Women, Healthcare and Retirement Planning

Factoring in rising health care costs is an essential part of the retirement planning equation. It takes even more priority for women, who face higher healthcare expenses as they grow older.

A 2016 report from HealthView Services found that a 65-year-old woman retiring now will spend approximately $314,673 on healthcare in retirement. That's 18 percent more than a 65-year-old man would pay.

This is just one more thing that puts women at a disadvantage for making their retirement savings stretch further.

For women who are looking for retirement security, finding ways to mitigate the impact of future healthcare costs is a priority. Here are some practical things to consider:

Save, save and save some more. If you're concerned about healthcare taking a bite out of your retirement income, you may want to take a second look at your target savings number, namely look at what you think you're going to need in retirement and add another 10 to 15 percent to the total. If you plan with a higher than average expense figure and save a little more aggressively, then you have a better chance of success.

Evaluating where you're investing your retirement dollars is the next step. It's essential that women maximize retirement contributions from their employer. Be sure to contribute enough to qualify for the full company match, if one is offered.

A health savings account is another investment avenue women should explore. Funds in an HSA grow tax-free and can be withdrawn tax-free when used for qualified health care expenses, which can give women an edge in terms of their life expectancy.

As women live longer and are likely to be single later in life, they'll be filing at single tax rates. Having a tax-free source of funds, such as savings in an HSA, Roth IRA or Roth 401(k) can make a big difference.

Understand the financial implications of Medicare. Medicare can be a help with managing healthcare costs in retirement, but there is a financial toll associated with this coverage, most notably the Part B premium.

Medicare premiums are based on your prior year's income and you could be in for quite a shock the first year of retirement when you see how big the monthly cost is. Women earning high salaries going into retirement should be aware of how that could affect their health care costs. Unless something changes drastically, Medicare's model for income-related premiums will continue to charge higher earners significantly more for their Part B coverage.

For example, as of 2018, the standard monthly premium is $134. A single filer earning between $160,000 and $214,000, however, would pay $348 per month. When you add in the costs of a supplemental plan and prescription drug coverage, the yearly total could approach $10,000.

Women need to keep that in mind if they're contemplating working beyond age 65 or if they're planning to execute a Roth conversion in their first year of retirement. A Roth conversion could reduce your taxable income in future years but it can trigger a much larger tax bill in the short term, which would impact your Part B premiums.

Plan now for long-term care and Social Security. Long-term care can add substantially to your healthcare costs in retirement and women should think about insuring against it. Purchasing long-term care insurance sooner rather than later is ideal, as like with life insurance, it is generally less expensive the younger and healthier you are.

Generally you should look into long-term care insurance between the ages of 50 and 60, before the cost becomes too prohibitive. But first, women should ask themselves whether they really need this type of insurance. Age, health history and family support are all factors in deciding whether long-term care insurance is needed or not. Women who have few health issues and substantial investments may be able to self-insure.

Social Security, like Medicare, can reduce some of the financial pressure women may feel as they enter retirement but the timing is critical. Delaying Social Security, if possible, is something women should consider. Women who can hold off on taking Social Security until age 70 would see their monthly benefits increase by ~8 percent, and you'd have that higher benefit for the rest of your life. Keep in mind though, that planning for what you will do is not something that should be done last minute - integrating when to take your Social Security benefits with your overall financial plan is something that women should start thinking about prior to age 62 (the earliest benefits can start on your own record).