You’ve worked hard to build your retirement nest egg, and the last thing you need is a wrench in your plans. You might wonder how a job loss or savings shortage could impact your ability to make your savings last in retirement. But the biggest wild card may actually be your health.
According to a recent survey, the two greatest threats to retirement savings for U.S. workers are health-related: rising health care costs and the potential for catastrophic illness. In the same survey, half of retirees indicated they are spending more than they expected on health care.1
Plan for Health Care Costs
Health care costs can add up fast in retirement, especially if you have a major health event or ongoing expenses for medication, medical supplies and in-home care. Health care expenses are also difficult to predict because retirees are living longer, and it’s hard to know if those additional years will bring good health or prolonged illness.
You can take steps now to be proactive about planning for health care costs:
- Estimate health care costs. Health care costs are much more difficult to estimate than other expenses like housing, food and travel. The amount you’ll need to cover health expenses in retirement can change dramatically if you have an accident or chronic illness. You can use the Health Care Costs Calculator available from AARP.org to get a ballpark idea.
- Ramp up your savings. Contributing to an individual retirement account (IRA) or employer-sponsored retirement plan can help you build your safety net to pay for health care and other expenses in retirement. In addition, if you’re eligible to contribute to a health savings account (HSA), don’t miss this opportunity to save money tax-free for current and future health care expenses.2
- Consider long-term care insurance. If you have concerns about covering the costs of long-term care as you get older, you may want to look into purchasing long-term care insurance. Long-term care insurance can help cover the cost of a nursing home stay or in-home care.
- Review timing of benefits. As you approach retirement age, you’ll want to analyze your options for taking Social Security at retirement age or delaying benefits. It’s also a good idea to review your health insurance options, especially if you’re planning to retire before you’re eligible to be covered by Medicare.
Help Is Here
Nearly 1 in 3 workers said understanding health care expenses was the area they needed the most help in planning for retirement.1 Your Seaside Client Advisor can review next steps and suggest strategies to help you prepare for health care expenses.
Top 4 Threats to Retirement Savings
This financial institution does not give tax advice. Consult your tax advisor for information specific to your situation.
- U.S. workers age 30+ identified these top four threats to their retirement savings.1
- Rising health care costs 22%
- Catastrophic illness 18% Losing your job 18%
- Not saving enough 16%
1 Source: 2017 Wells Fargo Retirement Study
2 Nonqualified withdrawals from an HSA are subject to income tax and a 10 percent tax penalty.
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