■ Schmidt Foundation

Preparing for the costs of healthcare in retirement

Kate Ashford | Nerdwallet

Health care in retirement is a big-ticket item. Experts estimate that an average 65-year-old retired couple in 2021 would need about $300,000 in after-tax savings earmarked for health care costs in their post-work life, even with Medicare, according to Fidelity.

The totals are daunting, but you can take steps to keep costs as low as possible with the right planning, good insurance choices and a healthy understanding of your conditions and coverage. Try these strategies — now and in retirement — to help control your health care bills.

Take advantage of an HSA

A health savings account allows you to put pretax money away for medical expenses. You can invest the funds, and both the principal and earnings are tax-free if you use them for eligible medical costs, today or in the future. This creates a powerful savings tool.

To use an HSA, you must have a high-deductible health plan. If that kind of plan makes sense for you, experts recommend saving money to your HSA and leaving it untouched for as long as possible. In 2021, you can save up to $3,600 pre tax as a single person or up to $7,200 if you have family coverage.

“These accounts are the most tax-efficient plans available,” says Sallie Mullins Thompson , a certified public accountant and certified financial planner in New York City. “The main thing you need to do is contribute to it religiously whenever you can.”

Make a plan for long-term care

A person turning 65 today has about a 70% chance of needing long-term care at some point, according to the Department of Health and Human Services. One of the best ways to approach this issue is to plan for it: How long do you intend to stay in your home? Where will you go when you can’t live there anymore? Who will help you with financial and health care decisions?

“People don’t like talking about it because it’s uncomfortable thinking about getting old and people taking care of you,” says Carolyn McClanahan, a physician-turned-CFP in Jacksonville, Florida. But planning can help you prepare for a change in circumstances.

This could mean buying a traditional long-term care insurance policy, which can cost thousands of dollars per year, according to the American Association for Long-Term Care Insurance. Or you might consider a hybrid insurance product that combines permanent life insurance with a long-term care rider. (You can use the benefit to pass money down to your heirs or — if you need it — you can tap it for long-term care expenses.)

You could also self-insure by setting money aside annually for long-term care expenses. The important thing is to consider your options while you’re in your 50s or early 60s, before products get too expensive.

Get the right Medicare plan

Choosing the best Medicare policy once you turn 65 means finding one that includes your preferred doctors and your regular medications, helping you avoid high out-of-network and out-of-pocket costs. You’ll also need to consider whether you want access to all doctors who accept Medicare — as with an Original Medicare plan — or whether you want a plan that comes with extra benefits but a more limited provider network, such as a Medicare Advantage plan.

One way to approach Medicare is to find an agent who can help you compare options. Find someone who’s certified to sell as many carriers as possible, meaning they’ll be able to present the full array of choices in your area, says Matt Chancey, a CFP in Tampa, Florida.

Ask questions

Be an active participant in your health care, no matter what life stage you’re in. When your medical provider orders tests, which can drive up your medical costs, make sure you understand why they’re being done.

“Say to them, ‘What do you hope to learn from this, and is doing this going to change the treatment?’” McClanahan says. “It’s important to do that, because a lot of times, doctors order things rotely. It’s part of their protocol and they don’t stop and think, ‘Is it really needed in this case?’”

The same goes for prescriptions. Ask your doctor whether there’s something less expensive you could take, or whether there are changes you could make that would help. “A lot of doctors won’t spend the time talking about lifestyle changes, so they throw pills at people,” McClanahan says. “You can avoid a lot of medications just by doing the right thing.”

Ways women can get an edge on building wealth

By Erin El Issa | NerdWallet

Women are paid less than men and are more likely to leave the workforce to take care of loved ones, both of which negatively impact the amount of money they have to save and invest over the course of their lives. Despite this, just half of Americans (50%) believe women have disadvantages compared to men when it comes to long-term investing. The survey was conducted in July 2021 — in the midst of the pandemic that has only deepened women’s systemic and socialized disadvantages. Yet the fact remains that in order to invest and build wealth for the future, women need to contend with these hurdles. Below is advice for how to combat five investing disadvantages that disproportionately impact women.

Evaluate your risk tolerance

Around 1 in 6 Americans (16%) believe women being more risk averse than men is a long-term investing disadvantage, according to the NerdWallet survey. It’s important to consider and acknowledge your personal risk tolerance when choosing investments. But if you’re so risk-averse that you’re unlikely to hit your financial goals or you’re avoiding the stock market altogether, it’s probably time to reevaluate your strategy. Diversification is one effective way to reduce your risk while still growing your portfolio.

You can diversify your portfolio not just by asset class — for instance, stocks and bonds — but also within asset classes. That could mean investing in companies of different industries and different sizes. If a specific company or industry underperforms, the rest of your portfolio may balance it out.

Diversification doesn’t have to be complicated. Funds, like exchange-traded funds or mutual funds, are made up of a mix of investments, so you’re diversified within a single asset. Aim to find a balance between your tolerance for risk and your goals, and use diversification to make you more comfortable investing for your future.

Increase savings as you can

The survey shows that close to a quarter of Americans (23%) believe women earning less than men is a long-term investing disadvantage because they have less money to invest. As of 2018, women earned, on average, 82 cents for every dollar men earned. And this gap is significantly wider for many women of color. Inequality of earning means women often have to save a higher percentage of their income than men do.

If you have a 401(k) through work, you may be able to set up automatic incremental increases — for example, 1% each year. You can also choose to bump up your contributions as you get raises if you can continue living comfortably on your old take-home pay.

But because part of the wage gap is due to the difference in jobs worked — oftentimes gender norms and expectations tend to encourage men and women to go into different industries — some women may not have enough income or earn the raises required to follow that advice. In that case, your best option may be to seek new job opportunities or fields. And if you have a partner with whom you split expenses, discuss contributing to the household proportionate to your income if that would give you more money to put away.

Keep investing during career interruptions

More than 1 in 5 Americans (21%) believe career interruptions associated with caregiving responsibilities are a long-term investing disadvantage women have compared to men, according to the survey. These interruptions have been magnified by the pandemic, as millions of women have left the workforce, many because of lack of day care or inperson schooling. But if family finances still allow, those who have a spouse with earned income don’t have to stop investing.

A spousal IRA allows the non-earning spouse to contribute up to $6,000 a year (or $7,000 for those age 50 and older), as long as the couple files taxes jointly. If it’s not reasonable for you and your spouse to max out both your IRAs, you can split whatever money you would put in IRAs and contribute to each equally.

Seek out resources

Around 1 in 8 Americans (13%) believe women’s lack of investing knowledge is a disadvantage compared to men, survey results show. Finding free or cheap financial advice and resources is easier than ever, though it’s important to vet your sources to make sure they’re legitimate. Your bank or broker probably has financial tools and educational content, and you can also look for additional financial resources online or from a book in your local library. Fact-check resources that are new to you and be skeptical of any source that promises you a certain return on your investment if you follow their advice.