According to sources like NerdWallet, the average age at which people choose to retire in the United States is around 62. This significant life milestone isn’t just about stepping away from the daily grind; it’s about stepping into a potentially new phase of life that could extend far beyond what was common in previous generations.

As life expectancy has increased, the longevity tables tell an intriguing story: the average American can now expect to live about 77.5 years from birth. But that’s not the whole picture. For those reaching 65, the forecast is even brighter, with men typically living to around 83 and women to 86, meaning many might see their 90s or beyond.

This shift in life expectancy has profound implications for your retirement planning. If you’re retiring at 62, you may be looking at a retirement span of 30 years or more. Yet, it’s important to recognize that not everyone retires at this age, and individual health outcomes will be impacted by genetics, healthier lifestyles, and medical science.

If you are nearing retirement or have recently retired in Central Pennsylvania, consider having a Camp Hill retirement planner review your plan to ensure adequate income, healthcare, and insurance coverage.

Our blog will examine how to properly plan for healthcare and life insurance coverages during retirement years and what to avoid.

Healthcare and Retirement Planning

Healthcare costs are often among the biggest and fastest-rising expenses in retirement, particularly later in life. Understanding Medicare, managing out-of-pocket costs, and leveraging tools like Health Savings Accounts (HSAs) can significantly impact your financial security and lifestyle.

Medicare is a cornerstone of healthcare for retirees, but its complexity can be overwhelming. Here’s an overview of its key components:

• Part A (Hospital Insurance): Your safety net for longer hospital stays, skilled nursing care, and some home health services. The best part? If you or your spouse paid Medicare taxes for at least 40 quarters during your working years, you won’t have to pay a premium for Medicare Part A coverage during your retirement years.

• Part B (Medical Insurance) – Consider this your go-to for doctor visits, preventive care, and even wheelchairs. You’ll pay a monthly premium for it, but here’s the catch: if you don’t sign up when you’re supposed to – around your 65th birthday – you might pay more later in life. That’s why talking to an experienced retirement planner in Central PA can help ensure you comply with the registration process.

• Part C (Medicare Advantage) includes everything from Parts A and B, plus often Part D (medications) and sometimes extras like eye exams or dental care. Private companies run it, so you can choose from several options based on your specific needs. 

• Part D (Prescription Drug Coverage): Plans can change what drugs they cover or how much they cost from year to year, so it’s smart to do a little comparison shopping each time a new enrollment period rolls around.

Retirement Reality Check: Are you running out of money? Watch our new video!

Supplemental Insurance (Medigap)

Medigap plans can fill the gaps in Medicare coverage, such as deductibles and coinsurance. This additional layer of protection can be invaluable for those with frequent medical needs.

Even with Medicare, retirees can face significant out-of-pocket expenses. These include:

• Deductibles you pay before Medicare or other insurance begins covering services.

• Co-pays and coinsurance for doctor visits, treatments, or medications.

• Long-term care insurance should also be considered, or self-funded savings can help bridge the gap of what Medicare covers for short-term care if you require extended nursing home stays or in-home care. 

Watch this video on retirement risks and the power of strategic planning to protect your nest egg. 

Health Savings Account (HSA)

If you are still working and are eligible for an HSA (before enrolling in Medicare), it’s a powerful tool for tax-advantaged healthcare savings. Contributions are tax-deductible, growth inside the account is tax-free, and withdrawals for qualified medical expenses are tax-free. These funds can help cover Medicare premiums, out-of-pocket costs, or long-term care needs.

Prescription Drug Costs

Managing medication expenses is essential, especially for those on multiple prescriptions. A few strategies to consider include:

• Enrolling in Part D and reviewing plans annually
• Opting for generic drugs whenever possible
• Exploring discount programs like GoodRx or patient assistance programs

Health Maintenance

Preventive care plays a critical role in reducing healthcare costs. Regular check-ups, vaccinations, and screenings can catch health issues early, avoiding more expensive treatments down the line. Focusing on a healthy lifestyle, including diet and exercise, can reduce your healthcare expenses.

Learn how to create a reliable income stream in retirement in our new video.

Life Insurance and Retirement Planning

Your life insurance needs may change as you transition into retirement, which is why it’s so important to assess your policies regularly to ensure they align with your financial goals. If you no longer need certain coverages, surrendering or converting the policy to an annuity might free up funds for other expenses. Some retirees may also sell their policies through a life settlement if they no longer need the death benefit.

Evaluate whether your current coverage meets your needs. Consider:

• Remaining debts or a mortgage
• Funeral and end-of-life expenses
• Support for dependents, such as a spouse or adult children with special needs

Review whether life insurance premiums are still affordable in your retirement budget. If they’re straining your finances, consider reducing the death benefit or switching to a different type of policy:

• Term life insurance typically ends after a set period. If your term policy expires, consider whether you need ongoing coverage or if self-insurance through savings is sufficient.

• Whole life insurance provides lifetime coverage with a cash value component, offering flexibility for later in life.

• Universal life insurance allows for adjustable premiums and death benefits tailored to your retirement budget.

Beneficiaries

You should review your beneficiary data regularly, especially after a significant life event. Outdated designations can create confusion or lead to assets being distributed contrary to your wishes. 

Work with a Camp Hill retirement planner to ensure these align with your estate plan.

Other Retirement Planning Considerations

• Inflation: Healthcare costs often rise faster than the CPI. Incorporating higher-than-average inflation rates into your retirement plan ensures you’re not caught off guard. Consulting with Central Pennsylvania retirement advisors can help manage this risk.

• Estate Planning: Life insurance can play a pivotal role in estate planning by providing liquidity to cover estate taxes, supporting loved ones, or funding charitable donations. A financial advisor can integrate life insurance with your broader plan to maximize benefits.

Why Partner with 1st Choice Financial Services?

1st Choice Financial Services specializes in crafting comprehensive retirement plans for Central PA individuals and families. As fiduciaries, our financial advice is always based on your best interests. Ready to learn more about retirement planning? Connect with us today.

Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

This is not endorsed or affiliated with any federal Medicare program, nor any U.S. government agency.  If applicable, we do not offer every plan available in your area and contacting us at the phone numbers provided herein will direct you to a licensed insurance agent.  Any information we provide is limited to those plans we do offer in your area.  Please contact Medicare.Gov or 1-800-MEDICARE to get information on all of your options.  All rights reserved.

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