Health Care Expenses in Retirement PC1320-Print



How to Prepare for Health Care Expenses in Retirement

You have probably spent time daydreaming about retirement – exploring new hobbies, enjoying more time with the grandchildren and taking extended vacations. You have probably even calculated how much you will need to make your dreams a reality, but are you ready for the potential impact of health care costs in retirement? If not, you’re not alone. An AARP survey of 1,000 people found that while a majority of 50+ workers (62%) say they are saving for health care costs, more than half (55%) are worried they may not be able to afford health care costs. 1 With such little preparation, it is not surprising to learn that an overwhelming 84% of Americans remain worried about being able to pay their health care costs in retirement. 2 Overlooking the impact of health care costs can upset an otherwise well-thought-out retirement plan. The following tips can help you prepare your portfolio for health care expenses in retirement. UPDATE YOUR PERSPECTIVE With increasing life expectancies, people are spending more years in retirement. Unfortunately, many pre- retirees have underestimated their health care expenses in retirement and the amount of time they will need to cover these expenses. According to a retiree health care cost estimate, a 65-year-old couple who retired in 2013 is estimated to need $220,000 to cover medical expenses throughout retirement – yet nearly half (48%) of 55- to 64-year- old pre-retirees who responded to a survey believe they will need only $50,000 to pay for health care costs in retirement. 2 Having a reasonable understanding of health care expenses in retirement is an important step in protecting your portfolio. WEIGH THE BENEFITS OF EARLY RETIREMENT Medical care will likely be a significant part of your retirement expenses regardless of when you retire, but it takes on an even larger role if you retire early. If you decide to retire before you are Medicare-eligible at age 65, you will have to explore interim coverage options. Assess the impact of purchasing private health care coverage or self-insuring by incorporating health care costs into your portfolio withdrawals.

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Once you understand your health insurance options, you can factor insurance premiums – along with co- pays and prescription costs – into your income planning. Budget for these items just as you would housing and food expenses. You want to look closely at your anticipated medical costs as part of your larger income planning goal, because they are an important and essential expense in retirement.

1 Planning for Health Care Costs in Retirement: A 2014 Survey of 50+ Workers, AARP Research, October 2014 2 Fidelity Estimates Couples Retiring in 2013 Will Need $220,000 to Pay Medical Expenses Throughout Retirement,, May 15, 2013

Contact a Commerce Trust professional to develop a strategy for your health care expenses in retirement. 1-855-295-7821 |

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Commerce Trust Company is a division of Commerce Bank. PC1320


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