Protecting Your Wealth from Health Care Costs

Protecting Your Wealth from Health Care Costs


When planning for retirement, you should save as much as possible, and be sure to account for what will likely be the biggest expense of your retirement – health care.

The Cost of Health Care in Retirement

With health care costs on the rise, you can expect to pay at least $266,600 in health care costs throughout retirement. This estimate does not, however, include the expense of long term care such as a stay in a nursing home or assisted living facility. Even if you are healthy when you retire, you are not guaranteed to stay healthy.

In fact, according to the U.S. Department of Health and Human Services, 70% of people over 65-years-old can expect to need some form of long-term care during their lifetime. With the yearly cost of a semi-private room in a nursing home averaging over $75,000 and the average nursing home stay lasting more than two years, the cost of long-term care can quickly deplete your retirement nest egg. So, how can you protect your wealth from the cost of unexpected health care needs?

Long-Term Care Insurance

Medicare, Medigap, traditional health insurance and disability insurance typically do not include coverage for long-term care. You can purchase long-term care insurance to supplement your existing health care coverage. The premiums for long-term care insurance vary based on the benefit amount and the age at which you purchase the policy. If you get a long-term care insurance policy in your 40s or 50s, the premiums will be much lower than if you want until you are in your 60s.

Health Savings Account

You may also consider opening a health savings account (HSA) before you retire to contribute to health care costs. An HSA allows you to contribute and withdraw money pre-tax for qualified health care expenses. Keep in mind you cannot contribute to your HSA once you enroll in Medicare Part A and/or Part B, although you may withdraw from your HSA even after you enroll in Medicare. If you withdraw from your HSA for non-medical or unqualified medical expenses before the age of 65, your withdrawal is taxed at your income tax rate plus a 20% tax penalty. Once you are over the age of 65, you may withdraw money from your HSA taxed as regular income, but with no additional tax penalty.

Protecting your wealth from unexpected health care costs is extremely important. Contact a Fifth Third Bank financial advisor today to begin the retirement and wealth planning process.

The information contained herein is for information purposes only, is not designed to address your financial situation or particular needs and does not constitute the rendering of tax or legal advice. You should consult with your tax advisor or attorney for advice pertinent to your personal situation. Asset Allocation, Alternative Investment and Hedging/Diversification strategies are intended to mitigate the overall risk within your portfolio. Some strategies may be subject to a higher degree of market risk than others. An investor should understand the costs, cash flows and risks inherent in a strategy prior to making any investment decision. There are no guarantees that any strategy presented will perform as intended. Fifth Third Private Bank is a division of Fifth Third Bank offering banking, investment and insurance products and services. Fifth Third Bancorp provides access to investments and investment services through various subsidiaries, including Fifth Third Securities. Fifth Third Securities is the trade name used by Fifth Third Securities, Inc., member FINRA/SIPC, a registered broker-dealer and registered investment advisor. Registration does not imply a certain level of skill or training.

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