Healthcare Costs In Retirement

With all the uncertainties of the future, it’s difficult for people to know exactly how much to save for retirement. While it may be relatively easy to gauge just how much you’ll need for everyday living expenses like food and housing, other expenses, such as the costs for healthcare can be a lot more difficult to estimate.

According to projections from the Employee Benefit Research Institute*, a baby boomer couple retiring in 2020 will need an average of $227,000 to cover medical expenses. You can hope costs will be lower than that, but there’s really no way to predict the amount of medical care you’ll need as you age — or the price tag that will go with it.

To help people better understand how their future health status, healthcare costs and finances are all intertwined, Ameriprise Financial recently released the Health, Wealth and RetirementSM study. Here are five key findings from the study, and tips to help you manage future medical costs:

1) Most baby boomers have yet to take financial action to prepare for healthcare and potential long-term care costs in retirement. You can take some comfort in knowing you’re not alone if you haven’t put a plan in place to manage your future healthcare costs. But, because these costs can be so significant, the sooner you take action, the better off you’ll likely be.

2) The majority of boomers see the connection between health and potentially reduced healthcare costs in retirement. While many health events are unpredictable, you can control some aspects of your future state of health. One way to offset your need for medicines or surgeries is to take care of yourself now — by eating right and getting sufficient exercise and rest.

3) One in four baby boomers experienced a serious health condition; 54 percent say it had a financial impact. This data reinforces the vital importance of an emergency healthcare fund and a comprehensive medical plan. Your task is to research retirement health coverage options, including supplemental plans to offset large, unexpected expenses in exchange for monthly premiums.

4) Those who have taken action to prepare for healthcare coverage in retirement experience positive emotions, while those who have not experience worry, anxiety and insecurity. Do your best to reduce the amount of worry and stress in your life by taking steps to plan and save for your healthcare expenses in retirement.

5) A majority (62 percent) of those preparing for retirement plan to consult their financial advisors about how to afford future healthcare costs. This fact reveals that this task requires a second opinion. With a qualified financial advisor, you can explore strategies for managing future healthcare costs in the context of a larger plan that considers all of your wants and needs in retirement.

Michael W. K. Yee, CFP
1585 Kapiolani Blvd., Suite 1100, Honolulu
808-952-1222 ext. 1240 | michael.w.yee@ampf.com

Michael W K Yee, CFP®, CFS®, CRPC®, is a Financial Advisor CERTIFIED FINANCIAL PLANNER practitioner™ with Ameriprise Financial Services, Inc. in Honolulu, HI. He specializes in fee-based financial planning and asset management strategies and has been in practice for 26 years.
* Employee Benefit Research Institute, “Savings Needed for Health Expenses for People Eligible for Medicare: Some Rare Good News,” October 2012.
The Health, Wealth and Retirement SM study was created by Ameriprise Financial utilizing survey responses from 1,075 Americans ages 50 to 64 employed full time with investable assets of at least $100,000. The online survey was commissioned by Ameriprise Financial, Inc., and conducted by Artemis Strategy Group from June 26 – July 11, 2014. For further information and detail about the Health, Wealth and Retirement SM study including verification of data that may not be published as part of this report, please contact Ameriprise Financial.
Ameriprise Financial, Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.
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