One of the biggest issues in retirement remains the cost of health. With the enjoyment of a longer retirement comes the cost of extended healthcare coverage. Furthermore, healthcare costs are increasing more than two-and-a-half times the rate of inflation. Additionally, as life expectancy rates continue to climb, so does the amount of money needed to sustain an individual’s costs over his or her lifespan.
Health care and retirement: How to prepare
First, consider your health record in conjunction with your family's medical history.
If you know that you are at risk for more health complications, you may want to build up a bigger cushion. In addition, it’s a good idea to compare this knowledge to the average cost of healthcare in retirement. The Employee Benefit Research Institute projects that the average 65-year-old man would need $127,000 in savings, and a 65-year-old woman would need $143,000, to grant a 90 percent chance of having enough savings to cover health-care expenses in retirement.
Second, it’s important to have a clear vision of what your retirement will entail.
Will you be traveling? Do you want to downsize or maintain your current household? The early stages of retirement often include a higher level of activity with more time and money spent on travel or other activities. With a decline in health comes a decrease in these spendings, but often shows an increase in medical expenses. Medical professionals refer to this pattern as the “Retirement Spending Smile” as spending patterns are often reflective in the shape of a smile. Expenses remain relatively high, dip down and then return to a higher level. Failing to recognize this pattern could become a critical obstacle in retirement.
Lastly, build a crisis situation into your plan that you may not foresee.
Unexpected medical expenses is one of the key factors that seniors list in filing for bankruptcy. Thus, medical emergency funds are an important consideration building your retirement funds. When you visit with a financial advisor, you can gain a better understanding of these costs and the different modes of savings available.
The more comprehensive financial plan you are able to formulate, the more accurate your idea of spending in retirement will become. By making health care costs an additional standard in retirement planning, you can aid in making this spending picture a little more clear. Learn more here.