“What to Expect from Healthcare in Retirement”

Many people decide if they are on track for retirement based on how much they expect to spend each year once they retire.  For some people, this will work.  However, for the majority of Americans who will face some sort of health issue in retirement, the extra costs can be debilitating.  The average couple requires $285,000 to fund health-care retirement costs; and that is before factoring in long term care, dental, or the premiums paid for Medicare.  So, for those who are worried about these extra costs but haven’t done anything yet to plan for them, what can be done?

Contribute towards an HSA Account

You may recall from a previous post that HSA’s are one of the unique savings vehicles that has a triple tax benefit.  In addition to this, it is the best account to save money in for future healthcare expenses.  In 2019 you can contribute up to $3,500 as an individual and $7,000 for a family into your HSA account.  If all other retirement accounts (401K’s and IRA’s) have been maxed out, then this is a great next step!

Plan on $15,000 per year in extra expenses

Another way to ensure you have “enough” money heading into retirement is to add in extra expenses to your annual retirement budget.  In other words, if you think you will be able to live off of $60,000 per year in retirement, try planning on $75,000 to provide buffer for the unexpected healthcare expense.  If that extra money ends up not being needed, then you can always spend it on something other than healthcare ?!  Once medicare premiums and extra insurance amounts are accounted for, the $15,000 amount should be a conservative annual expense that would cover the majority of health related expenses.

Take small steps now on health habits

The final thing you can do now to help with healthcare costs in retirement has nothing to do with saving or investing but could have the biggest impact to your retirement dollars.  Taking small steps today to ensure you are as healthy as possible as you age is so critically important for your mental, financial, and physical well-being.  Check out this post for 25 insightful tips to start today!

If you or someone you know are approaching retirement and are thinking about how healthcare costs can impact you then get in touch with one of our financial advisors today.

July 5th, 2019