Out-of-pocket medical expenses in particular could become very costly for retirees, according to a new report from the Vanguard Group.
The Vanguard Group, with assistance from Mercer Health & Benefits, found that the expected average cost of out-of-pocket medical expenses for a female retiree beginning at age 65, and accounting for the estimated remaining life span which would tack on 24 years, could go to as high as $200,000, WFMY News2 has reported.
The report also revealed that the average cost of out-of-pocket medical expenses for a male retiree is lower by 2 percent due in part to men having shorter lifespans than women on average.
If the prospect of trying to set aside $200,000 for retirement is intimidating and even seemingly unrealistic, the authors of the report encourage people to look at the challenge of saving up for possible expenses in a different way.
Instead of trying to figure out how to save $200,000, the report urges people to break down that amount into more manageable yearly goals.
Doing that reveals that the average retiree might end up needing to spend around $5,200 per year, but that will already cover out-of-pocket medical expenses, Medicare premiums and drug purchases. The number could still rise, but that would likely be due to inflation.
Notably, the estimates for out-of-pocket medical expenses do vary among different studies.
For instance, the Center for Retirement Research at Boston College suggests that the average amount a 65-year-old couple would need to set aside is around $197,000. The Employee Benefit Research Institute puts that number closer to $265,000 and Fidelity Investments has the number at $280,000.
It is worth pointing out that the estimates provided do not take into account potential long-term health costs which could vary greatly among retirees.
America Saves has provided some tips that could help people save their money better.
One of the tips calls on people to come up with budgets based on how much they will need to spend for food and personal care items over the course of a month.
Setting up short-term savings targets could also work to encourage people to stick to their goals better. These short-term targets are going to be small, but after they are allowed to pile up for a while, they will give people a substantial sum to draw from if needed.
People can also save on their medical costs by going in for routine check-ups that could serve to catch something before it becomes more expensive to treat.