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Category: Healthcare

Healthcare Costs in Retirement

In a 2020 survey, 36% of all workers reported they were either “not too” or “not at all” confident that they would have enough money to pay for their medical expenses in retirement. Regardless of your confidence, however, being aware of potential health care costs during retirement may allow you to understand what you can pay for and what you can’t.1

Health-Care Breakdown

Faucet

A retired household faces three types of health care expenses.

  1. The premiums for Medicare Part B (which covers physician and outpatient services) and Part D (which covers drug-related expenses). Typically, Part B and Part D are taken out of a person’s Social Security check before it is mailed, so the premium cost is often overlooked by retirement-minded individuals.
  2. Copayments related to Medicare-covered services that are not paid by Medicare Supplement Insurance plans (also known as “Medigap”) or other health insurance.
  3. Costs associated with dental care, eyeglasses, and hearing aids – which are typically not covered by Medicare or other insurance programs.

It All Adds Up

According to a HealthView Services study a 65-year-old healthy couple (male living to age 87; female, age 89), can expect their lifetime health care expenses to add up to around $606,337.2

Should you expect to pay this amount? Possibly. Seeing the results of one study may help you make some critical decisions when creating a strategy for retirement. Without a solid approach, health care expenses may add up quickly and alter your retirement spending.

Prepared for the Future?

Workers were asked how much they have saved and invested for retirement – excluding their residence and defined benefit plans.

Chart

Source Employee Benefit Research Institute, 2020

To learn more about CapSouth Wealth Management contact our office at 900.929.1001 or visit our website at www.capsouthwm.com

CapSouth Wealth Management – Dothan, AL, McDonough, Ga, Charlotte, NC

1. Employee Benefit Research Institute, 2020
2. HealthView Services, 2019

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with CapSouth Wealth Management. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Copyright 2020 FMG Suite.

Health Care Costs Interrupts Retirement Preparations

You may have seen this statistic before or one resembling it: the average 65-year-old retiring couple can now expect to pay more than $250,000 in health care expenses during the rest of their lives.

In fact, Fidelity Investments now projects this cost at $285,000. The effort to prepare for these potential expenses is changing the big picture of retirement strategy.[i]

Individual retirement savings strategies have been altered. How many people retire with a dedicated account or lump sum meant to address future health costs? Probably very few. Many retirees end up winging it, paying their out-of-pocket costs from their incomes, Social Security benefits, and savings.

While couples can save together, individuals also have considerable health care costs as well. Fidelity estimates the costs as $150,000 for women and $135,000 for men. The costs can potentially take up a considerable amount of a retiree’s income – 9% to 14%, according to Fidelity. Per year, out-of-pocket costs, including dental and vision, could run from $3,000 to $8,000 during an average year.[ii]

While households have begun adjusting their retirement expectations, considering their projected health care expenses, businesses have also quietly made some changes. If you can take advantage of employer matching contributions to your workplace retirement account, take advantage of that benefit.

There is no easy answer for retirees preparing to address future health care costs.

Staying active and fit may lead to health care savings over the long run, but some baby boomers and Gen Xers already have physical ailments. Barring some sort of unusual economic phenomenon or public policy shift, the question of how to pay for hundreds of thousands of dollars of medical and drug expenses after 65 will confound many of us.

To learn more about CapSouth and the retirement services we offer, visit our website at www.capsouthwm.com or call our office at 800.929.1001.

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.fool.com/investing/2019/12/07/these-5-factors-will-tell-you-how-much-you-really.aspx

[ii] https://www.plansponsor.com/estimates-health-care-costs-retirement-continue-rise/

What to Know About Flexible Spending Accounts at the End of Year

 

Flexible spending accounts (FSAs) are savings accounts reserved for out-of-pocket health care costs. They are offered through an employee benefit plan and allow you to use pretax dollars to pay for medical costs that insurance might not cover.

 

FSAs can save you money because they are funded with pretax dollars, but they are “use it or lose it,” meaning that if you don’t use the funds by the end of the year, they don’t roll over into the next. There is some flexibility, and employers may extend the deadline to use funds until March 15, but participants might want to aim for the end-of-year deadline to be safe. That means, by December, you should have a plan of how to maximize your FSA funds.

 

Not sure how to spend your remaining FSA dollars? FSA Store has thousands of items that are eligible, including first aid items, travel essentials, pain relief items, and much more.

 

To learn more about CapSouth Wealth Management and the services we provide, call our office at 800.929.1001 or visit our website at www.capsouthwm.com.

 

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

 

Tip adapted from TurboTax[i]

[i] https://turbotax.intuit.com/tax-tips/health-care/flexible-spending-accounts-a-once-a-year-tax-break/L8hwzKu7r

 

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

 

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

 

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