Thanks to modern medicine and healthy living, people live longer lives. But with the benefits of longevity come increased costs in health care. And as cost continue to grow, employers and the government will look to individuals to pay for their own medical expenses. That's why it's important to take health care expenses into account now as you plan for your retirement.
The cost of health care is projected to jump to more than twice the rate of inflation for the foreseeable future. The Center for Strategic and Budgetary Assessments reports that health care makes up $47 billion in military spending, and it expects costs to rise 5 percent to 7 percent per year. While health care coverage is provided by the military to retirees, not all costs are covered.
While illuminating, these estimates alone should not be used to set savings goals for health care expenses in retirement. Your individual needs are contingent on many factors, including:
- Age at retirement
- Life expectancy at retirement
- Availability of health insurance in retirement
- Health of the retiree
- Health care cost rate increases
- Interest rates
- Rate of return on investments
- Public policy changes
Perhaps the greatest challenge in planning for health care expenses in retirement is uncertainty. Lifespan is uncertain. Health care cost increases are uncertain. Inflation is uncertain. Interest rates are uncertain. And health status is uncertain.
As workers and retirees become increasingly responsible for their own retirement, the risk of uncertainty will make the planning process increasingly complicated. Financial Advisors have the tools and expertise to help you estimate how much you should set aside to cover medical expenses in retirement. By making sure you take into account the higher costs of medical expenses, you can better prepare now for the standard of living you desire for your retirement years.
For more retirement-planning advice, visit Military.com's Banking and Savings channel.