KEY POINTS
- On average, a 65-year-old individual in America is estimated to require around $157,500 specifically for covering healthcare expenses not covered by insurance during retirement.
- Growing your savings in a suitable account can be an effective method to get ready.
- There are a few additional tactics, like boosting physical activity and contemplating a relocation to a more affordable area, that can also be beneficial.
Medical expenses constitute a significant part of the financial obligations for many retirees. Fidelity’s recent projection suggests that an individual retiring at the age of 65 in the United States in 2023 should have approximately $157,500 set aside to pay for healthcare costs during retirement. Moreover, Fidelity predicts that the average retired couple will require around $315,000 saved specifically for healthcare expenses.
A lot of individuals do not have such a large amount of money saved up. their budget Particularly designed for medical costs. Whether you fall into this group or are interested in ensuring healthcare is more cost-effective and foreseeable during your retirement, here are five approaches you may want to explore.
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Utilize a health savings account (HSA)
One of the clearest strategies to get ready for healthcare expenses is to increase savings, especially in retirement accounts that offer tax benefits. best A savings option specifically designed for healthcare expenses is commonly referred to as a healthcare savings account. health savings account (HSA) , or HSA. Unfortunately, a low number of individuals utilize these beneficial accounts.
In order to qualify for an HSA, you must have a high-deductible healthcare plan that meets the requirements. However, if you meet the qualifications and make contributions, there are several important benefits to consider.
HSAs offer a unique triple tax advantage. The funds you deposit are eligible for a tax deduction. These contributions can be invested similar to a 401(k), with any investment earnings being tax deferred. Additionally, any funds used for qualifying medical expenses can be withdrawn without incurring any taxes.
Contrary to FSAs, funds in an HSA do not have an expiration date; they can be carried over and accumulate without any time constraints. Moreover, if you do not exhaust the funds on medical expenses, you have the flexibility to utilize your HSA as a regular retirement fund once you reach the age of 65.
Choose to settle down in a state with a lower cost of living for retirement.
Not only do total expenses for retired individuals Healthcare costs differ from state to state. The most recent information from the Centers for Medicare and Medicaid Services (CMS) shows that the average individual, regardless of age, pays around $10,191 for healthcare. This amount varies, with expenses ranging from $7,522 in Utah to $14,381 in Washington D.C.
Naturally, there are other important considerations to take into account when deciding where to retire besides healthcare expenses. However, it is crucial to remember that the location you choose to reside in can have a significant impact on your overall situation.
Delay retirement until the age of 65 or beyond.
One major advantage of delaying retirement until the age of 65 is that you will qualify for Medicare benefits. If you do not have access to healthcare coverage from your employer that you can retain after early retirement (which is uncommon), this decision can have a significant impact.
Apart from qualifying for Medicare, delaying your retirement can significantly increase your Social Security benefits. Individuals in the United States have the option to start receiving Social Security between the ages of 62 and 70. The longer you postpone claiming, the greater the amount of income you will receive that is protected against inflation.
4. Insurance that supplements Medicare
Medicare supplement insurance plans, which are also referred to as Medigap plans, may not always… reduce Medicare supplement insurance plans can help manage and make your healthcare expenses more foreseeable. These plans are designed to cover expenses that are not covered by Medicare parts A and B, making it easier to budget for healthcare costs. The website of Medicare Provides a comprehensive guide to these strategies and explains the coverage options available.
5. Stay active
It is a proven truth that individuals who remain physically active throughout their lifetimes not only typically have longer lifespans compared to those who are inactive, but they also incur notably lower healthcare expenses, on average. Multiple research studies support this claim, with one particular study featured in BMJ Open Sport and Exercise Medicine revealing that individuals who raised their physical activity levels in early adulthood experienced healthcare costs reduced by $1,874 annually after reaching the age of 65.
All the groups that either sustained or raised their level of physical activity any stage Individuals who were active throughout their life had lower healthcare costs in retirement compared to those who remained inactive from their teenage years to middle age.
The main point
Medical expenses during retirement can be costly, however, thoughtful preparation in advance can have a significant impact. By integrating these techniques into your retirement preparations, you may not only lower your healthcare expenses, but also ensure you are well-prepared for any potential costs.
