Healthcare costs may be a retiree’s largest expense during retirement. Fidelity estimates that a couple retiring today will need about $300,000 to cover their medical expenses. And yet, many don’t factor in these costs when planning for retirement.
A recent blog post from Nationwide notes that since clients may underestimate their healthcare expenses during retirement, advisors should provide clients with as much insight as possible to help with their health costs at every stage of retirement planning.
Health Savings Accounts (HSAs)
Nationwide’s 2021 Health Care Costs in Retirement Consumer Survey revealed that more than a third of working adults over the age of 25 are contributing to a health savings account. However, within this group, most (61%) plan to use their HSA to pay for today’s healthcare expenses only. Advisors may want to talk with their clients about using their HSA as a possible investment opportunity.
Long-Term Care Cost Planning
Many people planning for retirement may underestimate the costs associated with long-term care. According to Nationwide’s 2021 Long-Term Care Consumer Survey, more than six in 10 are uncertain about costs as they relate to specific long-term care options. The benefits to helping clients with long-term care planning include helping decide the type of long-term care they’ll receive, preserving assets for their loved ones, and creating relationships and trust with their family.
Reducing Taxable Income Close to Retirement
As clients approach retirement, advisors should discuss how they can reduce their taxable income in their retirement years. Some benefits of a tax-efficient retirement income strategy include adding years to the life of their retirement portfolio, improving their after-tax income, and adding value to their estate planning to help their beneficiaries. Nationwide provides tips on how to build tax-efficient retirement income plans.
Early Retirement Healthcare Costs
Those planning to retire before they’re eligible to receive Medicare will need to figure out their healthcare options and how they’re going to pay for them. Options range from signing up for a COBRA plan to having their spouse add them to their retirement plan to receiving coverage through the Affordable Care Act.
Those retiring earlier than planned will also need to figure out how to pay for these expenses. One option is a single premium immediate annuity (SPIA), which begins income payments soon after the initial lump sum investment is made.
People become eligible for Medicare when they turn 65. That said, Medicare comes with premiums, deductibles, co-pays, and co-insurance. There are a few options when it comes to coverage. Nationwide offers a Medicare 101 guide that goes over the Initial Enrollment Period (IEP), Medicare costs, Medicare options, as well as Medicare resources.
For advisors looking for retirement income options for their clients, Nationwide offers a variety of actively managed ETFs for advisors that cater to a range of investment exposures and strategies within the major indexes.
For more news, information, and strategy, visit the Retirement Income Channel.