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Top 4 Things You Should Know About Health Care Costs In Retirement

Doctor Examining Female Patient With Elbow Pain

Countless Americans are unaware that retirement and health care are linked. 1 in 3 Americans have $0 saved for retirement and many are falling short in estimating and preparing for out of pocket health-related expenses.

Below are 4 things to keep in mind when preparing for health expenses in retirement:

Retiring couples should set aside $280,000

Couples retiring this year may need about $280,000 to cover health care and medical expenses over the course of their retirement, according to a new report from Fidelity. The estimate represents a 2% increase from last year. Fidelity’s estimate applies to those with traditional Medicare insurance coverage and considers premiums, copayments, deductibles, and out of pocket drug costs. It excludes the cost of a nursing home or any long-term care you may need.

There are certain tax strategies that can help

Check with your tax advisor about the concept of bunching large deductible expenses.

Health is a concern for retirees

Health care expenses represent the number one threat to retirement savings and are a vital part of a retirement income plan. Unexpected health care needs and costs are a major issue, especially for the chronically ill. Older people usually have greater health care needs and may need frequent treatment due to a number of different health-related issues. Research shows that health care expenses are increasing each year. Retirees may need to rely on a combination of personal savings, pensions, housing equity, and work to cover the expenses. The most effective way to deal with health risks is with insurance.

Medicare is facing a bleak financial outlook

Medicare is facing a bleak financial outlook due to the aging population and other factors. Although reforms are not in the immediate future, Medicare’s trustees want Congress to adopt solutions sooner rather than later. According to the latest report of the trustees of the Social Security and Medicare programs, Medicare’s main hospital trust fund is expected to be depleted by 2029, at which time general revenue, payroll taxes, and other funds will be available to meet only around 88% of expected spending. This could mean even more onus will be put on the individual to cover expenses.

The best advice is to save as much as you can and to strive to have money saved to pay for health-related expenses in retirement. Understanding the risks that can come between you and the retirement you want is a crucial step towards meeting your retirement goals.

The key is planning.  There are types of life insurance and fixed annuities available that may help to mitigate costs in retirement. And don’t forget the possible effects a long-term care event could have on planning as well. A long-term care event could wreak havoc on an otherwise well-planned retirement, so make sure your clients know their options.

About Paul Seidel

Vice President of Marketing

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