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Prepare Now for Health Care Costs in Retirement

What happens to your health care plan when you retire? You’ll be eligible for Medicare, although you’ll have to pay for supplemental insurance, known as Medigap. But even so, you could face some hefty health care expenses over the years. Will you be prepared?

A big part of your preparation is knowing how much money you’ll need. Consider this: A 65-year-old couple in good health will require about $388,000 to pay for health-care costs for the remainder of their lives, according to HealthView Services1, which produces health-care cost projection software.

Other estimates show different amounts, but they’re all well into the six figures. However, the key number is how much your health care costs will be during your retirement years – after all, the $388,000 figure above is just an average. The amount you will need depends on several factors including: your age at retirement, your overall health, your family history of longevity, where you live, your lifestyle, and so on.

Once you know about how much money you’ll need, you can save and invest for it. Of course, it’s a good idea to accumulate as much money as you possibly can before you retire. So, try to "max out" your annual contributions to your traditional or Roth IRA and your 401(k) or other employer-sponsored retirement plan. And once you do reach the limits on these accounts, look for other tax-advantaged investment opportunities, possibly including a fixed annuity, which can provide you with a guaranteed lifetime income.

Another method of saving money for health care costs is through a health savings account, which offers deductible contributions, tax-deferred growth and tax-free withdrawals for qualified medical expenses. HSAs are only available through high-deductible health plans, though, and your health insurance may not qualify. But if you have a spouse with access to an HSA, you may want to encourage him or her to take advantage of it.

And here’s one more suggestion for coping with health care costs during retirement: Stay healthy. Obviously, we can’t control everything that happens to us, including sickness and accidents. Nonetheless, by taking care of yourself with regular exercise and a proper diet, you can actually do a great deal to help prevent illnesses such as diabetes and heart disease, both of which are quite costly, both to your health and your finances. 

Don’t forget long-term care

Thus far, we’ve just looked at ways of dealing with the regular costs of health care during retirement. But we’ve excluded one sizable expense: long-term care. And that’s a cost you can’t afford to ignore. Here’s why:

  • Someone turning age 65 today has an almost 70% chance of eventually needing some type of long-term care, according to the U.S. Department of Health and Human Services.2
  • The average cost for a private room in a nursing home is about $100,000 per year, while a home health aide costs about $50,000 per year, according to Genworth, an insurance company.3

What can you do to protect yourself against these potentially devastating costs?

You could purchase a long-term care (LTC) insurance policy, which will pay for qualified long-term care costs. And the younger you are when you buy your policy, the lower your premiums will likely be. (Keep in mind, though, that even a good LTC policy will probably include a waiting period before the insurance kicks in and a maximum amount of coverage, such as three years.)

Another possibility is a "hybrid long-term care policy, which combines long-term care benefits with those offered by a traditional life insurance policy. So, if you were to buy a hybrid policy, and you never needed long-term care, your policy would pay a death benefit to the beneficiary you’ve named. Conversely, if you ever do need long-term care, your policy will pay benefits toward those expenses. And the amount of money available for long-term care can exceed the death benefit significantly. Hybrid policies can vary greatly in several ways, so you’ll need to do some research before choosing appropriate coverage.

Contact an Edward Jones financial advisor to learn more about preparing yourself for the costs of long-term care, and for all health care expenses in retirement. By getting a healthy grip on all these expenses, you’ll enjoy your years as a retiree even more.

Important Information:

Edward Jones is a licensed insurance producer in all states and Washington, D.C., through Edward D. Jones & Co., L.P. and in California, New Mexico and Massachusetts through Edward Jones Insurance Agency of California, L.L.C.; Edward Jones Insurance Agency of New Mexico, L.L.C.; and Edward Jones Insurance Agency of Massachusetts, L.L.C.

1 HealthView Services White Paper (

2 U.S. Dept. of Health and Human Services: “How Much Care Will You Need?” (

3 Genworth Cost of Care Survey 2019 (

More Resources:

What Could Health Care Cost You in Retirement?

While health care costs in retirement may be beyond your control, you can control how you prepare for them.

Three Reasons Long-term Care Is Important to Women

Building financial strategies now can provide you with options for long-term care, including where you receive it and by whom.

Avoid Overconcentration in Your Portfolio

You could be at risk of holding too much money in too few investments, also known as overconcentration.

Are You Getting the Most from Your Deferred Compensation?

How to maximize the benefits of your other income sources

Tax-efficient Investing for High Earners

From Roth conversions to considering municipal bonds, here are a few steps you can take to become a more tax-efficient investor.

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