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Retirement Planning

Effect of health care costs on retirement

Health care is likely going to be one of your biggest expenses in retirement. Read this article for helpful information to plan for your future needs.

Your retirement plans are in place but have you considered how health care costs may affect them? We're all living longer. And most of this longevity can be attributed to leading more active, healthy, and smoke-free lifestyles, as well as advances in medical treatments. But just because we are living longer doesn't mean we're going to remain healthy throughout our entire lifetime. The fact is, while some of us will continue to live healthy lives throughout our senior years, many of us may experience chronic health conditions such as diabetes, heart disease, and/or arthritis as we grow older.1

While some of these costs may be offset by health insurance plans, much will be paid out-of-pocket. In fact, the Centers for Medicare & Medicaid Services estimate that out-of-pocket spending for health care is projected to grow at an average of 4.4 percent through 2019.2

The reality is that medical expenses may be a very real (and substantial) cost for retirees, especially with us all living longer. So what can you do about it?

  • Don't presume that Medicare and Medigap insurance will cover all of your health care expenses.
  • Get familiar with what is and isn't covered under Medicare and Medigap plans so you'll have an idea of what type of supplemental insurance you may need not only to help fill the gap, but what you could be facing in the way of additional premiums.
  • Project your future medical/health care needs. Although you can't predict the future, your family history may give you an indication of what type of care you might need when you retire. For example, does high blood pressure or heart disease run in your family? What about diabetes?
  • Factor in the cost of long-term care services. Remember, Medicare won't pay for non-skilled long-term care services, and Medicaid only pays out if you and your spouse meet specific income and asset criteria.
  • Include the cost of health care in your retirement plan. A qualified financial advisor can help you determine how much you should be setting aside and what adjustments you should be making so that you're not completely blindsided by health care costs when you retire.


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