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5 Retirement Healthcare Cost Tips

In my post titled Retirement Healthcare Costs, I described how a recent study calculated that a 65-year-old couple retiring this year would need $225,000 to cover healthcare costs. Due to the enormity of this number, the report also included some tips about how to plan for such a large expense. Here are the highlights, with my analysis of each point:

1. Create an individual retirement plan

We often stress the importance of planning to reach your financial goals here on the Lending Club blog. As everyone’s financial situation is different, so too should his or her retirement plan be tailored. Taking your financial and physical health into consideration will help to assess your expected healthcare costs. Understanding your expected costs can in turn help to define your saving plan.

2. Start early and maximize opportunities to save

As with all investments, such as a person-to-person loan portfolio from Lending Club, the early you begin, the more time you’ll have for your investment to grow. Your retirement portfolio will likely see its share of ups and downs; the earlier you start saving, the more likely you’ll be able to overcome any downturns. Taking full advantage of tax-deferred and matching benefits of your employer will allow you to maximize your savings opportunities.

3. Assess health status and become a smarter consumer of health care

Preventative health care measures can lead to big savings. Use all of the tools at your disposal to become informed about your health and make the most of it. If your employer offers a gym membership reimbursement, for example, taking advantage of that not only saves you money on the membership itself but regular exercise will probably also lead to lower medical bills down the road.

4. Be aware of the details of any employer-sponsored coverage

Benefits change on a yearly basis at most companies, so it’s important to stay current on the latest retirement benefits in the area of health care coverage. Even if you know what type of coverage will be available in retirement, make sure you know the costs of that coverage as well. In many cases, retirees who can continue employer-sponsored coverage in retirement can only do so at an elevated cost.

5. Understand the financial impact of health care costs on Social Security income

As part of the cited report, Fidelity found that “a 65-year-old worker today, who is earning $60,000 and decides to retire this year, should expect that 50 percent of his or her pre-tax Social Security benefit will be used to pay for personal health care expenses in the next 17 to 19 years.” Not factoring these costs into your overall plan could leave your retirement seriously under-funded.

Seeing a number like $225,000 for retirement healthcare costs can be so overwhelming that you might decide there’s nothing you can do about it. Understanding what your costs will be, and making a plan to address your situation, will help to bound the problem and allow you to move forward. These five tips, and the background provided for each, should help you to plan this critical area of your retirement.

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