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How to deal with retirement healthcare expenses

February 24, 2019

This Spring, Simply Money Advisors is becoming Allworth Financial. As we expand our services to better meet your retirement planning needs, we needed a name that encompasses all that we are.  Don’t worry. We’ll still deliver our same no-nonsense money advice every week in the Simply Money column, presented by Allworth Financial.

Clyde from Warren County: My wife and I are both 63 and are going to retire in 14 months. Our biggest worry is healthcare. I used to think that Medicare paid everything. Can you please give us some suggestions for cutting costs? 

Answer: Healthcare is definitely among the biggest costs of retirement. And you’re not alone in thinking Medicare will cover everything. But Medicare doesn’t cover most modern drug therapies, various medical devices, certain personalized care, a majority of laser surgeries, most dental (unless hospitalization is required), and any long-term care.

So, how much are we talking? On average, couples retiring today can expect to spend about $280,000 over the course of their retirements on healthcare. And the more you earn (and the longer you live) the more you’re likely to pay in Medicare premiums.

With all that said, there are four ways to help minimize some of your retirement healthcare costs. First, realize that if you have to pay a private physician out of pocket for a type of therapy or care (which is likely), you can negotiate the price. 

Second, hire a ‘care manager.’ While having a personalized consultant who is familiar with your medical history might seem extravagant (and expensive), having a bedside advocate to approve treatments, advocate for you, and keep costs in check may not only save you serious money, it could save your life. 

Third, consider long-term care insurance. Find quotes for a policy that will cover three to five years and see if it’s affordable. 

And fourth, exercise and be social! No one plays a more important role in keeping healthcare costs down than you. 

The Simply Money Point is that yes, healthcare expenses will be a large chunk of your retirement budget. But the more planning you can do now – before you retire – the better off you’ll be.

 

Tina from Mt. Lookout: My daughter is living on her own for the first time and is learning how to budget. Are there any particular apps you recommend? 

Answer: What an exciting time for your daughter! Be sure you share our Simply Money Rule of 50/30/20 with her: 50 percent of her money should go to ‘needs’ (rent, utilities, car payment, groceries, etc.); 30 percent should go to ‘wants’ (going out with friends, the latest and greatest smartphone, vacation, etc.); and 20 percent should be saved (emergency fund, retirement, or a short-term goal). This rule is an easy way for her to get her spending and saving priorities straight from the get-go. And while the ‘wants’ percentage is negotiable (it can be less if her bills are higher), the percentage she is saving (20 percent) should not be negotiable.  

Now, as for apps themselves, there are a few she might want to try out. The most popular option a lot of people have heard of is ‘Mint.’ It will create a ‘real time’ picture of what she spends her money on by automatically updating and categorizing purchases. Mint will also issue alerts when she’s spending too much money or going over budget. 

Some other good options include ‘YNAB’ (You Need A Budget), ‘PocketGuard,’ and ‘GoodBudget.’ 

She could also give the app ‘Acorns’ a try, though this isn’t a technically a budgeting app. Instead, this app will track her purchases then automatically round up to invest the difference. 

The Simply Money Point is that you daughter needs to find the right budgeting method that works best for her. If that’s an app, great. If it’s an Excel spreadsheet or even just pencil and paper, great. Because, at the end of the day, what really matters is that she sticks with it.

 

Responses are for informational purposes only and individuals should consider whether any general recommendation in these responses are suitable for their particular circumstances based on investment objectives, financial situation and needs. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing, including a tax advisor and/or attorney. Nathan Bachrach and his team offer financial planning services through Simply Money Advisors, a SEC Registered Investment Advisor. Call (513) 469-7500 or email simplymoney@simplymoneyadvisors.com.

Retirement Financial Planning