Forties, Fifties and Beyond. Her website is Follow her on Twitter @kerryhannon. Read More
Next Avenue LogoMeeting the needs and unleashing the potential of older Americans through media
©2024 Next AvenuePrivacy PolicyTerms of Use
A nonprofit journalism website produced by:
TPT Logo