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No Plan to Pay for Health Care in Retirement?

Filed under: Managing Medical Costs

What’s the biggest expense you will face in retirement? Housing costs? Discretionary expenses like dining out, shopping and travel? Depending on your income level, taxes could certainly be a major cost.

One of the biggest, though, may be something you haven’t considered—health care. Many retirees assume that Medicare will cover all of their health care expenses. That’s usually an incorrect assumption.

Medicare offers several different plans, and, depending on which ones you choose, you could have a significant amount of coverage. However, you will still likely face out-of-pocket costs. According to a recent Fidelity study, the average 65-year-old couple will spend $245,000 out of pocket in retirement on things like premiums, deductibles, copays and more.1

You may also face long-term care expenses. According to the U.S. Department of Health and Human Services, the average 65-year-old has a 70 percent chance of needing long-term care at some point in retirement.2 Long-term care is usually provided in a facility or in the home and offers assistance with daily living activities, like bathing, dressing and eating.

How will you pay for these costs? If you don’t know the answer to that question, now may be the time to develop a strategy. Below are three ideas to consider:


Fund your HSA.

If you have a health savings account (HSA), it could be one of your most effective tools for paying for medical expenses. With an HSA, you can save pretax dollars and then allocate them across a portfolio of investments. Your account grows tax-deferred, and you can withdraw the money tax-free as long as the funds are used for qualified medical expenses.

You can also take your account with you when you leave the working world. That means you can save money today for health care costs in retirement. Best of all, you get a tax break today, tax-deferred growth and tax-free future withdrawals.


Think about long-term care insurance.

Long-term care is an unfortunate reality for many retirees. As you age, it’s only natural for your body to become more vulnerable to injury or illness. All it takes is an accidental fall, a stroke or even a quick decline in cognitive ability for a person to need long-term care.

Long-term care insurance helps protect you and your assets against excessive long-term care costs. You pay the insurer premiums today, and then your policy covers your long-term care costs in the future. Many policies cover not only nursing home care, but also assisted living and in-home care. Some policies also include a life insurance feature, which allows your beneficiaries to receive any unused benefits.


Invest in your health today.

Maybe the most important step you can take is to actively improve your own health. Exercise and a healthy diet are keys to healthy living. Think about quitting unhealthy habits like smoking or drinking to excess. Take care of your cognitive health by staying socially active and challenging your mind with hobbies, games and puzzles.

The healthier you are, the more resistant you may be to serious injury or illness. Invest in your health to reduce your need for costly care later in life.

Don’t have a plan for managing health care costs in retirement? Let’s talk about it. Contact us today at Ambrose Financial & Insurance Services for help with developing a plan to manage your medical and long-term care expenses.






This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.

15853 – 2016/6/27