Healthcare Costs in Retirement

Jun 15, 2016

Question: I am in my 50s and plan to retire within the next ten to fifteen years. What should I plan for with respect to health care costs? When it comes to healthcare costs after you retire, what can you expect? Well, for one - a lot of uncertainty. That doesn’t mean to throw up your hands and surrender. It just means that precision in this prediction is going to be hard to come by. We just know it’s likely to be a big number. Healthcare costs are rising at 7% to 8% annually, much higher than inflation. And fewer and fewer companies are offering any kind of retiree health coverage. What about Medicare? In their 2014 annual statement the Social Security and Medicare Boards of Trustees said, “Neither Medicare nor Social Security can sustain projected long-run program costs in full under currently scheduled financing, and legislative changes are necessary to avoid disruptive consequences for beneficiaries and taxpayers.” Translated, that means that either your taxes are going to go up or your benefits are going down. One danger at this point is that you would throw up your hands and give in. But that won’t help any, will it? So here are some positive steps you can take to prevent wealth loss due to health costs in retirement: First, take care of yourself now. You cannot guarantee yourself a healthy future by taking care of yourself now, but you can greatly increase your odds. How ironic that so many of us sacrifice our health by overworking so we can make more money, only to spend all the money we made fixing the body we ignored all those years. Second, start saving now. If you think saving is hard now, wait until you are older and you have less energy, less margin and less time. Make hard choices now, so you won’t have a hard life later. Put a safety net in place now. The fact that you cannot predict with utter certainty what healthcare costs will be in your future is no reason to freeze. It is very likely you’ll need money for healthcare in the future, so why not put those dollars in place now (at a discount) through strategic insurance purchases. That may include long-term care insurance, Medigap insurance (at the proper time) and even life insurance. Life insurance is an often overlooked tool for managing the financial risks of longevity. Work with an experienced agent to explore any of these options. You can’t predict your future. But you can prepare for it. Get started now.