People work for decades with a hopeful eye toward retirement. But while many try to envision their retirement years as a blissful time of fun and relaxation, no one has a crystal ball showing exactly what all the expenses will look like. This is especially true of health care. Fidelity’s annual Retiree Health Care Cost Estimate projected that a 65-year-old couple retiring in 2019 could expect $285,000 in health care and medical expenses during their retirement. An Edward Jones survey showed many Americans are concerned about health care expenses in retirement, particularly baby boomers. “People spend their healthy years accumulating all their wealth,” says Michael Macke, vice president and co-owner of Petros Financial Group. “They work hard and save, building their nest egg. How do you plan for that great unknown — health care costs in retirement? Macke offers these tips:
Make extra wiggle room for the “what-if” medical expenses. “When planning a long-term budget, most people just look at their baseline monthly expenses, but it’s wise to have a discussion about how health care costs can fit in during retirement,” Macke says. “Budgeting for a potential additional expense of $350 to $500 per month in the future can help you be better prepared to handle that ‘what-if’ scenario.”
Open a Health Savings Account (HSA). An HSA offers tax advantages such as deductible contributions and tax-free withdrawals for qualified medical expenses. “The funds from your HSA can be used to pay for Medicare premiums and long-term care insurance premiums,” Macke says. “Those who are 55 or older can make a catch-up contribution of $1,000 a year in addition to the maximum contribution limit (which is $3,500 annually for individual coverage and $7,000 for family coverage).”
Pay attention to your health. Sounds simple, but a healthy lifestyle is the best way to reduce the chance of health complications and costly bills in retirement. “Don’t miss annual checkups with both your doctor and dentist,” Macke says. “Adhere to a reasonable diet and fitness regimen. And don’t discount the dentist. Cardiovascular disease shows up in the gums first.”
