Healthcare Costs in Retirement

I trust that this will find you well and enjoying life.

Have you considered the single biggest expense that you will face in retirement? Would you suspect it to be housing? Or recreation? How about health care costs?

Between Medicare premiums and the portion of medical bills Medicare doesn’t pay, health care costs are actually a bigger retirement expense than housing and recreation combined. These expenses are likely to get worse when you consider that Medicare Parts B and D are increasing 7% this year and likely to only continue to increase, based on the large number of baby boomers moving into the Medicare system. So it’s an issue that is not going away. In fact Fidelity research shows that a couple who retired last year could expect to spend an estimated $245,000 on healthcare throughout their retirement years.

Medicare premiums are based on your level of modified adjusted gross income. So it’s a good idea for you to be in tune with what that is and if possible, to make sure to not go into a higher tax bracket needlessly. Based on who you are economically, there are different ways to shelter assets from taxes and different ways to draw from your assets in a more tax efficient way than others. For the sake of this discussion just know that it’s something that you need to examine based on your particular circumstances, and create a strategy that maximizes your opportunity to minimize adjusted gross income and therefore minimize Medicare premiums.

For a married couple to move one tax bracket lower can save a couple $65,000 in Medicare premiums over a twenty year period. So it’s worth being conscious of and examining to see how you can control this expense. The old saying it’s not what you make but what you keep comes to mind with this discussion.

If we can help in any way with this or any thing else related to retirement don’t hesitate to contact us.

Best regards.

Jeff Christian CFP, CRPC

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