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What Every Woman Should Know about Health Care Costs in Retirement

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On average, women live longer than men and face distinctly different challenges in maintaining their health. Furthermore, women tend to spend more than men on out-of-pocket medical expenses in retirement. According to a 2012 Employee Benefit Research Institute (EBRI) study, retired men spent an average of $124,000 on healthcare, while retired women spent $152,0001 — $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 is not covered by Medicare.

With these expenses in mind, it is not surprising that the cost of health care is one of the biggest retirement planning concerns for Americans. Though it is essential that everyone plan financially for health care needs in retirement, it is especially important that women understand the specific challenges they may face. This knowledge may help women prepare for these expenses and help avoid a financial shortfall in retirement. Start by:

• Estimating 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.

• Being realistic — If you think you have got it covered with Medicare, think again. Today Medicare only pays about 60 percent of retiree healthcare costs and it does not reimburse for most long-term care expenses.2 Plus, there is 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 those challenges may cost – can make a difference in being prepared.

• Creating 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 will likely be better positioned to absorb medical costs not covered by Medicare.

• Being proactive about your health — Schedule and keep routine dental and medical check ups and stay up-to-date on preventative services from physicals to 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 are important to quality of life at any age. They are also one of the best and most inexpensive ways to keep medical bills at bay.

• Consider setting up a health savings account (HSA) — 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.3 Unlike a flexible spending account (also known as health care spending account), you do not lose money you do not use. The money rolls over to the next year and is 100 percent portable. Plus, you can use it anytime 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.

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. Consider working with a financial professional who can help you factor real and potential health care costs into your overall financial plan for retirement.


1 & 2 Employee Benefit Research Institute, "Savings Needed for Health Expenses for People Eligible for Medicare: Some Rare Good News," October 2012.

3 Note that an HSA is only available with a high deductible health insurance plan.

Ameriprise Financial and its representatives do not provide tax or legal advice. Consult with your tax advisor or attorney regarding specific tax issues.

Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC.

This communication is published in the United States for Texas only; and this advisor is licensed only in the states of CA, CO, FL, KS, MO, NC, NM, OK, TX, and VA.

M. Ahmad Adnan, CFP®, CRPC®, RFC®

Financial Advisor

Business Financial Advisor

Ameriprise Financial Services, Inc.

3200 Steck Avenue | Suite 250 | Austin, TX 78757

Phone: 512.213.6400 Ext. 102 | Toll Free: 866.238.4230

Email: masroor.a.adnan@ampf.com


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