There’s an old saying that if you don’t have your health, you don’t have anything. That may ring true for retirees. According to a recent study from Fidelity, the average married couple will pay $275,000 for out-of-pocket health care costs in retirement.1
If you are approaching retirement, you may be surprised to learn that your health care costs could be that high. After all, you’ll likely enroll in Medicare, which you may expect will pay for much of your health care expenses. However, even Medicare comes with premiums, deductibles and copays. Also, Medicare doesn’t cover every treatment.
The truth is that you’re likely to face substantial out-of-pocket costs for most types of health care services and treatments. As you get older, you’re more vulnerable to illness and injury, especially in the later years of retirement. Your health care costs could quickly add up and deplete your savings.
Tax season is here again. If you are recently retired or approaching retirement and haven’t budgeted for taxes, you could be in for a surprise. Many retirees assume their tax liability will go down after they leave the working world, but that’s not always the case. If you don’t prepare for taxes, you could find yourself with less disposable income than you had anticipated.
The good news is there are steps you can take today to minimize your tax exposure in retirement. Below are three such steps. You also may want to consult with a financial professional to develop action steps that are aligned with your specific needs and goals.
Are you retiring soon? If so, you may be wrestling with some big decisions. How much income should you take from your savings? Should you downsize to a smaller home? Do you need long-term care insurance?
Perhaps one of the biggest questions you may face is when to file for Social Security. Should you file as soon as you’re eligible? Or wait as long as possible? Once you start receiving benefits, you can’t change your mind.
The timing of your filing is an important factor in the calculation of your benefit amount. If you file early, you’ll see your benefits reduced. On the other hand, you could delay your filing, which would lead to an increase in your benefit amount.
You can file for Social Security as early as age 62. However, your benefit is permanently reduced if you file at any point before your full retirement age (FRA). Most people reach their FRA between their 66th and 67th birthdays.1
You don’t have to file at your FRA, though. In fact, you can delay your filing as long as you wish. For each year you wait past your FRA, your benefit amount increases 8 percent, up to age 70. Conversely, your amount could be reduced as much as 25 percent if you file before your FRA.1