Planning for Health Care in Retirement

May 17, 2019

Many Americans are not educated on what Medicare does and does not cover, which may leave them ill-prepared for health care expenses. Recent data from the Retiree Health Care Cost Estimate Report conducted by Fidelity Investments should be a wake-up call to younger generations.


In 2019, a 65 year old retiring couple will spend $285,000 on medical expenses during retirement. This is up from $280,000 in 2018. Single female retirees can expect to spend $150,000 and single male retirees can expect to spend $135,000.


If a 35 year old couple today invests $2,820 annually ($235 monthly) in a health savings account (HSA), they could potentially save $285,000 in 30 years. This is a good strategy for younger couples to consider implementing.


Since health care costs vary significantly per individual, it is important for pre-retirees to learn what expenses are covered under Medicare. For those close to retirement, it could be a harsh wake-up call.


Other strategies to focus on include:


Maximizing tax-advantaged savings accounts such as 401(k) or 403(b) plans - the contribution limit for each is $19,000 this year. Those over age 50 can contribute another $6,000.


Deferring Social Security benefits - the longer an individual waits to age 70, the more they can collect, which is a good strategy assuming they live a long life.


Discovering employer retirement benefits - have a conversation with HR to find out what benefits are offered in retirement. An employer may offer group coverage or professional support in choosing a Medicare product.


Speak with a financial professional - long-term health care needs are difficult to predict, so it is helpful to speak with a financial advisor to discuss needs based on current health, family history, and other personal factors.


To learn more about planning effectively for health care expenses in retirement, please contact us at 515-557-1860 or email us at invest@taberasset.com.  TABER Asset Management is a fiduciary, investment management and financial planning firm serving clients from across the U.S.

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