One of the biggest expenses for retirees is healthcare–and it’s getting more expensive.
A recent analysis from Fidelity Investments shows that a healthy, 65-year-old couple retiring this year will need $275,000 to cover their healthcare costs during retirement. That’s up six percent from 2016. 1 Fidelity’s calculations include premiums and out-of-pocket costs associated with Medicare parts A, B and D. The numbers don’t, however, include over-the-counter medications, dental services or long-term care.
Even faced with these staggering amounts, pre-retirees do have choices to help reduce healthcare costs in retirement. One option, a health savings account (HSA), offers some attractive tax savings. Any worker who has a high-deductible healthcare plan can open an HSA. You’re currently allowed to save up to $3,400 annually, or $6,750 for family coverage in the account. 2 You don’t pay tax on your contributions, they’re allowed to grow tax-free, and as long as the funds are used to cover qualified healthcare expenses, you don’t pay any taxes when you withdraw the funds either. You can even use them to pay certain Medicare premiums.
It’s important to consider long-term care. Medicare does not cover it, and in order to be covered by Medicaid, a family needs to completely and drastically spend down all assets. A private room in a nursing home now costs consumers more than $8,000 per month, or $97,455 per year, according to the “Genworth 2017 Cost of Care Survey,” released September 26, 2017 by Genworth Financial, which provides national median figures. 3 Long-term care costs can easily sabotage your retirement objectives, as well as your legacy, so it is critical to have a plan in place.
If you are concerned about healthcare in retirement, now is the time to review your plan. Contact your personal wealth advisor at Silverhawk Private Wealth to schedule an appointment. Silverhawk has offices in Scottsdale, AZ, Irvine, CA and Seattle, WA to serve you.