When considering retirement, many clients wisely consult with their financial advisors to ensure they have sufficient means to stop working. Some, however, do not, or make the mistake of assuming their ability to retire based upon their current expenses. However, they fail to consider just how much some expenses will increase.
U.S. households led by an individual who is 65 or older spend an average of $7,030 a year on health care, according to the Bureau of Labor Statistics’ latest data on consumer spending, which is for 2021.
Money Talks News’ recent article entitled “How Much Retirees Actually Spend on Health Care in the U.S.” says this translates to about 13% of the total spent each year by senior households ($52,141) and makes health care the second-largest spending category among those households. Only housing accounted for a bigger share of seniors’ spending in 2021. By comparison, all U.S. households spend an average of $5,452 a year on health care, which translates to about 8% of spending across all households ($66,928).
Here’s a detailed look at how senior households’ medical spending breaks down.
Health insurance. The average spending for a U.S. household led by someone age 65 or older is $4,974 per year. By comparison, the average spending across all U.S. households is $3,704 per year. Insurance is without a doubt the biggest health care expense for households of any age, but it’s highest for senior households. They spend $4,974 — around $415 a month — on insurance on average—roughly 10% of their total spending.
Medical services. The average spending for a U.S. household led by someone age 65 or older is $1,077 per year, compared to the average spending across all U.S. households at $1,070 per year. This type of health care expense includes a wide variety of care, such as:
- Hospital room and services
- Healthcare professionals
- Eye and dental care
- Lab tests and X-rays
- Medical care in a retirement facility; and
- Care in a convalescent or nursing home.
Drugs. The average spending for a U.S. household led by someone age 65 or older on medications is $726 per year, as opposed to $498 per year for the average spending across all U.S. households. This includes spending on prescription and nonprescription medications, as well as vitamins.
Medical supplies. The average spending by a U.S. household led by someone age 65 or older is $253 per year. The average spending across all U.S. households is $181 per year. This type of spending covers:
- Various supplies, such as dressings, antiseptics, bandages, first aid kits, syringes, ice bags, thermometers and heating pads
- Medical appliances, like braces, canes, crutches, walkers, eyeglasses and hearing aids; and
- Rental and repair of medical equipment.
Housing. Very rarely does a client tell me they don’t want to live in their home. However, we all have to consider an increase in housing expenses if health won’t let us live at home. The average costs of a nursing home in the Houston areas is less than $6,000. Several of the places you’d prefer to live at are in the $7,000 to $10,000 range. When I practiced in upstate New York it wasn’t uncommon to deal with nursing homes that cost $12,000 or more. Many clients fail to consider these costs, which is why we end up discussing Medicaid for these costs.
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Additionally, clients assume they can live at home with the aid of a professional care giver. If health is such a concerned you need to be under the supervision of a doctor, then this won’t cover it. Even if it does, and many people use this for a limited time, the cost isn’t much less. Most services will cost between $20-25 an hour easily. Let’s assume you only need 8 hours of care at that rate. Assuming 30 days a month and $20 an hour, you are talking about $4,800. Most people using this service need more hours. In short, the cost is there regardless.
Reference: Money Talks News (Oct. 25, 2022) “How Much Retirees Actually Spend on Health Care in the U.S.”