As you look toward your target retirement date, you will continue to evaluate your expected budget and then compare those figures to your estimated retirement income. Lately we’ve all confronted a new reality with the coronavirus outbreak, and many of you might be rethinking your retirement plans in light of stock market changes, the cost of healthcare, and other factors.
For most retirees, healthcare can be one of their most significant expenses, even surpassing housing for some. According to Fidelity, the average couple who retired in 2019 could expect to spend about $285,000 on healthcare over the course of their retirement years. For single women that expense amounts to $150,000, and single men could expect to spend an average of $135,000.
Why so high? Many retirees are surprised to learn that Medicare Parts A and B do not actually cover 100 percent of their healthcare expenses. There are a number of ways to prepare for this problem, including:
Save money in a health savings account. If you’re eligible for a health savings account, you can stash pre-tax money in the account to be used toward qualified medical expenses. In the event that you don’t use all of the money in the account each year, it can be rolled over to future years indefinitely. Whatever you carry into retirement will be yours to use for Medicare premiums, supplemental plan premiums, deductibles, co-pays, and many uncovered medical services and products.
Consider a Medicare Advantage plan, or supplemental plans. Most retirees assume that they will enroll in both Medicare Parts A and B. But those plans don’t offer coverage for prescription medications, dental care, vision benefits, and some other necessary services. A Medicare Advantage plan rolls Part A and B together, and sometimes includes other services as well. Or, you could purchase supplemental coverage for the services you want.
Stay informed. Things do change, so continue to follow healthcare news and stay on top of opportunities. For example, right now Medicare and many other insurance companies are not charging out-of-pocket fees for coronavirus testing, so that you can access the care you need at this critical time.
Continue to work closely with us. Your financial planner can help you continue to plan your budget and retirement income after you retire. Meet with us regularly so that we can continue to evaluate your needs together, and make any necessary changes to your plan.