Health care will cost couples $275,000 in retirement

CNN Lifestyle 13 months ago

If you need a kick to start saving more for retirement, here's a statistic that should light a fire under you.

A couple retiring this year will need and estimated $275,000 to cover health care costs in retirement, according to Fidelity. That's a 6% increase over last year.

Of course, it's a ballpark number. The true cost depends on a variety of factors like your health and how long you'll live. Plus, there's ongoing uncertainty about what the health care landscape will look like in the future.

"No matter how you slice it, the number is brutal," said Adam Stavisky, senior vice president at Fidelity Benefits Consulting.

Fidelity's estimate applies to those with traditional Medicare insurance coverage and considers premiums, co-payments, deductibles, and out-of-pocket drug costs. It excludes the cost of a nursing home or any long-term care you might need.

The estimate assumes that both spouses are retiring at age 65 and that they'll live to between the ages of 86 and 88.

Related: 1 in 4 workers have less than $1,000 saved

Costs are only expected to rise in the future. Younger workers who are further away from retirement should expect to spend a lot more.

The good news is, time is on their side. Stavisky suggests using a Health Savings Account, known as an HSA, to invest savings earmarked for health care costs.

Contributions aren't taxed when they go in, and they're allowed to grow tax-free. The money won't be taxed when you take it out either -- as long as the funds are used for health care expenses.

Any worker who has a high-deductible health care 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.

Related: Will I ever be able to retire like my Grandma?

You have to actively choose to invest the money stashed in your HSA. Otherwise, it will remain in cash. Roughly one-third of Fidelity customers who have an HSA save all their money in the account. About one-third spend it all each year, and the remaining people spend some and save the rest.

If you don't have an HSA, use other retirement accounts that offer tax benefits like a 401(k) or IRA to save.

Health care won't be your only expense in retirement, but it will likely be the biggest. To get a more personal estimate of your health care costs in retirement, try using a calculator like this one from HealthView or this one from AARP.

Source link
Read also:
Forbes 13 months ago
Couples who divorce just prior to retirement face a distinct set of financial planning challenges. Learn five money matters to consider.
Los Angeles Times 13 months ago
Cal State Los Angeles was awarded $16.6 million to bring dental care to underserved communities in the greater Los Angeles area, officials said...
Bloomberg Finance 13 months ago
Teva Pharmaceutical Industries Ltd.’s women’s health assets have drawn interest from U.S. health-care and consumer product makers Church & Dwight Co...
The Hill 13 months ago
For now, it appears the Affordable Care Act (ACA) and Prevention and Public Health Fund will remain intact. This should give policymakers and...
Slate Politics 13 months ago
Earlier this year, the Republican Party attempted to follow through on promises it had been cynically making its most extreme voters for years by...
Slate 13 months ago
With Obamacare repeal defeated for the time being, Democrats have begun looking ahead and crafting plans to expand health coverage to the millions of...
Miami Herald Finance 13 months ago
The Vermont Attorney General's Office has settled a claim against an economist accused of submitting false invoices while evaluating the state's...
NPR News Lifestyle 13 months ago
In the wake of congressional Republicans' failure to pass a health care bill, two governors from different parties are going to bring their own ideas...
CNN Politics 13 months ago
When Congress returns to Washington after Labor Day, it will immediately confront a tough question: Can there be bipartisan agreement on fixing the...
One click to connect
Select a social network to associate your account