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Clarity Financial Planning Services is an advocate for your financial future who takes a holistic approach to your needs and goals.

Plan for Health Care Costs in Retirement

When you hear that health care costs are rising, you may feel overwhelmed and tempted to ignore the matter all together. Please don’t do that. There are online calculators and ways to at least estimate you healthcare costs so you have a goal to work towards. Kiplinger.com recommends “5 Ways to Plan Ahead for Rising Health Care Costs” instead of hoping for the best. The article states, “ According to a 2017 Fidelity report, the average couple retiring at age 65 will need $275,000 to cover their medical expenses through retirement.”

You can set aside money specifically for health care expenses in a Health Savings Account (HSA).  If you want to open an HSA, you will need have a high-deductible insurance plan. Perhaps you wonder if an HSA can do double-duty as an all-purpose savings account…not really. There is a penalty to  withdraw expenses for non-medical reasons before 65 but not if you do this after 65. And you will pay taxes if you withdraw money for non-medical expenses no matter your age. The advantage of an HSA can be having  a funding source dedicated for medical expenses and you’ll need to start one before you enroll into Medicare since you can withdraw from but cannot start one once you’ve enrolled in Medicare.

It is also important to recognize the limits of Medicare. Medicare offers a number of supplement plans but you can only choose one that works best for you if you have an idea of what your costs may be. And when you plan ahead, you can do your research to figure it out what will work before you feel pressured because you need to apply.

And you do not need to approach the labyrinth of options you have to plan for health care costs in retirement alone. You can seek the assistance of a Fee-Only financial planner:

“If you’ve been fretting about the damage that rising health care costs could do, talk to your adviser about building some proactive strategies into your long-range retirement plans. If you are not working with someone who discusses these issues and helps plan for them, ask why not; maybe it is time to search for a planner who does.”