When you think about your existing costs, you likely think about your home, your kids, education, travel, eating out. But a key one is health care costs in retirement.
Health Care In Retirement
Why?
Because health care costs tend to come more into play the older we get, since our bodies start to be less healthy and general ageing issues commence.
But it’s more pernicious than that, because the cost of health care already exists in the form of your health insurance premiums and deductibles, which is an expense almost everyone has.
And it’s going up at a rate you may not be aware of: In 2003 an employee spent ~5% of their income on health insurance premiums and deductibles.
In 2013?
10%
Yes. That’s double in 10 years.
And these are your working years, before you are in what’s considered the high health care expenses phase of your life, when you are 60+ years old.
So, when you think about your future, and your retirement savings goal, you need to break it down into sub goals:
1. Everyday baseline expenses (eg utilities, groceries, taxes, insurance, gym membership, cell phones,)
2. Everyday discretionary expenses (entertainment, beauty, eating out, liquor/wine/beer, clothing, travel, cable)
3. Home Improvement and Maintenance
4. Vehicle Replacement
5. Health Care
Health Care is now it’s own goal in retirement.
Why?
Because it’s a category that will only become bigger through time
Health care costs in retirement tend to not decrease, but increase.
It’s a category that needs to be parsed out so you can consider how you will plan for it.
If you include it in #1 above (everyday baseline expenses), it health care costs in retirement can get lost in your other costs and your inability to see it as it’s own category to plan and manage for.
The fact that costs have doubled for working adults should raise the alarm for everyone and create a sense of urgency around thinking about how to intentionally fund it as its own goal.
Health Savings Accounts can be part of the solution of health care costs in retirement, and are a main reason to consider High Deductible Health Plans.
Next Step
Ready to take the next step and work with a fee-only CFP? Reach out to schedule a Discovery Meeting to learn more.