Tuesday Tidbit
Are you participating in a 457 Deferred Compensation plan or RHS to save for Retirement? New studies show that Retirees need $130,000 just to cover health care.
Today's 65-year-olds can expect to spend an average of $130,000 on health care during their retirement, from premiums to co-payments to eyeglasses, according to new estimates. The average single 65-year-old woman can expect to need $135,000 to spend on health care in retirement, while a man will spend $125,000, according to estimates from Fidelity Investments. (The difference is because the woman is expected to live longer—an additional 22 years, vs. 20 years more for the man.)
Every year, Fidelity estimates how much it will cost for today's average 65-year-olds to cover health-care expenses for the rest of their lives if they retire now. For a while, it looked as if health care costs were holding steady, but Fidelity this year says couples need to set aside a record $260,000 for Medicare premiums and all other out-of-pocket medical costs—up 6 percent from last year and 18 percent from 2014.
Prime culprits in accelerating health expenses are prescription drugs, especially high-priced specialty drugs, Fidelity says. And as the economy recovers, retirees are using more health care, driving up costs.
For many Americans, $260,000 may seem an impossible amount to save on top of other retirement expenses, but financial planners say several strategies can help.
First, get the right Medicare supplemental insurance policies. The program is complicated, and retirees may need help from an expert or an organization such as AARP to get it right. Second, save for health care in a tax-efficient way. Third, consider creative strategies to maximize income late in life, when health-care costs tend to rise. By waiting until they're 70 to take Social Security benefits, retirees reap bigger benefits--76 percent higher than if they had taken them at age 62.
Posted:
August 30, 2016