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Plan Now for Health Costs in Retirement

Don't let future out-of-pocket costs deplete your savings

En español | I don't know about you, but I hope to live a long, healthy life. My father lived to 82 — even with three separate bouts of cancer — and my mom is still going strong at 76.

I'd rather bet on living to 100, and plan accordingly, than run the risk of outliving my money. Frankly, I'd rather get hit by a bus than run out of money in my later years.

And if 30 or more of those years will be spent "in retirement," it turns out I can't afford not to be healthy.

I found this out the easy way, by using AARP's newest online tool, the Health Care Costs Calculator.

The tool, which was produced and sponsored by Optum, is our latest effort to help people identify and plan for costs they will face in retirement. It turns out that health care is a much, much larger expense than I had ever imagined — even for those with supplemental Medicare and retiree health benefits through their employer. In fact, according to the calculator, I should expect to spend about $311,000 — out of my own pocket — on health care during my 30-plus years of retirement. Most of the sticker shock comes from the cost of premiums, deductibles and coinsurance requirements. The tool also considers costs associated with specific diseases that run in my family (hello, cancer), and provides some tips on how to manage those diseases (hello, vegetables).

Apparently, I'm not alone in my naïveté about retiree health care costs. In a recent AARP study, we found that almost two-thirds of respondents have never tried to figure out how much their health care will cost them in retirement. And when we asked them to give a ballpark estimate of how much money they might need, over 40 percent guessed that they would need less than $100,000 to cover their health costs throughout retirement.

Clearly, the tool fills an all-too-common gap in the retirement-planning process. Check it out as you make your retirement plans. In the meantime, here are a few things to keep in mind about health costs:

Most of us will qualify for Medicare at age 65, as long as you or your spouse worked and paid into Social Security and Medicare for at least 10 years.

Next page: Choose the right Medicare plan for you. »

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