How Much Will My Parents Really Need for Healthcare Costs in Retirement?

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By Joe DeMarkey, Strategic Business Development Leader at Reverse Mortgage Funding LLC 

Did you know that a healthy 65-year-old couple that retired in 2020 will need nearly $300,000 to cover their retirement healthcare expenses? It’s no surprise that the National Council on Aging found that medical debt is one of the larger obstacles between older citizens and economic well-being. 

Determining how much a parent or family member might need to save depends largely on their plans for the future: 

  • Are they relying on you or other family members to provide care? 
  • What’s the plan on paying for out-of-pocket medical costs? 
  • Can they afford nursing home care? 
  • Would they rather have in-home care as they age? 
  • Do they have long-term care insurance to supplement Medicare coverage? 

When extra care is needed 

Those without long-term care insurance often start out relying on an unpaid family caregiver like you or another family member. Eventually, many need paid help — and that can be expensive. 

According to Genworth’s 2020 Cost of Care survey, the national average bill for a home health aide is $4,576 monthly, varying widely depending on location and needs. Though Medicare may cover part of the costs for at-home medical services, it doesn’t reimburse families for personal care such as medication reminders, bathing assistance, errands, shopping and transportation. 

For individuals requiring more robust care options, assisted living is approximately $4,300 per month depending on where you live. This cost is predominately paid out of pocket, but financial assistance may be available for some. Nursing homes, on the other hand, are approximately $7,500 per month and are generally covered by Medicaid. Medicare typically covers up to 100 days of nursing home care, after which patients and their families are on the hook for further long-term costs. 

A closer look at the numbers  

According to the Kaiser Family Foundation, out-of-pocket health costs for older Americans covered by Medicare will consume up to 50% of the average Social Security income by 2030. Prescription drug costs remain a major issue, especially for the chronically ill. Retirees will also need to plan for common medical services that may or may not be covered — think dental care, hearing aids or glasses. And if they need hospitalization, the average cost of a three-day hospital stay could set them back $30,000

New thinking on retirement healthcare options 

The ongoing COVID-19 pandemic has been a huge wake-up call regarding the healthcare system. It’s important to know what the current healthcare options are, so you can help your parents choose wisely.  

If you’re thinking about a healthcare cost game plan for your family, there may be some financing options that will benefit your parents, such as leveraging their home equity via a reverse mortgage