Health­care could cost cou­ples $280K in re­tire­ment

Fi­delity In­vest­ments’ an­nual cost es­ti­mate is new mo­ti­va­tion for em­ploy­ers to step up ef­forts in help­ing em­ploy­ees plan for med­i­cal ex­penses dur­ing their post-work years.

Employee Benefit News - - CONTENTS - By Paula Aven Gla­dych

Em­ploy­ers bet­ter step up their em­ployee re­tire­ment plan­ning ef­forts: Ac­cord­ing to Fi­delity In­vest­ments’ lat­est an­nual cost es­ti­mate, a 65-year-old cou­ple re­tir­ing this year would need $280,000 to cover health­care and med­i­cal ex­penses through­out their re­tire­ment. That’s a 2% in­crease from 2017, and a whop­ping 75% in­crease from Fi­delity’s first es­ti­mate in 2002. “De­spite this year’s es­ti­mate re­main­ing rel­a­tively flat, cov­er­ing health­care costs re­mains one of the most sig­nif­i­cant, yet un­pre­dictable, as­pects of re­tire­ment plan­ning,” says Shams Talib, ex­ec­u­tive vice pres­i­dent and head of Fi­delity Ben­e­fits Con­sult­ing. “It’s im­por­tant for in­di­vid­u­als to ed­u­cate them­selves and take steps while work­ing to en­sure they are pre­pared to ad­dress these costs. Oth­er­wise, peo­ple risk hav­ing to dip into more of their sav­ings than orig­i­nally an­tic­i­pated, po­ten­tially im­pact­ing their over­all re­tire­ment lifestyle.” Fi­delity’s health­care cost es­ti­mate is based on met­rics that shift de­pend­ing on the econ­omy and changes in government reg­u­la­tions. The 2% in­crease to this year’s es­ti­mate was the small­est an­nual in­crease since 2014, “which in­di­cates that many of the fac­tors con­tribut­ing to the es­ti­mate, such as pre­scrip­tion out-of-pocket drug ex­penses and Medi­care pre­mi­ums, have re­mained rel­a­tively flat over the last year,” Fi­delity found. The Fi­delity re­port has im­pli­ca­tions for em­ploy­ers, who in­creas­ingly have been dis­cussing with em­ploy­ees how to man­age health­care costs in re­tire­ment. More em­ploy­ers have been push­ing health sav­ings ac­counts; the money saved in an HSA can be used for med­i­cal ex­penses in re­tire­ment if a per­son doesn’t use up their bal­ance ev­ery year. Any ex­tra funds are in­vested, just like they would be in a typ­i­cal re­tire­ment plan. “In­di­vid­u­als who are faced with the prospect of re­tir­ing early, re­gard­less of the rea­son, will need to ed­u­cate them­selves on the op­tions avail­able to bridge the gap to Medi­care el­i­gi­bil­ity to help pay for the ex­tra health­care ex­penses they’re likely to in­cur dur­ing this pe­riod,” Talib says.

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