This was published in November 2013 in the Madison Press written by Ronald Garver, CFP®, CRPC®, and speaks to one of the challenges my American friends have when they retire.
Health Care in retirement is a concern for all of us, but the costs of healthcare in Canada are less than the US but many of the prescriptions and other needs we have are not covered by our medicare programs and with the current government thinking they will not be. One of our Premiers, Kathleen Wynne warns that "Canada is headed for a huge economic crisis if the provinces and the federal government don't improve retirement incomes," preferably by enhancing the CPP,
Whether there is federal or provincial action, much thought must take into account that simply increasing the contributions by employee and employer, without additions that factor in the lower wages, particularly of women, workers' precarious jobs, leaving the workforce to care for family members, and immigrant workers who lack the residency requirement, does little to increase and protect the income security for these workers.
On average, women live longer than men and face distinctly different challenges in maintaining their health. Perhaps as a result, women tend to spend more than men on out-of-pocket medical expenses in retirement. According to a 2012 Employee Benefit Research Institute (EBRI) study, retired men spent an average of $124,000 on healthcare, while retired women spent $152,0001 — $28,000 more than their male counterparts. In addition, women are more likely to need (and to spend more money funding) long-term care, some of which isn’t covered by Medicare. (Employee Benefit Research Institute, “Savings Needed for Health Expenses for People Eligible for Medicare: Some Rare Good News,” October 2012.)
With these expenses in mind, it’s not surprising that the cost of healthcare is one of the biggest retirement planning concerns for Americans. Though it’s essential that everyone plan financially for healthcare needs in retirement, it’s especially important that women understand the specific challenges they may face. This knowledge may help women work toward preparing for these expenses and to help avoid a financial shortfall in retirement. Start by:
Estimating your healthcare costs — Begin by assessing your overall health and family health history. Calculate your current annual medical and dental expenses as a starting point. For help projecting what these costs may be in retirement, use an online healthcare calculator or estimator to help you become familiar with treatment costs for a variety of health and dental conditions. Also become educated about various long term care insurance options to determine if a policy might be right for your situation.
Being realistic — If you think you’ve got it covered with Medicare, think again. Today Medicare only pays about 60 percent of retiree healthcare costs and it doesn’t reimburse for most long-term care expenses. Plus, there’s uncertainty about how much it will cover in the future due to potential entitlement reform changes. Knowing the challenges you may face with your health — and what they may cost — can make a difference in being prepared. (Employee Benefit Research Institute, “Savings Needed for Health Expenses for People Eligible for Medicare: Some Rare Good News,” October 2012.)
Creating an emergency fund — Reducing your debt and saving as much as you can before you retire is the simplest way to prepare for an unanticipated need — medical or otherwise. If your balance sheet is healthy, you’ll likely be better positioned to absorb medical costs not covered by Medicare.
Being proactive about your health — Schedule and keep routine dental and medical check ups and stay up-to-date on preventative services including the flu and pneumonia vaccines, colorectal cancer screening and mammography. Thoughtful prevention and early detection can help prevent minor medical issues from becoming major ones. Maintaining a healthy diet, exercising regularly and avoiding tobacco and other addictive substances is important to quality of life at any age. It’s also one of the best and most inexpensive ways to keep medical bills at bay.
Consider setting up a health savings account (HSA) — An HSA allows you to make tax-deductible contributions when you put money in. The money builds up tax-free and you can withdraw it tax-free for qualified medical expenses. Unlike a flexible spending account, you don’t lose money you don’t use. It rolls over and is 100 percent portable. Plus, you can use it anytime during your lifetime to pay for qualified medical expenses. Keep in mind that if you withdraw funds for non-medical purposes, you are subject to a tax penalty. (Note that an HSA is only available with a high deductible health insurance plan .)
