When estimating how much money is needed for retirement, workers must keep in mind the rising costs of healthcare. In a recent study, it was found that retiree health care costs amount to 13 percent of annual spending for people 65 and older.
While it is usually recommended that retirees have enough saved up to replace 80 percent of their pre-retirement income, this may not be enough to cover health care costs these days. Household expenses in retirement are assumed to rise with overall inflation, which is about 2.5 to 3 percent per year. However, healthcare costs are assumed to rise about six percent in the next 10 years. This makes health care more of a concern when looking at finances.
Another cost factor is the increase in average life expectancy. People are living longer, thanks to health care becoming more advanced. While this is a great thing, it means retirees will likely end up spending even more out-of-pocket for health care. A 55-year-old male with an average life expectancy of 86 who ends up living to 88 will end up being responsible for almost an additional $70,000 in health care costs not included in retirement savings projections.
One way to combat the rising health care costs, is to open a Health Savings Account with Mountain West IRA. Contributions to an HSA are 100 percent deductible, just like with a Traditional IRA. It combines high deductible health insurance with a tax-favored savings account. The distributions used to pay qualified medical expenses can be taken out at any time.
- Covered by qualified high deductible health insurance plan
- Not covered by other health insurance
- Not enrolled in Medicare
- Not another person’s dependent
For those eligible and wanting to maximize their retirement savings, contact Mountain West IRA. Opening an HSA could help retirees pay less out-of-pocket for health care. Nobody can predict exactly how much they will need for health care expenses but it is better to have extra money available to cover these and other costs.