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How Will Your Health Impact Your Retirement Savings?

How Will Your Health Impact Your Retirement Savings?

Odds are you'll have to bank more than you might have expected.

As science and medicine continue to advance and help us live longer, it’s only logical that we need to save more for our retirement years. Although the average life expectancy in the United States is 79 years old, many financial advisors plan for their clients to live to 95 and even 100 years of age. But it turns out, saving money isn’t the only key to a comfortable retirement—you have to take your health and the cost of your health into consideration, too.

So, how does your health impact your retirement plan? It’s simple: If you’re healthy, you’ll likely live longer, but will need a larger retirement fund to remain comfortable during those extra years. If you’re unhealthy, you may have a shorter lifespan—but you’ll most likely have higher medical bills during retirement.

The cost of healthcare is climbing, but we’re not planning for it
Not only are we living longer, but the cost of healthcare is rising—to the tune of $3.3 trillion in 2016 (or about $10,348 per person in the United States), according to the Centers for Medicare and Medicaid Services. What’s more, approximately two-thirds of the workforce reports contributing less to their retirement funds due to healthcare costs, and one in four American adults report forgoing medical care solely because it was too expensive. The bottom line? Many Americans—whether they’re insured or uninsured—have a hard time affording their healthcare.

And retirees are no different. For those in retirement, the ability to pay for ongoing medical care can be a major financial concern. It’s true that government programs like Medicare can offset some health expenses, but out-of-pocket costs are not covered; Medicare wouldn’t cover a nursing home or assisted living services, for example. More concerning, some reports estimate that retirees will spend between $110,000 and $400,000 on out-of-pocket medical expenses alone during their retirement years.

Start planning your healthier financial future—today
Have you considered the cost of healthcare in your retirement planning? If you haven’t, you’re not alone. According to a survey by Brightwork Partners, only 12 percent of employed Americans factor healthcare costs into their retirement funds.

So, whether retirement is years away or right around the corner, it’s vital to address some key concerns as you plan for and enter your golden years. Depending on your current health status, here are some things to consider:

  • If you’re healthy: You likely have fewer health-related expenses throughout the year, so try to put those savings towards your retirement fund. Like we said, those who are healthier generally live longer and need even more retirement savings. Plus, healthy retirees are likely to travel or pursue new hobbies with their newfound freedom, which can add to the overall cost of retirement.
  • If you have health issues: In addition to a sustainable retirement fund, be sure to plan for unexpected and out-of-pocket medical expenses. According to a report by HealthView Services, people who are over age 65 and have conditions like cancer or heart disease spend a whopping $100 to $200 more each month than a healthy person. Working with a financial advisor and sticking to a budget now can help supplement your monthly savings, so you can be prepared for unexpected health costs down the road.

The reality is that many Americans aren’t prepared for retirement—one in five have no retirement savings whatsoever. But with the proper planning and preparedness for both everyday and unexpected expenses, it is possible to live comfortably during retirement.

Medically reviewed in July 2018.

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