When people sit down to figure out how much they need to save for retirement, many times they don’t take healthcare expenses into account. That could be because they believe government programs will step in and cover all of their expenses or just that the idea hasn’t crossed their minds, says Adam Stavisky, senior vice president, Fidelity Benefits Consulting.
Fidelity takes a look at retirement healthcare expenses each year to determine how much the average 65-year-old couple will spend on healthcare expenses in retirement. The 2017 estimate of $275,000 is a 6% increase over last year’s estimate of $260,000.
That increase reflects general market trends and a variety of expenses individuals might face in retirement, including Medicare premiums, Medicare copayments and deductibles and prescription drug expenses. The $275,000 figure doesn’t include nursing home or long-term care expenses.
“With ongoing uncertainty across the healthcare landscape, it’s more important than ever for individuals to educate themselves on steps they can take to prepare for their healthcare needs in retirement,” Stavisky says. “These expenses are only expected to increase in the future, so it’s critical that people include healthcare as a significant part of their retirement plan.” Stavisky points out that most people probably assume Medicare pays for everything in retirement, but “by design it doesn’t cover everything.”
About 35% of that $275,000 accounts for most individuals having to pay for Medicare Parts B and D. Part D is a supplement to Part B. Employers can help by taking a more active role in helping employees manage their health and wellbeing during their pre-retiree years and providing benefits that can contribute to improved health and potentially lower healthcare costs in retirement.
Many companies have moved to high-deductible health plans that are paired with health savings accounts. HSAs help employees save money for their current healthcare expenses pre-tax, but if they don’t spend that money, they don’t lose it. It gets invested and can be used for future healthcare expenses as well. HSAs are like having an additional tax-advantaged retirement savings account, only the money comes out tax-free as well as long as it is used for medical expenses.
Read more at https://www.benefitnews.com/news/how-to-put-retirement-healthcare-costs-on-employees-radar