Retirement in Motion: Planning for Health Care Expenses

Boomers on the Brink: Issues affecting participants as they approach retirement


Perhaps the most critical expense to account for during a retirement that can last 20 years or more is healthcare. According to a recent study by Fidelity Investments, a couple aged 65 retiring in 2012 is expected to need an average of $240,000 to pay for medical costs throughout retirement, excluding the cost of over-the-counter medication, long-term care and most dental services.1 

Q&A: Common questions plan participants ask

 How much home insurance coverage do I need?

Roughly two-thirds of U.S. houses are undervalued for insurance purposes, according to a 2008 survey from consultant Marshall & Swift/Boeckh. This means these homeowners wouldn’t have enough coverage to fully repair or rebuild their houses after a disaster. Basic policies cover the costs of repairing the house, as well as medical expenses resulting from accidents on your property. But many standard policies exclude coverage for damage resulting from flooding, insect damage, windstorms or earthquakes. Most homeowners should choose a replacement-cost plan, that covers the actual cost to repair or rebuild the home with similar materials, rather than one that pays market value. Expanding liability coverage, especially if you have a home-based business, and documenting your personal belongings and valuables, is worth considering as well. Visit www.insureuonline.org for more tips and resources.

 Quarterly Reminder:

 Many CDs mature in October

Be on the lookout for notices from your bank about certificates of deposit (CDs) that may be maturing in October. Generally, you will have to provide instructions to the bank if you want to do anything but roll the money over into a new certificate at prevailing interest rates. This could limit your ability to use the money for other purposes, since most CDs carry a hefty charge for early withdrawals.

Tools & Techniques: Resources to help guide your retirement plan

Social Security payments via debit card

In 2009, the U.S. Social Security Administration (SSA) introduced a debit card that you can use to access your Social Security benefits. With the Direct Express® card program, the SSA deposits federal benefits payments directly into your card account. You can use the card to make purchases, pay bills or get cash at thousands of locations. The Direct Express card is available to anyone receiving Social Security or Supplemental Security Income payments, and you don’t need to have a bank account to qualify. Learn more at www.ssa.gov.

Corner on the Market: Basic financial terms to know

Early withdrawal penalty

If you withdraw amounts from your IRA or other qualified retirement plan before reaching age 59, the amount will be subject to ordinary income tax as well as a 10% early withdrawal tax (also called a “premature” distribution), unless one of a number of exceptions applies. The 10% tax is reported on the appropriate line of IRS Form 1040.


1 Assumptions: The couple signs up for Medicare at age 65 and has no employer-provided retiree health insurance. Men are assumed to live for 17 years until age 82, while women are expected to spend 20 years in retirement until age 85. The calculation takes into account Medicare’s cost-sharing provisions including deductibles, coinsurance, and other likely out-of-pocket costs for Medicare Parts A, B, and D. Source: Fidelity Investments, May 2012.

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