Retirement is one of the most significant financial goals most Americans will save for, beginning early in most workers’ careers.
However, the rising cost of living has been exacerbated by inflation, making it difficult for workers to save consistently and for seniors to get by on a fixed income. Though retirees have a guaranteed income through Social Security, many find that payments can’t keep pace with rising costs of everyday life.
Though the longevity and solvency of Social Security remain murky, the age at which retirees begin to claim benefits can significantly impact their monthly income and the quality of life in their golden years.
JP Morgan explains why Social Security benefits play a crucial role in retirement and how to save for the anticipated rising healthcare costs as seniors age.
The age Americans claim Social Security is crucial for successful retirement
Social Security is the lifeline for many retired Americans, serving as the only universal source of guaranteed income, regardless of occupation or age. However, the difference between claiming benefits at 62, 67, and 70 can have significant implications for retirees.
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More on retirement strategies:
- Tony Robbins warns Americans on Social Security mistake to avoid
- Dave Ramsey has blunt words on Medicare for retired Americans
- Suze Orman offers candid advice on Social Security for retirees
However, the “right” time to retire and claim social security depends on each individual’s financial standing and personal health.
At 62, the likelihood of men reaching age 70 is 85% and 91% for women. However, the likelihood of reaching age 81 drops to 53% for men and 66% for women, indicating that life expectancy is a major factor in determining how seniors should approach retirement savings and Social Security payments.
HSAs may be the key to covering healthcare expenses in retirement
Though leisure spending decreases throughout retirement, housing, and healthcare costs rise as seniors age.
According to JP Morgan analysis, the average senior aged 60-64 spends $74,600 annually. However, seniors 75-79 only spend $58,660, the majority of which goes toward housing and healthcare costs.
, meaning tax incentives are offered on contributions, earned interest, and withdrawals.
Contributions are made with pre-tax dollars, which lowers your taxable income for the current year. If contributions are made automatically through employer payroll, they aren’t subject to Medicare or Social Security taxes, either.
funds taken out of an HSA account aren’t subject to taxes as long as they are used for designated medical expenses.
HSA funds also roll over each year, meaning that earnings on the account can grow tax-free for decades.
Since healthcare related costs are often significant for older Americans, it’s a good idea to plan ahead so you’re not caught off guard when facing illness. Having a well-funded HSA can help make healthcare costs less stressful during your retirement years.
