Preparing for healthcare expenses and unknowns in retirement

Healthcare continues to rapidly change and evolve, but one thing is certain. Most retirees significantly underestimate what those expenses will amount to when they are planning for their retirement.

This article contains a lot of useful information about healthcare expenses and strategies for meeting those expenses, particularly in retirement.

One statistic in particular jumped out at me – there is a 70% chance that retirees will need some form of long-term care. It doesn’t matter whether the person is married or single, long-term care is a virtual certainty.

That’s one of the reasons why we continue to believe in the purchase of late-in-retirement income through QLAC or a deferred income annuity that will pay out 100% of the time.

How to manage tax-efficient drawdowns in retirement

The phrase “tax-efficient withdrawals” is somewhat of an oxymoron that should be avoided whenever possible.

Income, whether it be Social Security payments, pension, interest, dividends, IRA distributions or annuity payments, is taxable under different formulations.

An investor needs to look closely at these different income sources to plan for optimal efficiency. To be effective, that goal must consider the following:

  1. The income ought to be dependable and come from true “income” sources.
  2. The after-tax income objective must be balanced against the objective of after-tax wealth preservation.
  3. Look not only at taxes, but also at fees, which can reduce an investor’s net returns.
  4. Adding income annuities to the mix with certain tax benefits should be part of the answer.