We have written several posts about the importance of addressing health-related issues as you engage in comprehensive estate planning and plan for your retirement. You may want to invest in long-term care insurance, or you may want to create a trust that you can fund with money to help you cover healthcare expenses as you age. Whatever your approach, a recent WealthManagement.com article reminds us of the importance of considering healthcare as part of a responsible estate planning strategy. Filing to do so could have a significant negative effect on your estate and the assets that you can pass on to your heirs.
The article cites a recent Fidelity Investments estimate that the average couple retiring at age 65 this year can expect to have to pay approximately $275,000 for healthcare and related needs during their retirement. This astronomical number is six percent higher than it was in 2016. In fact, the uptick in healthcare costs during retirement have pretty much been on the rise since 2002, with most years seeing an increase in the estimated cost. Since Fidelity first did an estimate of healthcare costs in retirement about 15 years ago, the cost estimate has gone up 70 percent.
Single people retiring at 65 this year can expect to pay around half of that price tag, with women expected to have to pay more in either situation because they typically live longer than men. While the cost estimate for healthcare in retirement does include certain things covered by Medicare like doctor visits, surgery, and other covered items, these covered items only account for around 35 percent of Fidelity’s current estimate as to the cost of healthcare in retirement. That means that, over time, you may be responsible for 65 percent of medical costs on an out-of-pocket basis.
Options for Your Retirement
There are a number of options for you to explore to help lessen the economic impact healthcare might have on your finances, and ultimately on the assets that remain in your estate for you to distribute to your heirs. Even purchasing supplemental insurance can cost you a significant amount of money, bringing you close to the average estimate above. Often, these plans come with high deductibles, too – and that can discourage people of any age from using their coverage until it is absolutely necessary. At that point, you may have invited a host of other issues in to compound your illness and ultimately compound the out-of-pocket costs you will be responsible for.
Health savings accounts can also provide some relief to individuals still working that are looking to put aside money to afford some of the higher deductible plans that are increasingly more common today. Employees are allowed to contribute to these accounts throughout the year using pre-tax income, and many times employers will pitch in, too. Many of these accounts allow you to keep your money growing in them until you need to withdraw it for qualified medical expenses, which means that they could ultimately provide you with another way to save for retirement and be able to tackle unexpected healthcare costs or even just help strengthen your estate to allow you to leave even more to your heirs. An experienced estate planning attorney can help you understand more about the options available to you when it comes to the various investment accounts you bring to your estate planning portfolio.