What Wealthy Retirees Fear the Most

high healthcare costs
Healthcare costs are skyrocketing, leaving many retirees anxious

When it comes to retirement-related fears, you might think that wealthy retirees have fewer concerns than most. However, that’s not the case. No matter how much money you have saved up, there are still an abundance of stressors to face as you look toward retirement.

When asked what their greatest retirement fear is, most wealthy retirees – that is, those who have $1 million or more in assets – reported that getting sick was their greatest retirement-related fear. Additionally, most wealthy retirees struggle with feeling insecure about their long-term care planning. Considering the high cost of health care, it’s not difficult to understand why this is such a common concern.

Ballooning Healthcare Costs

According to the Fidelity Retiree Health Care Cost Estimate, today’s average retired couple aged 65 should expect to spend approximately $295,000 on health care expenses during retirement. And that’s a healthy couple! This amount does change depending on the length of retirement, health status, and what sorts of accounts you use to cover health care costs. If you enter retirement with a pre-existing condition or a known health issue, or you’re diagnosed with a condition early on, your costs could go up even further. Additionally, this figure doesn’t take into consideration how much you may spend on long-term care, which can add a significant amount to that final price tag.

Long-term Care Costs 

It may be tempting to think that you won’t need to plan for long-term care services, especially if you feel healthy and capable when you initially retire. However, the U.S. Department of Health and Human Services reports that at least 60% of retirees will need some type of long-term care services in their retired years. What’s more, it’s estimated that the current lifetime cost of formal long-term care is around $172,000, so planning for long-term care should be a part of your retirement planning strategy.

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It’s uncomfortable to think about the end of your life or declining health, but it’s smart to ask yourself how you see the end of your retirement playing out. Will you want to stay at home no matter what, or are you willing to move into a facility that provides assistance? Do you have family members that will be able to help you cover the costs? Is the area you live in cost-effective, or will you want to consider moving? How might government programs like Medicare and Medicaid or savings accounts like HSAs help you relieve the burden of high costs?

Ultimately, deciding how to pay for your potential long-term care costs will depend on your unique situation. The most important element is that long-term care must be a part of your retirement planning strategy.

Building a More Robust Planning Strategy

No matter how much you have saved up for retirement, you need to have a firm grasp on exactly how you plan to pay for health care once you stop working – and no longer have access to an employer-sponsored health plan. Here are three key strategies that you can consider incorporating into your financial planning:

  • Take advantage of your company’s 401(k) by increasing your contributions. If you’re younger, contributing to retirement plans sooner rather than later means you won’t always have to contribute such a large sum. If you’re closer to retirement, you’ll want to max out your contributions as much as possible to ensure you’re in the best position possible. What makes a 401(k) such a great option is that it has the advantages of tax deduction, tax free accumulation, and creditor proofing.

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  • If it’s offered through your employer, consider utilizing a high deductible health insurance plan (HDHP) combined with a Health Savings Account. HSAs are a great option because all distributions are tax-free, your savings accumulate in the account tax-free, and all qualified withdrawals are tax-free. Qualified health costs include prescription costs, co-pays, surgeries, accidents, dental care, vision care, long-term care, and more.
  • Consider investing in long-term care insurance. Long-term care insurance premiums may not be affordable for everyone but, if you can manage it, it can be incredibly beneficial if you end up needing long-term care in the future. This type of policy can pay a monthly benefit toward long-term care for either a specified amount of time or for the remainder of your lifetime.

Concluding Thoughts 

Even if your retirement assets total more than $1 million, it’s important to properly budget for your future health care needs. The amount you set aside depends largely on your age and overall health, but keep in mind that many people don’t budget enough. Health care costs are continuing to rise, and this means greater expense for both healthy individuals who may live longer than expected, and those in poor health who may require extensive care. For these reasons, it’s important to carefully consider your future health care spending.

Since planning for your retirement future is crucial – and health care is a part of that – you may benefit from working with a financial advisor. Here at Andersen Wealth Management, helping you achieve the financial freedom you need for a secure retirement is our number one goal. If you’d like guidance in establishing a retirement plan that will protect you through all of your retirement needs, please contact us today.