Planning for health care

When planning for retirement, we need to account for our health (both now and in the future), protect our wealth and consider our future goals and dreams.

stacking health care blocks

Health, wealth and happiness — a solid retirement plan incorporates all three! When planning for retirement, we need to account for our health (both now and in the future), protect our wealth and consider our future goals and dreams.

The cost of health care has skyrocketed in recent years. It’s estimated that Medicare covers only about half of retirees’ health-care needs. And premiums and out-of-pocket expenses go up over time. The average 65-year-old couple retiring today can expect to spend $285,000 on health-care expenses throughout retirement.

Of course, you won’t be spending that amount all at once. But those expenses should be factored into your retirement plan. There are a few options you can explore now to help ease the financial burden:

Save in a HSA

A health savings account is a tax-advantaged savings vehicle you can use at any age to pay for qualifying health-care expenses. An HSA balance carries over each year and can be invested — once it reaches a designated balance minimum — in mutual funds or other investment options.

HSAs are excellent retirement savings tools because they allow you to withdraw the money tax-free for qualifying medical expenses. If you’re 65 or older and need to take the money out for another reason, you’ll pay taxes, but you won’t pay a penalty. These accounts also don’t require minimum distributions at age 70½, so the money can keep growing until you need it.

Long-term care insurance

Living longer is costing us more. Statistics also show 70% of people over age 65 will require some form of long-term care later in life. The average cost of a private room at a nursing home in Minnesota is nearly $9,000 a month!

Long-term care expenses, and the need for long-term care insurance, will vary from person to person, depending on overall health and life expectancy. An insurance policy or an annuity rider can help fund long-term care needs. Sit down with your financial professional to determine if long-term care insurance is right for you.

Delay retirement

The timing of your retirement can make a big difference in how much you pay for out-of-pocket health-care costs. The average retirement age in Minnesota is 63. However, that’s considered early retirement by Medicare and the Social Security Administration.

Consider delaying retirement: This will allow you to keep your employer’s health-care coverage until you’re able to enroll in Medicare at age 65.

Couples might also consider staggering their retirements, with one spouse retiring and the other remaining on the job. In this case, you can both remain covered under one spouse’s employer, which is generally more comprehensive than the traditional Medicare coverage known as Original Medicare.

Remember caregiving costs

It’s not just your health, wealth and happiness you need to plan for: Many Americans find themselves caring for an aging loved one as well. In the U.S., family and friends spend $470 billion each year on caregiving expenses.

You need to consider both health care and caregiving before you retire, and working with a financial advisor can help. A recent survey shows that people who worked with an advisor to create a Social Security strategy received 15% more in monthly benefits.

Share any health concerns with your advisor as well as your family health history and expected longevity.

Bottom line: Your future self will thank you if you take the time now to plan for your health-care needs.

Larry Kallevig, owner of Haven Financial Group in Burnsville, helps clients create financial plans that ensure dependable and comfortable income in retirement.