What Women Need to Know

When planning for healthcare costs during retirement, women should be aware that they face higher lifetime costs than men.  The primary reason for this cost disparity is longevity.  According to a 2021 report from HealthView Services, a provider of healthcare-related data to the financial services industry, women live approximately two-to-four years longer than men.  Consequently, the average woman will incur more years of healthcare-related expenses, including premiums and other out-of-pocket costs.  This is compounded by the fact that the average woman is at least two years younger than her husband.  Therefore, a married woman may be forced to pay healthcare-related expenses for up to four years or longer after her husband’s death.

According to the most recent Retirement Healthcare Costs Data Report, a healthy 65-year-old couple retiring in 2021 is estimated to pay approximately $662,000 in healthcare costs over their lifetime.  When you consider costs not covered by Medicare, the cost differential becomes even greater.  These costs, including vision, dental, and hearing, could raise healthcare costs closer to $1 million.*  These figures assume that the individual’s (or married couple’s) modified gross income remains below the thresholds that trigger Medicare’s income-related surcharges.

Planning ahead for these potential costs is a vital component of a comprehensive financial plan.  Individuals who have some time before retirement can set aside the funds necessary to ensure that a surviving spouse is able to afford premiums and other healthcare costs.  Healthcare costs are expected to increase by approximately 6% per year, according to the Centers for Medicare & Medicaid Services, and will generally be highest during the final years of life.  When planning, couples should consider their current health and prospects for longevity.  Individuals in excellent health have a greater chance of living beyond life expectancy and facing additional years of healthcare expenses.

There are a variety of ways for a couple to ensure that a wife will be able to cover healthcare costs after her husband’s death.  For example, a couple may consider an annuity that will provide income for the surviving spouse’s life.  A couple may also consider a life insurance policy with a death benefit that will provide the surviving spouse with income to cover healthcare costs.  Finally, a couple may increase savings in employer-provided retirement plans, IRAs, and health savings accounts (HSAs) with the goal of providing for future healthcare costs.

Unfortunately, these costs do not account for the potential future need for long-term care.  Since Medicare will only provide funds for a short period under very specific circumstances, additional planning is necessary to address the potentially insurmountable costs associated with long-term care.  Be sure to consult the Hutchinson Wealth Management Team – we can coordinate with your tax and legal professionals to assess your options.