Unfortunately, when it comes to healthcare costs in retirement, there is no silver bullet solution. But by following these tips, you can help take control of the things you do have influence over now to help prepare. Consider working with a financial professional who can help you factor real and potential healthcare costs into your overall financial plan for retirement
Health Care in retirement is a concern for all of us, but the costs of healthcare in Canada are less than the US but many of the prescriptions and other needs we have are not covered by our medicare programs and with the current government thinking they will not be. One of our Premiers, Kathleen Wynne warns that "Canada is headed for a huge economic crisis if the provinces and the federal government don't improve retirement incomes," preferably by enhancing the CPP,
Whether there is federal or provincial action, much thought must take into account that simply increasing the contributions by employee and employer, without additions that factor in the lower wages, particularly of women, workers' precarious jobs, leaving the workforce to care for family members, and immigrant workers who lack the residency requirement, does little to increase and protect the income security for these workers.
On average, women live longer than men and face distinctly different challenges in maintaining their health. Perhaps as a result, women tend to spend more than men on out-of-pocket medical expenses in retirement. According to a 2012 Employee Benefit Research Institute (EBRI) study, retired men spent an average of $124,000 on healthcare, while retired women spent $152,0001 — $28,000 more than their male counterparts. In addition, women are more likely to need (and to spend more money funding) long-term care, some of which isn’t covered by Medicare. (Employee Benefit Research Institute, “Savings Needed for Health Expenses for People Eligible for Medicare: Some Rare Good News,” October 2012.)
With these expenses in mind, it’s not surprising that the cost of healthcare is one of the biggest retirement planning concerns for Americans. Though it’s essential that everyone plan financially for healthcare needs in retirement, it’s especially important that women understand the specific challenges they may face. This knowledge may help women work toward preparing for these expenses and to help avoid a financial shortfall in retirement. Start by:
Estimating your healthcare costs — Begin by assessing your overall health and family health history. Calculate your current annual medical and dental expenses as a starting point. For help projecting what these costs may be in retirement, use an online healthcare calculator or estimator to help you become familiar with treatment costs for a variety of health and dental conditions. Also become educated about various long term care insurance options to determine if a policy might be right for your situation.
Being realistic — If you think you’ve got it covered with Medicare, think again. Today Medicare only pays about 60 percent of retiree healthcare costs and it doesn’t reimburse for most long-term care expenses. Plus, there’s uncertainty about how much it will cover in the future due to potential entitlement reform changes. Knowing the challenges you may face with your health — and what they may cost — can make a difference in being prepared. (Employee Benefit Research Institute, “Savings Needed for Health Expenses for People Eligible for Medicare: Some Rare Good News,” October 2012.)
Creating an emergency fund — Reducing your debt and saving as much as you can before you retire is the simplest way to prepare for an unanticipated need — medical or otherwise. If your balance sheet is healthy, you’ll likely be better positioned to absorb medical costs not covered by Medicare.
Being proactive about your health — Schedule and keep routine dental and medical check ups and stay up-to-date on preventative services including the flu and pneumonia vaccines, colorectal cancer screening and mammography. Thoughtful prevention and early detection can help prevent minor medical issues from becoming major ones. Maintaining a healthy diet, exercising regularly and avoiding tobacco and other addictive substances is important to quality of life at any age. It’s also one of the best and most inexpensive ways to keep medical bills at bay.
Consider setting up a health savings account (HSA) — An HSA allows you to make tax-deductible contributions when you put money in. The money builds up tax-free and you can withdraw it tax-free for qualified medical expenses. Unlike a flexible spending account, you don’t lose money you don’t use. It rolls over and is 100 percent portable. Plus, you can use it anytime during your lifetime to pay for qualified medical expenses. Keep in mind that if you withdraw funds for non-medical purposes, you are subject to a tax penalty. (Note that an HSA is only available with a high deductible health insurance plan .)
Unfortunately, when it comes to healthcare costs in retirement, there is no silver bullet solution. But by following these tips, you can help take control of the things you do have influence over now to help prepare. Consider working with a financial professional who can help you factor real and potential healthcare costs into your overall financial plan for retirement
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