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When
you retire, some of your regular
expenses are going to go down. But
others are going to go up, and topping
the going up list is health care. Well
before you retire, make sure you have
the resources necessary to deal with
those doctor's visits and prescription
drugs.
How expensive will health
care be for you during your retirement
years? Here's a number to consider: A
65-year-old couple retiring today will
need, on average, $200,000 set aside to
pay for medical costs in retirement,
according to a recent study by Fidelity
Investments. This number does not even
include the cost of over-the-counter
medicines, most dental procedures and,
most importantly, long-term care (such
as in-home health care or an extended
stay in a nursing home).
Of course, the $200,000
figure is just an average; your costs
may be considerably different. For
example, you might have retiree health
coverage from your former employer,
although this seems to be becoming less
likely, given the fact that more and
more companies are scaling back on
precisely these benefits.
To prepare yourself for the
six-figure sums you might need to pay
for health care, consider these
suggestions:
Stay healthy.
Obviously, you can neither prevent all
illnesses nor suspend the natural aging
process. However, by eating right,
exercising regularly and reducing
stress, you can improve your health and
possibly reduce the odds of incurring
high medical costs in retirement.
Contribute to a
Health Savings Account (HSA). If you
have access to this type of plan at
work, consider using it. Your money has
the potential to grow tax deferred, and
you can withdraw funds from your account
tax free, provided withdrawals are used
for qualified medical expenses. Keep in
mind, though, that the contribution
limits to HSAs are relatively low, so
your savings will probably not grow
enough to cover all, or even most, of
your medical costs. Yet, every dollar
can help.
Plan ahead for long-term
care. If you are fortunate, you will
never have to enter a nursing home or
require the services of a home health
care professional. Still, you never
know. People who reach age 65 have a 40
percent chance of entering a nursing
home, according to a study by the U.S.
Department of Health and Human Services.
In some areas, just one year's stay in a
nursing home can easily cost $100,000.
To avoid incurring these catastrophic
expenses, consider putting a long-term
care protection plan in place.
Boost your savings.
It is easier said than done, but try to
put away as much as you can while you're
working. Fully fund your IRA each year,
and put as much as you can afford into
your 401(k) or other employer-sponsored
retirement plan. If you max out on your
IRA and 401(k), you might want to invest
in an annuity, which provides the
potential for tax-deferred growth of
earnings and can be structured to pay an
income stream that you can't outlive.
No one can predict the
future. But by recognizing the likely
costs of health care during your
retirement years, and by taking the
steps necessary to deal with these
expenses, you can hopefully avoid some
unhealthy surprises down the road.
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