Managing Retirement-Related Healthcare Costs

When people begin planning for retirement, the typical expenses taken into account include housing, utilities, gas, and even food. Unfortunately, retirees fail to consider the increasing cost associated with healthcare costs during retirement. By failing to manage healthcare costs before retiring, aging individuals risk facing an expensive oversight later in life. With healthcare being one of the most costly aspects of retirement, it’s imperative to plan before being slapped with sticker shock at the beginning of your golden years.

In 2021 alone, your average retired couple needed to plan for over $300k in savings to cover the entirety of their healthcare expenses alone. According to a survey conducted by RBC Wealth Management, up to 80% of the individuals surveyed felt they would fail to afford healthcare in retirement. Concern has arisen due to the simple fact that retirement funds are fixed figures. Although it’s essential to understand how health insurance premiums change over the years, it isn’t worth stressing over.

As you age, the expenditures associated with healthcare increase. For example, a couple between 65 and 74 should plan to spend $12k per year. As the couple ages between 75 and 84, it increases to $21k. During your golden years, you may notice that your set retirement income remains the same as healthcare costs rise. For this reason, individuals choose to invest in plans such as a health savings account (HSA) or 401(k).

Planning for future medical costs can mean the difference between enjoying retirement and scrambling to stay on top of your finances. You will be far ahead of the curve by estimating costs ahead of time and putting a healthcare plan into your plan from the beginning. Start by considering your family and medical history, especially if you suffer from a chronic condition or have spent any time smoking.

The location of your retirement is another commonly overlooked factor, but why does it matter? Regarding retirement healthcare, the state where you purchase your policy may offer different benefits to solo and spousal plans. Some families purchase gap insurance to bridge the gap in existing coverage, with options such as COBRA. Gap insurance helps pay for areas traditional insurance providers do not cover, which means it won’t cover 100% of your bill. For example, eye exams, long-term care, and dental or hearing care aren’t covered by Medicare plans and are billed as out-of-pocket expenses without gap insurance.

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Bio:
Todd Carmack grew up in Dubuque, Iowa, where he learned the concepts of hard work and the value of a dollar. Todd spent years in Boy Scouts and achieved the honor of Eagle Scout. Todd graduated from Iowa State University, moved to Chicago, spent a few years managing restaurants, and started working in financial services and insurance, helping families prepare for the high cost of college for their children. After spending years in the insurance industry, Todd moved to Arizona and started working with Federal Employees, offing education and options on their benefits. Becoming a Financial Advisor / Fiduciary can help people properly plan for the future. Todd also enjoys cooking and traveling in his free time.

Disclosure:
Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice has been filed, or is excluded from notice filing requirements. This information is not a complete analysis of the topic(s) discussed, is general in nature, and is not personalized investment advice. Nothing in this article is intended to be investment advice. There are risks involved with investing which may include (but are not limited to) market fluctuations and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making any investment decision. You should consult a professional tax or investment advisor regarding tax and investment implications before taking any investment actions or implementing any investment strategies.