[UNITED STATES] When it comes to retirement planning, one name often stands out: Suze Orman. As a leading financial expert, Orman has been advocating for sound financial planning for decades. One of her most urgent warnings in recent years is that many Americans seriously underestimate a critical aspect of retirement: healthcare costs. This oversight, Orman argues, could lead to financial disaster for those who don’t start planning early enough. In this article, we will break down why healthcare costs are one of the biggest financial burdens retirees face and how you can prepare for a secure retirement.
The Financial Reality of Retirement
Retirement is often seen as a well-deserved break after decades of hard work. However, many Americans are woefully unprepared for the financial realities of life after work. According to recent studies, most retirees are living on a fixed income, which leaves little room for unexpected costs. While people are typically focused on saving for their everyday living expenses, Orman emphasizes that there’s a critical, often overlooked component of retirement savings: healthcare.
Orman has long cautioned that failing to account for healthcare expenses can derail even the best-laid retirement plans. Healthcare costs in retirement are rising at an alarming rate, and with medical advancements increasing life expectancy, retirees may find themselves living longer than they anticipated — and spending more on healthcare than they ever imagined.
Why Healthcare is the Key Retirement Need
In an interview, Suze Orman stated, "You cannot, under any circumstances, underestimate the need for healthcare in retirement." This statement is more relevant than ever. While many Americans are preparing for the typical retirement costs, including housing, transportation, and entertainment, they are often blindsided by the high price of healthcare services.
Orman points out that many retirees will experience a dramatic increase in their healthcare needs as they age. From prescription medications to doctor’s visits, hospital stays, and long-term care, healthcare expenses often account for a large chunk of a retiree’s budget.
According to the 2023 Fidelity Retirement Healthcare Cost Estimate, the average couple retiring at age 65 can expect to spend $315,000 on healthcare costs throughout their retirement. This amount doesn’t include the cost of long-term care, which can be even more expensive. Long-term care, which includes nursing home care, home health aides, and assisted living, can easily exceed $100,000 annually.
The Growing Cost of Healthcare
The rapid increase in healthcare costs is one of the main reasons why retirees are struggling to save enough for retirement. Medical expenses have been growing faster than inflation for decades, and Orman stresses that it’s crucial to take these rising costs into account. She suggests that when planning for retirement, individuals should assume that their healthcare costs will increase significantly year over year.
"Health insurance is just the tip of the iceberg," Orman said. "You need to plan for the cost of doctor visits, prescription drugs, dental care, vision care, and the real possibility of needing long-term care." She also warns that many people fail to account for the fact that traditional Medicare does not cover all healthcare expenses. For example, dental and vision care, along with hearing aids, are not included in standard Medicare plans. Many people may need to purchase additional insurance plans or private insurance to fill in the gaps, adding even more to their retirement expenses.
How to Prepare for Rising Healthcare Costs
Given the unavoidable rise in healthcare costs, what can Americans do to prepare for retirement? Orman has several suggestions for creating a financially secure retirement plan.
Start Saving Early
One of the most critical pieces of advice Orman gives is to start saving for retirement as early as possible. The more time you give your savings to grow, the better positioned you’ll be to cover rising healthcare costs. “The earlier you begin saving, the easier it will be to meet your retirement goals," Orman says. "Time is your greatest asset."
Consider Health Savings Accounts (HSAs)
Health Savings Accounts (HSAs) are one of the best tools available for individuals who want to save for healthcare expenses in retirement. These accounts offer a triple tax advantage: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified healthcare expenses are tax-free. Orman recommends contributing the maximum amount allowed each year to an HSA, which can help cover out-of-pocket medical expenses in retirement.
Account for Long-Term Care
Orman also emphasizes the importance of preparing for long-term care, which many people don’t consider when they begin saving for retirement. Long-term care is often excluded from basic health insurance plans, including Medicare. According to the U.S. Department of Health and Human Services, nearly 70% of people over the age of 65 will need some form of long-term care during their lifetime. This can include anything from in-home care to nursing home care.
One option for preparing for long-term care expenses is purchasing long-term care insurance. This insurance can help cover the high costs associated with nursing homes, assisted living facilities, or home health care services. However, Orman cautions that long-term care insurance can be expensive, so it’s important to plan ahead.
Maintain a Healthy Lifestyle
While it may not seem like it, maintaining a healthy lifestyle can also play a huge role in reducing healthcare costs in retirement. Chronic illnesses such as diabetes, hypertension, and heart disease are costly to manage, and as Orman points out, these diseases can shorten your life and lead to expensive treatments.
Orman suggests adopting habits such as regular exercise, healthy eating, and stress management techniques. Not only will these practices improve your overall health, but they will also help you avoid costly medical bills down the road.
Create a Comprehensive Retirement Plan
Lastly, Orman urges people to create a comprehensive retirement plan that accounts for all possible expenses, including healthcare. A retirement plan should take into consideration factors such as your expected retirement age, your desired lifestyle, and the potential for rising healthcare costs. She advises working with a financial advisor to ensure that your plan is thorough and realistic.
Why Ignoring Healthcare Costs Could Derail Your Retirement
The primary reason that underestimating healthcare costs in retirement is so dangerous is that it can quickly consume all the savings you’ve accumulated over a lifetime. Without proper planning, healthcare expenses can quickly eat away at your nest egg, leaving you with little to no money for other essentials.
Suze Orman highlights that many Americans are caught off guard by healthcare costs because they assume that Medicare will cover all of their medical expenses. However, Medicare doesn’t pay for everything, and retirees are often left with large out-of-pocket expenses. Those who haven't saved enough for these costs risk running out of money and becoming financially dependent on others in their later years.
Suze Orman’s warning about underestimating healthcare needs in retirement is a crucial reminder for Americans to take a closer look at their financial planning. As healthcare costs continue to rise, it’s more important than ever to be proactive in saving for these expenses. By starting early, utilizing tools like Health Savings Accounts, considering long-term care, and maintaining a healthy lifestyle, you can ensure that you are prepared for the financial realities of retirement.
Remember, as Orman wisely puts it: “You cannot, under any circumstances, underestimate the need for healthcare in retirement.” Planning ahead and addressing these critical needs can help ensure that you enjoy a financially secure and healthy retirement.
WhatsApp
Instagram
Threads
