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Women and Money: Avoiding Healthcare Expense Mistakes in Retirement

Women generally have a long list of to-dos that can feel never ending. More often than not, last on the list is “take care of myself.” The repercussions of that oversight can be damaging when it comes time to retire.

How much should the average American woman expect to spend on healthcare expenses in her retirement?  The answer is more than you think. According to Fidelity.com, the average 65-year-old couple will spend $300,000 on healthcare expenses alone.[1]  According to recent data published by Businesswire.com, women’s healthcare premiums alone are now estimated to be $200,000 more than her male partner during retirement.[2]

The following are three common healthcare-based pitfalls women face when it comes to saving for retirement – and a few tips to avoid them:

Pitfall #1: Women live longer on average than men but have smaller retirement funds.  The fact of the matter is women live longer. The Society of Actuaries reports that half of all married women will outlive their spouse by 15 years.[3] Yet, a longer life doesn’t necessarily mean a more prepared life. Many times, women enter retirement with a smaller nest egg than men. They are typically out of the workforce longer acting as a caregiver for children, grandchildren, or aging parents. Those responsibilities can set women back when it comes to career advancement and retirement plan contributions.  Women are also saving for retirement on a smaller income overall. A study published pay payscale.com  shows that women make less money throughout their careers due to a gender wage gap that broadly remains at 82 cents for every $1 a man earns, while for certain occupations, such as Waiters and Waitresses, the pay gap is much greater at 76 cents.[4]

Tip: The risk of having your money die before you do is high, that’s why saving starts now. You can create a plan that will address your current and future expenses. A good starting point is using a healthcare cost calculator found online like this one from AARP. It’s a tool that can give you an estimate of how much you will need to budget. If you’ve already hit retirement, it is still a good tool to help you gauge costs in the upcoming years. The best part is that it’s free and accessible for you to use.

Pitfall #2: Women are at a greater risk for long-term care expenses. Longevity also means that we are more likely to live alone in later years with no one in the household to help with daily tasks. The statistics are striking. 70 percent of nursing home residents are female and Medicare does not cover the cost of this type of custodial care, according to an AARP report.[5]  Expect to shell out thousands on premiums and out-of-pocket expenses on healthcare that is not covered by Medicare and private insurance as a retiree.

Tip: To curb the costs, consider advance care planning and participate in healthcare-related conversations with your family to address concerns before a crisis hits. Speak with loved ones about your wishes and complete any legal documents – Advance Directives, Living Will, Durable Power of Attorney, just to name a few. Think about appointing a health care proxy or decision maker while you’re still mentally competent. Depending on your health, you might want to look into long-term care insurance, which covers care that is not covered by insurance.

Pitfall #3: Healthcare costs continue to rise. The price to treat ailments, insurance, and medicine has risen dramatically. Baby boomers will feel it the most as they begin to enter their senior years. There’s an expected 6.5 percent increase in healthcare costs in 2022, according to a study from PricewaterhouseCooper’s Health Research Institute.[6] The good news is that this rate is down slightly from 2021, but with an additional focus on the aftereffects of the pandemic, long-term healthcare spending will continue to be subject to inflation for years to come.

Tip: Take a look at your coverage and determine if it will accommodate your needs years down the road. If it doesn’t, take a look at other plans and options. This might be a daunting task but it’s necessary to consider if you hope to be prepared for retirement. Finally, I encourage you to work with a professional who can help you plan a healthy, well-balanced retirement and face this new phase of life with confidence.

Obstacles can be overcome and you might even be better for it in the end. These healthcare pitfalls sound daunting at first, but as I mentioned before, the good thing is you can be prepared for the road ahead. With a little foresight, planning, and some life advice from a financial advisor, retirement should be less scary and a little more comfortable.

 

[1] https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs

[2] https://www.businesswire.com/news/home/20200929005942/en/Women%E2%80%99s-Health-Care-Costs-in-Retirement-Projected-to-be-200000-More-than-Men%E2%80%99s

[3] https://www.soa.org/globalassets/assets/Files/resources/research-report/2018/women-post-retirement-risks.pdf

[4] https://www.payscale.com/research-and-insights/gender-pay-gap/

[5] https://www.aarp.org/home-garden/livable-communities/info-2007/fs77r_ltc.html

[6] https://www.pwc.com/us/en/industries/health-industries/library/behind-the-numbers.html

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