A report released by Fidelity Investments revealed that a 65-year-old couple retiring this year (2018) would need $280,000 to cover healthcare and medical expenses throughout their retirement. That’s a jump of 2% from 2017 and a 75% increase from Fidelity’s first report back in 2002. If you haven’t been thinking about potential medical and healthcare costs in planning for retirement, now would be a great time to do so.
Healthcare Costs for Women and Men
According to the report, a single man retiring this year would need $133,000 saved up to cover his healthcare costs. A single woman retiring this year will need to have saved up $147,000 for these costs due to having a higher life expectancy than men in general. Don’t worry, there’s some good news though. Fidelity reports that the 2% increase from 2017 to now was the smallest boost since 2014 regarding how much money retiring people should save for healthcare costs. The estimate illustrates factors such as prescription out-of-pocket drug expenses and Medicare premiums that have remained flat over the last year.
Employees are Saving More for Retirement
Some other good news about this is that employees today are saving more for retirement than just a few years ago. Fidelity analyzed the 401k accounts they manage and found that the average savings increased close to 10% since 2013. This is a small indicator that people across the country are becoming more aware of the financial burdens they can leave themselves with if they are not prepared for retirement.
Preparing for Future Healthcare Costs
However, more needs to be done to get the general population aware of the risks they face if they don’t have a retirement plan that also includes preparing themselves for their future healthcare costs. According to Merrill Edge, people serious about saving for their healthcare costs in retirement could open up a health savings account.
“Consider funding a health savings account (HSA) on your own or at work, if your employer offers one. If you have a high-deductible health plan (HDHP), an HSA can help you save for current medical expenses and healthcare costs in retirement. Qualified distributions will be federally and possibly state tax-free. Any unused balance carries over from one year to the next.
Read more about HSAs and the benefits of them for employees and employers by clicking here.
Some ways to reduce your future healthcare costs while in retirement
Below are a few strategies from Rachel Hartman, of U.S. News, to help you prepare for those expensive healthcare costs while in retirement.
Think of long-term needs: As people tend to think more of the short-term than the long-term, it can leave them in a precarious place. Especially when an unexpected medical issue arises that affects you and/or your family for a long time. Hartman recommends that people should look into a long-term care insurance policy either through their place of employment or on their own if they don’t currently have an emergency fund set up. According to Genworth Financial, the national median cost for a home health aide was $4,099 per month in 2017. With that said, if people are unable to afford a long-term care policy or build an emergency fund, they may need to strategize with family on how to approach potential long-term health issues. Loved ones may be able to help with basic tasks such as grocery shopping, transportation and more.
Take preventative steps: If you’re healthy or relatively healthy, now is the time to evaluate yourself and lifestyle to see if there are any needed changes to help prevent a situation where you’ll need long-term care. Get plenty of sleep, make time to exercise, focus on your mental health, eat well, get vaccinated, etc. All of these are ways to help keep you mentally and physically healthy, which will help keep you out of the hospital for any long-term problems.
Know your policies: If you’re enrolled in Medicare, learn and understand your insurance benefits for both medical and pharmacy. Review what is covered and ask questions if you need something clarified or explained. You can learn which hospitals and pharmacies are in your preferred network. You may find out that your Medicare plan covers some services without any out-of-pocket costs.