We all know that our health is important, but it’s easy to forget that when you feel rested and healthy. Nowhere is that more true than in retirement planning, according to a recent retirement survey released by Merrill Lynch.
People underestimate and thus under-preparing their health care costs in retirement. This is bad news for anyone who falls into this category, because health care costs tend to hit you when you are least prepared to deal with the consequences.
Read on for our summary of the survey that can help you plan ahead of an impending costs. (For related reading, see Top Tips to reduce the cost of health care in Retirement.)
Health Impact on Retirement
According to Merrill Lynch health and retirement survey, “health care costs have risen in the past decade at double the rate of inflation.” This means that seniors planning to retire should be extra careful in determining whether their nest egg can afford all the fees. If your retirement is 30 years, will pay you expect approximately $ 318,800 in expenses out-of-pocket health care.
The survey also revealed that 70% of the seniors need long-term care at some point, but only about half that number think they will. Long-term care is another cost to be paid by the seniors themselves, further draining their retirement accounts.
The survey also found that older people most often retire early, not because they can afford it, but because they are health issues that force them to resign. Retiring early when you can unprepared to do this leave you stranded’re financially for the rest of your retirement, so focus on your health should be just as important as focusing on your money. (For more information, see: Taking The Surprise Out Of Long-Term Care.)
How can I anticipate Healthcare Costs
Unfortunately, many people underestimate how much health care costs will increase in retirement.
“According to the Bureau of Labor Statistics Consumer Expenditure Survey, people aged 65 and over an average of $ 5,815 a year in health care and 13% of their total expenditure compared with only $ 3,541 and 6% paid by people under 65 spend “said Joseph Hogue CFA My Stock Market Basics. “By far the largest part of this is for the health insurance, which costs an average of $ 4,005 per year for seniors.”
With this information in mind, retirees can better plan their budgets and to allocate their money well. One way to plan ahead is to start saving regularly in a health savings account (HSA). HSAs allow you to use the money for health care costs related tax-free. You need to start a high-deductible account to an HSA. If you have $ 2,000 or more in an HSA, you can invest that money in the same way you would invest in a mutual fund.
Long term care insurance is another popular way that pensioners to plan ahead. This coverage will pay for stints in nursing homes, assisted living or employed in-home caregivers.
Medicare is available to those who go 65 years and older, so wait until then to retire can be a smart option. Pay for your own health insurance for years before the age of 65 may be more expensive than you realize.
The Bottom Line
Be proactive in your health. You may never have considered your health and finances as being inherently related, but they are in health care costs can be directly linked to a lack of exercise and poor diet, so staying in good shape can cut costs more than shopping around for a new doctor. To get a more accurate projection of what your health care costs will look like need in retirement, consult a financial advisor, who can help assess you, remind you of important considerations and help from your account on the right track. (For more information, see: 3 Big Medical Costs and how to protect against them.)