Planning for Rising Healthcare Costs in Retirement

Tom Sedoric and Casey Snyder

How long do you wait in between annual checkups? How many times have you thought, ‘I should really get this checked out,’ but put it off indefinitely? (Which, for the record, isn’t a great idea.) How often have you opted not to make a call over to the doctor’s office because you figure it’s “probably just a cold,” and there’s not much they can do and not worth shelling out the co-pay for. We can all identify with one (or more) of these examples.

Healthcare. As a topic of discussion, it’s never really at the top of people’s list of interests – until it is. It’s something we all need to deal with throughout the entirety of our lives, but, outside of actually dealing with it, many of us would much prefer to leave it alone until it’s time to visit the doctor for our annual checkup (let’s pretend for a minute that said annual checkup is not a year overdue). It’s daunting. All of us just naturally want to be healthy. It’s not easy to think about the choices we make to facilitate a healthy lifestyle, nor do we particularly want to think about the financial ramifications of the costs associated with healthcare appointments, medications, treatments, etc. 

With that said, planning for these financial commitments is an absolute necessity because, quite frankly, it rarely gets cheaper. Healthcare costs in retirement only rise with time, and, obviously, as we age, the chances we’ll need to assess our healthcare needs will inevitably increase as well. 

The fact is, a healthy couple who enter retirement at the age of 65 can expect to spend in excess of $300,000 over the course of their golden years. Further, this figure does NOT include the costs associated with senior/assisted living should you find yourself in a situation where you need that type of care as you age. And, in the spirit of transparency, it’s worth noting that the Department of Health and Human Services makes the claim that, “someone turning age 65 today has almost a 70% chance of needing some type of long-term care services and support in their remaining years.”

Healthcare isn’t cheap. 

So, how can you best prepare for healthcare costs in retirement? The short answer is planning. If you’re proactively saving for this inevitable financial situation before the bills start piling up, you’ll be far better positioned to weather the storm. 

How To Prepare For Future Healthcare Costs 

We actively engage our clients here at The Sedoric Group to take a long hard look at expected lifestyle expenditures, and other financial considerations that will come up, even if you don’t know what they’ll look like just yet. Healthcare costs in retirement are an absolute piece of the long term financial puzzle. 

Do you have a health savings account (HSA)? If you answered “yes,” - great! You’re ahead of the curve. If you answered “no,” you may wish to consider one. An HSA is a smart option for you to set aside funds pretax that you should leave untouched for as long as you possibly can. The benefit of an HSA is that, as long as you utilize the monies within the account on eligible medical costs (now and in the future), you won’t be taxed on the principal or the interest you accrue as you allow that money to grow (assuming you leave it untouched until you reach retirement age). 

Currently (as of 2021), you can set aside up to $3,600 (pretax) annually as a single person or $7,200 with a family plan. Obviously, it would take a considerable amount of time to grow that lump sum into the $300,000 we’ve outlined above, but, anything you can put into this account is going to help in the long run given the tax benefits alone. 

It’s not the end of the world if you are older or don’t have an HSA though. Rest assured, there are other ways to strategically create a retirement portfolio that will take rising healthcare costs into consideration and keep your financial future as flush as can be. The important piece is to take action as soon as you’re able. According to a report published by HealthView Services, “...while 61% of American workers are “significantly concerned” about their inability to cover future healthcare expenses, only 26% have calculated the monthly income they will require to address their needs in retirement.” And heck, if you haven’t even calculated what you know is ultimately coming, you’re not doing yourself any favors. 

It doesn’t need to be all on you though. If you need help, reach out. We’d be glad to offer up our expertise. 

The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results.

Please note that the URL(s) or hyperlink(s) in this material is not to a Steward Partners Investment Solutions, LLC website. It was created, operated and maintained by a different entity. Steward Partners Investment Solutions, LLC is not implying an affiliation, sponsorship, endorsement with/of the third party or that any monitoring is being done by Steward Partners of any information contained within the linked site; nor do we guarantee its accuracy or completeness. Steward Partners is not responsible for the information contained on the third party web site or the use of or inability to use such site.

Securities and investment advisory services offered through Steward Partners Investment Solutions, LLC, registered broker/dealer, member FINRA/SIPC, and SEC registered investment adviser. Investment Advisory Services may also be offered through Steward Partners Investment Advisory, LLC, an SEC registered investment adviser. Steward Partners Investment Solutions, LLC, Steward Partners Investment Advisory, LLC, and Steward Partners Global Advisory, LLC are affiliates and separately operated.

AdTrax 5727939.1 Exp 7/24