Don't Let Poor Health Kill Your Retirement Fund


Poor health can destroy your finances in retirement if you fail to build both a healthy retirement fund and a healthy retirement body.

Research shows that physical and financial health are closely linked. In a 2002 University of Michigan study, married couples with excellent health averaged $500,000 in net worth, about three times that of married couples with poor health who had an average of $164,000. (See also: 10 Easy Ways to Supercharge Your Retirement)

When it comes to costs, many Americans may underestimate how much money they'll spend on health care in their golden years. Over half of the respondents to a Fidelity Investments Retirement Savings Assessment survey say they'll need about $50,000. But Fidelity predicts an average couple will need more than $220,000 over the course of their retirement — just for health care!

Indeed, retirees now spend more on health care than they do on food, and at the present rate, health care will be retirees' largest expense after housing.

So to help you prepare, start thinking hard about the following steps.

Building a Healthy Retirement Budget

Investment broker Fidelity recommends taking these four steps to prepare for health care costs in retirement.

1. Set a Savings Goal

Set an annual savings goal of 10% to 15% or more of your income, including 401(k) plans and IRAs. Consider saving part of any raises, bonuses, or tax refunds and increasing contributions to savings plans by 1% every year.

2. Go on Auto-Pilot

Sign up for automatic savings plans with your financial services company. Use the automatic increase feature in your 401(k) plan if it's offered.

3. Use Health Care Savings Accounts

HSAs, offered through employers, offer a triple tax advantage. Contributions and investment earnings accumulate tax-free and roll over year to year if not spent. Distributions for qualified medical expenses are not subject to federal taxes. (See also: How to Choose a Health Insurance Plan)

4. Understand Medicare Options

Most people qualify for Medicare hospital insurance, or Part A, at age 65 and don't pay for the coverage if they paid Medicare taxes while working, according to Fidelity.

However, you pay monthly premiums for Medicare medical insurance, or Part B, which covers doctor visits and other medical services. Plus, there's no limit on out-of-pocket expenses.

4. Understand Unbundled Vs. Bundled Coverage

Unbundled coverage involves using Medicare Part A and Part B along with Veterans benefits, former employer retiree plans or purchasing supplemental, or Medigap, insurance from a private insurance company. That route may be best if you want to fill in gaps in coverage and keep the original Medicare coverage. You can use any doctor or facility you like but may pay higher premium. The policies don't include prescription coverage so you'll need to buy Medicare Part D to cover prescription drugs.

Bundled coverage is Medicare Advantage or Managed Care plans, privately managed plans that combine Medicare Parts A and B, and supplemental coverage you purchase. They often include prescription coverage and can offer lower premiums or better benefits. Simpler than unbundled coverage, it requires just one ID card.

The disadvantage is that it can limit you to only network providers.

Medicare's website offers a useful tool for comparing supplemental insurance in your state.

Building a Healthy Retirement Body

Maintaining a healthy lifestyle and being informed during your working years is key to your financial fitness in retirement. Here's ten actions to take now to improve your health in the future (some pulled from health care insurer Aetna's excellent website, Plan For Your Health):

1. Know Your Cholesterol

Cholesterol has a big impact on heart health. Healthy cholesterol levels are 200 milligrams per deciliter (mg/dL) or lower for total cholesterol, 100 mg/dL or lower for LDL cholesterol, and 60 mg/dL or higher for HDL (or "good") cholesterol, and 150 mg/dL or lower for triglycerides (fat).

2. Don't Smoke

Smoking raises blood pressure, increases fatty plaque in arteries, and increases chances for heart attacks.

3. Check Your Blood Sugar

Have your blood sugar level tested once a year. High blood sugar levels indicate higher chances of diabetes, which in turn means higher odds for other health problems.

4. Eat Right

Eat high-fiber foods, fruits, vegetables, legumes and whole grains. Apples can decrease the risk of cancer, according to AARP. A handful of nuts a day may help prevent both heart disease and cancer. Beans and lentils are good for your colon, garlic fights off digestive-tract cancers, and curry has ingredients that may offer protection against brain tumors. (See also: Eating at the Intersection of Cheap and Healthy)

5. Exercise Daily

Daily exercise reduces the ill-effects of aging, such as worsening eyesight and less bone density. Even 10 minutes of exercise a day helps, writes James Rouse, a naturopathic physician and host of "Optimum Wellness." The many simple exercise options, he says, include going for walking, dancing, bicycling, playing water volleyball, or jumping on a trampoline.

6. Be Friendly

Stress builds up if you keep your feelings bottled inside. Talk to your friends and family and ask for support. If you don't have a good support system, work to develop one to have someone to talk to when you're upset.

7. Relieve Pressure

To prevent or manage high blood pressure, use less salt, limit alcohol and caffeine, quit smoking, mind your cholesterol, and exercise daily. Besides making you unhappy, too much stress can increase your heart rate and raise your blood pressure. Try meditation, deep breathing, muscle relaxation, listening to relaxing music, or picturing pleasant scenes.

8. Take Health Tests

Women should have a Pap smear annually until age 65, a mammogram annually starting at age 50, a bone density test to guard against bone thinning, advises Dr. Mehmet Oz, host of "The Dr. Oz Show."

Men should have a prostate-specific antigen, or PSA, test at age 50 for a baseline reading, followed by yearly testing. Both men and women should have a colonoscopy at age 50, then once every 10 years.

9. Watch Your Weight

Over 60% of American adults are overweight and a third are obese. An average woman of 5 feet 4 inches is obese at 175 pounds. An average man of 5 feet 9 inches is obese at 196 pounds, says Dr. Oz. Measure your waist above your hip bone and below your rib cage. It should be less than half your height.

10. Beware the Sun

Use sunscreen and reapply it every two hours when you're in the sun, Dr. Oz advises. Men should remember their ears and scalp where they're more prone to skin cancer than women. Wear sunglasses in bright sun to help ward of failing eyesight in latter years.

How are you planning for health care costs in retirement? Please share in comments!

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Guest's picture

To avoid "destroying your finances in retirement" work on staying healthy by making it a priority. Be physically active, stay mentally sharp, remain socially engaged and follow a good diet. Staying healthy can help reduce illness and injury and also reduce medical costs. The site Retirement And Good Living has many pages and posts about health, fitness and nutrition. The site also provides several exercise videos.

Guest's picture

Did you really cite 'Dr.' Oz?? You know he is a major pusher I pseudo-science. Sure, these specific points may have been accurate, but there are many better places to cite than Oz.