If you're like most people, you probably don't have access to employer-sponsored pre-65 retiree medical coverage. Read Viewpoints on : Should you take Social Security at 62? Generally speaking, the longer you can wait until age 70 to take Social Security benefits, the more you can collect, assuming you live a long life. But if you can postpone retirement or save enough to cover health care costs until 65, then you may be able to defer your Social Security benefits. These decisions are interconnected and could make a difference in your living costs and lifestyle in retirement-and when you can retire.Īpproximately one-third of "early retirees" who claim Social Security at age 62 4 do so to help pay for health care expenses until they are eligible for Medicare coverage at age 65. Pre- and early retirees: Make the most of your time to prepareĪs retirement nears, you will have several big decisions to make, including when to stop working, when to take Social Security, how to pay for health care, and how to generate cash flow from your retirement assets. Read Viewpoints on : 5 ways HSAs can fortify your retirement You can save pretax dollars (and possibly collect employer contributions), which have the potential to grow and be withdrawn tax-free for federal and state tax purposes if used for qualified medical expenses. An HSA can help you save tax-efficiently for health care costs in retirement. Tip: If you're still working and your employer offers an HSA-eligible health plan, consider enrolling and contributing to a health savings account (HSA). The amount you need will also depend on which accounts you use to pay for health care-e.g., 401(k), HSA, IRA, or taxable accounts your tax rates in retirement (see chart) and potentially even your gross income. Of course, the amount you’ll need will depend on when and where you retire, how healthy you are, and how long you live. Note: Fidelity’s 2023 Health Care Cost Estimate remains the same as last year (2022), due in part to limits on expected retiree out-of-pocket costs for prescription drug coverage starting in 2025. An average retired couple age 65 in 2023 may need approximately $315,000 saved. So you should carefully weigh all options."Īccording to the Fidelity Retiree Health Care Cost Estimate, a single person age 65 in 2023 may need approximately $157,500 saved (after tax) to cover health care expenses in retirement. "Many people assume Medicare will cover all your health care cost in retirement, but it doesn't. "Health care is creating a 'retirement cost gap' for many pre-retirees," says Steve Feinschreiber, senior vice president of the Financial Solutions Group at Fidelity. In general, people are living longer, health care inflation continues to outpace the rate of general inflation, and the average retirement age is 62 for most Americans-that's 3 years before you are eligible to enroll in Medicare. There are a number of drivers behind this mounting retirement health care cost challenge. So health care costs will likely consume a larger portion of your retirement budget-and you need to plan for that. But unlike your parents' generation, you won't likely have access to employer- or union-sponsored retiree health benefits. If you are like most Americans, health care is expected to be one of your largest expenses in retirement, after housing and transportation costs.
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