Don’t Underestimate Your Retirement Healthcare Expenses

Retirement and healthcare are inextricably linked. The golden years, which used to require only a comfortable pension, now necessitate some serious healthcare planning. The new year is a good time to evaluate these needs. Medicare requires premiums and copayments. It also may not cover all the services you need. Additionally, Medicare may be depleted or at least be in a period of financial hardship before you really need it.

Medicaid, meanwhile, pays for medical assistance for certain individuals and families with low incomes and assets, but it will cover some long-term care costs. Plus, to be eligible, you have to exhaust virtually all of your personal resources. As a result, failing to factor health costs into your retirement plan can be financially devastating. It’s a good idea to do some advance planning.

How much will you need? According to the Employee Benefit Research Institute (EBRI), a 65-year-old man needs roughly $73,000 in savings and a 65-year-old woman needs roughly $95,000 in savings for a 50% chance of having enough to cover medical insurance premiums and prescription drugs in retirement.

Health savings accounts (HSAs) may be an option. They allow individuals who purchase high-deductible health insurance to save money annually on a tax-free basis ($3,650 in 2022, and $1,000 extra if you are age 55 or older). And they are great if you start young. If you start with $3,650, contribute the same every year for 10 years and generate a 6% annual return, you will have $57,533 after 10 years, $98,802 after 15 years and $154,029 after 20 years. Worried about how you’ll pay for your healthcare needs in retirement? Call or email us. We’re here to help.