When you need a doctor, you won't want to lie in your sick bed without one.
So as you save for retirement, don't forget to factor in the doctor, the hospital and your prescription drugs. And brace yourself for what they will cost you.
Although many Americans think Medicare covers all medical costs for retirees, the reality is much different. You are probably going to have to pick up more than 20 percent of your costs.
For the average 65-year-old couple retiring today, health-care expenses over the next 20 years are likely to total about $215,000, according to a recent estimate by Fidelity Investments. That's on top of what Medicare and the new prescription-drug benefit will cover.
Given the fact that most Americans 10 years from retirement have saved no more than $88,000, paying $215,000 for health care might be a little unnerving. But don't let wishful thinking allow you to gloss over it.
The figure is not unlike one released a few months ago by the Employee Benefit Research Institute, a think tank known for its number-crunching.
In that estimate, Paul Fronstin, a Temple University professor, calculated that a person retiring at age 65 in 2014 would need $202,000 to cover retirement health insurance for 15 years--or to age 80. A person living to 90, Fronstin calculated, would need $381,000 for health care.
Health-care expenses generally take retirees by surprise, said Brad Kimler, senior vice president for Fidelity Employer Services.
As people glance over their monthly living expenses before retiring, he said, they think they will live on less than their working years. They spot obvious savings on commuting costs and work-related clothing.
But they forget to figure in health-care costs--probably because many receive health insurance at work, Kimler said. So the expense doesn't show up prominently in the family budget during the working years.
Yet, in retirement, people must pay a monthly premium for their Medicare insurance--at least $93.50 in 2007, according to AARP. And Medicare only pays 80 percent of most medical expenses. If you need an ambulance, you pay 20 percent. If you go to the doctor, you pay 20 percent. If you need an X-ray or other tests, you pay 20 percent.
Some seniors buy supplemental insurance to cover those costs, but the insurance can run over $200 a month per individual, depending on the state where the person lives. And prescription drugs--even with Medicare's new drug benefit--can add hundreds more a year in costs.
In a recent survey of retirees, Fidelity found that 82 percent expected their monthly expenses in retirement to be no higher than their pre-retirement costs. In reality, however, 39 percent reported spending more than during their working years. Kimler attributed much of those extra costs to health care.
For a couple living on $60,000 just before retiring at age 65, health costs are likely to consume 27 percent of their initial Social Security benefits. But with health-care costs rising about 7 percent a year, and Social Security benefits going up just 3 percent of late, Fidelity calculates that medical needs will consume 50 percent of the couple's Social Security benefits by age 80.
About 44 percent of current retirees depend on Social Security as their primary income source.
Faced with expenses higher than they anticipated, 48 percent of retirees have made major lifestyle changes, according to the Fidelity survey. Some cut back on doctor visits or their prescriptions. Others took part-time jobs or moved to more affordable areas of the country, or to less-expensive housing.
Among retirees with poor or fair health, 50 percent said they were having difficulty affording retirement.
"People haven't identified health care as a primary part of their retirement planning," Kimler said.
"A significant amount of retirees told us their state of health is not good, and they are spending more in retirement than they ever planned," he said.
While many people don't plan for health-care needs, they also tend to overemphasize their ability to work. Among retirees, Fidelity found that 22 percent retired earlier than they expected because of health reasons.
Gail MarksJarvis is a Your Money columnist and the author of the book, "Saving for Retirement Without Living Like a Pauper or Winning the Lottery." Contact her at email@example.com.Copyright © 2015, Los Angeles Times