Does post-retirement health care cost more for women? The answer is yes. 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 an Employee Benefit Research Institute study, retired men spent an average of $124,000 on health care, while retired women spent $152,000 – $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.
With these expenses in mind, it’s not surprising the cost of health care is one of the biggest retirement planning concerns for Americans. Though it’s essential everyone plans financially for health care needs in retirement, it’s especially important 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. Here are five ways to start:
• Estimate your health care 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 health care 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.
• Be realistic. If you think you’ve got it covered with Medicare, think again. Today, Medicare only pays about 60 percent of retiree health care 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.
• Create 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.
• Consider setting up a health savings account. 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 any time 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.
• Be proactive about your health. Schedule and keep routine dental and medical checkups 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.
Unfortunately, when it comes to health care 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.
Paula Dougherty, CFP, ChFC, CLU, is a financial adviser with Dougherty & Associates, Ameriprise Financial Services Inc. in Springfield. She is licensed in Missouri, Arkansas, Kansas, California and Arizona and may be reached at paula.j.dougherty@ampf.com.
