In my 31 years as a financial advisor, I have had the privilege of working with clients in all stages and phases of their lives. One constant concern that virtually every client deals with no matter their age, is knowing that their health will always be well taken care of. As we know, women are statistically living longer than men and face distinctly different challenges in funding their healthcare needs in retirement.
According to a 2016 study by HealthView Services, a 65-year-old man who retires this year will spend an average of $200,000 on healthcare in retirement, while a woman will spend $235,0001 — $35,000 more than their male counterparts.
With these expenses in mind, it’s not surprising that the cost of healthcare is one of the biggest retirement planning concerns for Americans. While it is essential for everyone to plan for healthcare expenses, it is especially important for women. The following strategies can help you create a plan to give you peace of mind and prevent a financial shortfall in retirement:
• Estimate your healthcare costs. Begin by assessing your overall health and family health history, using your current annual medical and dental expenses as a starting point. For help projecting what these costs may be in retirement, consider using an online healthcare calculator. Many estimators can educate you on potential treatment costs for a variety of health and dental conditions. Knowing the challenges you may face with your health – and what they may cost – can make a difference in being prepared.
• Have the right insurance coverage. Insurance plays an important role in helping you manage your current healthcare costs, as well as plan for expenses you may incur down the road. Review your current life, disability, long-term care and health insurance policies to ensure you have enough coverage for your financial situation. If you don’t have coverage in one of these areas, become educated about various insurance options to determine if a policy makes sense for you. Plan to review your coverage regularly and update as your health or financial situation changes.
• Consider setting up a health savings account (HSA) if you have a high deductible health insurance plan. An HSA allows you to both build money up and withdraw it for qualified medical expenses tax-free. Unlike a flexible spending account, you don’t lose money you don’t withdraw. If you change jobs, you can take the account with you. Plus, you can use it anytime during your lifetime to pay for qualified medical expenses. Keep in mind that if you withdraw funds for non-medical purposes, you are subject to a tax penalty.
• Save strategically for other retirement expenses. If you have a healthy retirement account that covers what you expect to spend on living expenses and the dreams you want to pursue, you can feel more comfortable about your ability to handle out-of-pocket healthcare expenses. Compare your current retirement savings to the amount you anticipate needing in retirement to live the lifestyle you want. Then, make a plan to fill in any gaps.
• Prepare for unexpected expenses. Reducing your debt and saving as much as possible before you retire is the simplest way to prepare for an unanticipated need — medical or otherwise. If your balance sheet is healthy, you’ll likely be better positioned to absorb medical costs not covered by Medicare or your insurance.
• Be proactive about your health. Schedule and keep routine dental and medical check-ups as well as stay up-to-date on preventative services. Thoughtful prevention and early detection of potential health concerns may keep minor medical issues from becoming major ones.
While planning for healthcare costs in retirement can be a challenge, there are steps you can take today to help you feel more prepared for your future. Consider working with a financial professional to help you factor real and potential healthcare costs into your overall plan for retirement so you can feel comfortable as you move through every stage of your life.
Geri Eisenman Pell, CFP®, MBA, CDFA™, is a private wealth advisor & CEO of Pell Wealth Partners, a private wealth advisory practice of Ameriprise Financial Services, Inc. in Rye Brook, New York. She offers fee-based financial planning and asset management strategies and has been in practice for 31 years. To contact Geri, visit pellwealthpartners.com or call 914.253.8800
Investment advisory products and services are made available through Ameriprise Financial Services, Inc., a registered investment advisor.
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1 Tergesen, Anne. The Wall Street Journal, “Women face 20% higher healthcare costs in retirement, study finds; Longevity seen as the reason for the gap with men,” Dec. 7, 2016.
