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Planning for Later: Retirement and Health Care

Planning for Later: Retirement and Health Care

October 24, 2016

According to CNN Money (August 2016), a couple retiring this year will need $260,000 to cover health care costs in retirement. “This estimate applies to those with traditional Medicare insurance coverage and considers premiums, co-payments, deductibles, and out-of-pocket drug costs. It assumes that both spouses are 65 years old.”

There’s no getting around it: Health care costs are consistently rising. After retirement, as your monthly income reduces and health care continues to rise, how does a retiree plan for the future?

  1. Figure out how much you need to save. Consider annual costs for prescriptions, insurance premiums, dental, hearing and vision coverage, and any other costs associated with healthcare.
  1. Consider Medigap coverage. A Medigap plan covers the costs in excess of Medicare coverage. There are numerous types of Medigap plans with varying benefits, so research your options carefully. Your health insurance advisor can help guide you toward an appropriate solution.
  1. Consider postretirement savings plans. A Health Savings Account (HSA) allows you to save money in a tax-deferred account to use for healthcare costs, similar to a 401(k) or 403(b) plan. If you are already maximizing your contributions to a tax-deferred retirement plan, an HSA can provide some additional tax benefit and allow you to grow that money tax free into retirement, helping offset some of the growing costs of medical care.