Mistake 5: Not Planning for Healthcare Costs
When thinking about living costs you’ll need to cover in retirement, including housing and daily necessities, healthcare costs could slip through the cracks. This is especially true if you don’t have any current health problems that require additional spending.
“The best medicine is to make sure your retirement plan takes into account this large line item — and to find ways to cut future costs or develop income streams to pay expenses,” according to Kiplinger’s Retirement Report.
Why This Is a Mistake
A couple retiring in 2017 would need $275,000 to cover healthcare costs in retirement, according to a study by Fidelity. This is a significant amount of money, even for someone with a $1 million-plus nest egg. For 2018, there will be a cost-of-living adjustment of 2 percent for Social Security, but many retirees’ Medicare premiums will also increase.
For those still working and who have access to one, a health savings account (HSA) can be a great way to supplement retirement savings and build up a nest egg with pre-tax money that can be tapped tax-free in retirement for qualified medical expenses.
For those who are already retired, make sure your savings can cover healthcare costs outside of those that will be covered by Medicare. Keep in mind that you need savings to cover both short-term medical expenses and long-term care.
