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Figure Health Care Costs into Purchase of Fixed Annuities

In the Retirement Income Journal’s article “Estimating Out-of-Pocket Health Care Costs in Retirement” by Kerry Pechter, a somewhat startling figure is highlighted.  In retirement, couples should expect to spend over $200,000 on their co-pays, deductibles, and premiums.  The reason it is so difficult to plan for health-care expenses in your retirement is the unpredictability of it all.  The 10% of the US population that spends the most money on health care accounts for 63% of yearly health care spending.  But no one knows if and when they will be part of that 10%.  While planning for you retirement with fixed annuities and other financial vehicles, account for the estimated $10,000 that couples will most likely spend yearly on health care.

So how can a couple prepare to pay the estimated $200,000-$300,000 to cover Medicare deductibles and co-pays and any premiums for private insurance?  As health care costs are expected to rise, the following tips will become even more important.  Save more for your retirement budget to accommodate health care costs.  Wait to retire until you receive Medicare coverage at 65 or purchase private insurance to cover the gap between retirement and Medicare.  It is wise even when you receive Medicare to supplement its coverage with some private insurance and to purchase long term care insurance for covering nursing home or assisted living stays.  You have the most control over the last two pieces of advice.  Be a smart consumer of health care and economize your health care spending along with ensuring that you live a healthy lifestyle to combat health care needs.

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