Save Thousands of Dollars by Delaying Retirement Just 5 Years

NEW YORK (MainStreet) — This is not about Social Security. While retirees can draw benefits at age 62, delaying benefits to full retirement age – generally around age 65, depending on your date of birth – will boost your monthly Social Security check. But there is another way to pad your retirement budget, and it's all about health care.

Medical expenses for a 65-year-old retired couple will cost an average of $220,000 during retirement, according to Fidelity Benefits Consulting research. That's a big number, but surprisingly that estimated cost did not rise in the past year, due to a number of factors including lower-than-expected Medicare spending and long-term savings on prescription drugs.

No doubt about it, health care is one of the largest expenses in retirement. Deciding when to retire can impact that cost. Retiring just three years earlier, at age 62, a couple could expect to pay $17,000 per year in health insurance premiums -- for the period prior to Medicare covering kicking in -- as well as out-of-pocket expenses. That will boost the total ticket for retirement healthcare to $271,000.

Delay life after work until age 67 and that same retired couple could save more than $70,000 – paying an average of $10,000 a year for health care and reducing their estimated costs during retirement to $200,000.

"We understand that some people don't have a choice in when they retire," says Brad Kimler of Fidelity. "Sometimes health issues or someone's occupation plays a role. So it's critical that people plan well in advance for the considerable cost of health care by adding it into their overall retirement planning discussions."

The estimated health care costs exclude nursing-home care and considers only traditional Medicare insurance coverage.

"Rising health care expenses are forcing people to make educated decisions now more than ever, ranging from the services they utilize to the age they choose to retire," adds Kimler.

Fidelity's health care cost estimate rose an average of 6% per year for nearly a decade, then began declining in 2010.

"However, increases in aggregate Medicare spending have grown at a faster rate because of a larger number of beneficiaries," the report says. "While the current trend of lower spending per enrollee has had a positive impact on Medicare costs, the growth in Medicare enrollees over the next few years is expected to continue to strain Medicare-related resources."

--Written by Hal M. Bundrick for MainStreet

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