The fear of outliving one's retirement savings weighs heavily on the minds of both retirees and those who are about to retire. Few have taken the time to perform a detailed analysis of projected expenses and create a strategy to successfully address their financial needs in the future. According to research, the person who retires at age 65 can expect to live to be 85. Over that 20-year period the value of one dollar will decrease to 46 cents at a modest 4% rate of inflation.

According to a recent report, a 65-year-old couple retiring today should have $190,000 in savings just to cover out of pocket medical expenses until they die. And for those now age 55 and planning to retire at 65, that number will nearly double to $370,000. Those costs will be divided almost in three—36% for insurance co-payments and deductibles, routine eye care and glasses and other needs not covered by Medicare. Prescription drugs will claim 33% of their savings and Medicare premiums another 31%.

According to a survey of more than 1,300 people with $1 million to invest, excluding their homes, accumulating substantial assets is not enough to wipe away concerns about increasing healthcare costs. Even more so, as employer-sponsored retiree health insurance premiums see double digit escalation since 2001, many employers are eliminating benefits for future retirees or asking employees pay more out of pocket to cover the tab.

Most people don't plan to fail; they fail to plan. The majority of those surveyed said they had yet to craft a retirement plan and were relying largely on 401K plans, Social Security, Individual Retirement Accounts and investments to pay for retirement including medical costs. “The average annual cost of health care for a retired person in this country is about $12,000,” notes Terry Marr, president of NIA Securities. “That doesn’t include people with exceptional health issues. Those nest eggs could be quickly depleted if a retiree should face a catastrophic illness over a significant period of time.”

To cover the ongoing escalating cost of medical expenses, Marr recommends instituting a Medicare supplement plan and a portfolio structure to provide the needed funds. This may include fixed income securities to provide cash flow with modest returns and growth stocks to offset inflation and rising costs. In some cases, an annuity provides the needed funds for both the present and the future.

“Baby boomers approaching retirement must take action to structure a financial program to plan for health care needs and provide needed capital in the future,” notes Marr. “The first step in achieving peace of mind is to meet with one of our financial planners at NIA Securities,” he suggests. “We’ll help an individual or couple identify their health care needs and have a frank discussion examining assets, liabilities and life-style goals to give them an effective road map toward financial security.”

For more information about post-retirement healthcare coverage and financial planning, contact NIA Securities at 201-845-6600.