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Staying Fit in Retirement Could Mean a Healthier IRA Future

Published on December 9, 2015

happy elderly senior grandfather and child in park using laptop computer

An article on Bloomberg.com recently cited that Fidelity Investments has estimated a 65-year-old couple who retired in 2014 would need, on average, $220,000 to cover out-of-pocket medical costs over the course of their retirement. This figure assumed there is Medicare insurance but no (additional) retiree health-care insurance through a former employer.

(Add to that figure another $17,000 annually for every year that the couple is in retirement before age 65.)

This is just for medical expenses; what about daily living or paying for that long-awaited travel, indulging the grandkids or making sure you can live the way you’re accustomed to in those golden years?


Dal Watson, an insurance adviser and employee benefits consultant says he believes the $220,000 figure should be viewed as a minimum. “Since we don’t have a crystal ball, it’s prudent to plan for a more worst-case scenario. The total monthly costs for in-home care range from $4,000-5,000; nursing home care can range $4,000-6000 per month for a semi-private/double occupancy room, and $7,000 monthly and up for a private room. The more complicated the medical care situation, the greater the price.”

It seems that our health will take a huge chunk out of our retirement savings if we’re not careful. So how to plan now for a healthier future, both physically and financially?


Here’s another interesting note: In a recent nationwide survey by Schwab Retirement Plan Services, respondents said they’d rather see their 401(k) balance increase by 15 percent than lose 15 pounds this year. And about 35 percent of the 25-to-70-year-olds in the survey were unwilling to sacrifice their quality of life today (such as cutting down on dinners out or on vacations) to save more for retirement.

Well, many of us might not want to do less takeout or take a staycation, but it’s clear that taking care of ourselves and being healthier in retirement will cost us less in health care expenses—and give us a potentially better retirement lifestyle.


For instance, committing to a regular exercise regimen has been shown to increase earnings. A 2011 study from Cleveland State University found that men who exercised three or more times a week had about a 6 percent earnings gain compared with men who didn’t. For women, the gap was about 10 percent. The reason for the earnings gap was not identified.


Of course, the healthier we stay, the less we spend on medical bills and procedures. But another way to prepare for medical costs is to open a health savings account (HSA), which is available for people with high-deductible health insurance plans. The HSA will travel with you from job to job and you control how the money is spent.

“HSAs are excellent way to accumulate monies for long-term health conditions and/or disability needs, with tax-preferred benefits,” notes Watson. “If you think your health plan or Medicare supplement is going to get you very far down that road, you are kidding yourself.  Ask anyone who has lived it first-hand.”

Even better, you can have a self-directed health savings account, with the potential to grow the fund more aggressively by investing in alternative assets.

Individuals can contribute up to $3,350 a year in a HSA. Adding to the financial health they can confer, these accounts are “triple tax-free.” You put pretax money in them, it grows tax-deferred, and you aren’t taxed on the money you use for medical reasons. After age 65, you can pull money out and use it for non-medical reasons, and pay regular income tax on it.


Dal Watson adds this final note: “Check with your tax professional for more information and how it affects you personally. If you have substantial assets, or cannot medically qualify for a long-term care policy, a self-directed plan is a great alternative.” (You can follow him on Twitter: @HealthReform411).

Whether it’s time to lose those extra pounds, start exercising, or take care of those medical issues that have been dogging you for years, it’s always a great time to open a self-directed health savings account for those who qualify. If you have any questions about self-direction as a retirement wealth-building strategy, we invite you to read our informative white paper. For questions about how to include nontraditional investments in your HSA to grow healthier retirement savings, contact Next Generation Trust’s helpful self-direction specialists at (888) 857-8058 or Info@NextGenerationTrust.com.

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