Whether retirement is a long-range goal or a near-term prospect, your most valuable asset is time. The choices you make now can help you get a head start on having sufficient resources for the health care you may someday need.
The rise in the cost of care as you age is pronounced at each stage along the way. This can be discouraging for those in the middle of their working life, as expense projections compound into some truly daunting numbers.
For younger savers time is truly on your side, as your human capital from now until retirement represents your most valuable asset in addressing care and expense concerns for the future.
By taking a long-term planning view and being strategic, you can invest and grow assets, avoid costly missteps, and help drive outcomes for the future.
Today’s benefit packages include a variety of powerful resources that can bolster your physical and financial fitness and build a strong base for the future.
In addition to traditional benefits such as retirement savings and medical benefits, more employers are offering employees expanded options, including accident and critical illness coverage, life insurance, and group legal plans. With an increased focus on managing health care costs, employers are also offering wellness programs that address physical and emotional well-being, and in some cases offer incentives to promote healthy behavior changes.
The challenge of affordability remains a top issue for most Americans. For those still in their working years, many have health care benefits through their employer, often with important annual elections to make. Most employers offer both a traditional higher-cost, low deductible option and a lower-cost high deductible option. Understanding the impact and overall cost of each option often depends on your family and health situation. Many employers have tools to help evaluate these options and make a more informed decision.
If you and your family are not heavy consumers of health services, consider a high deductible health care plan that provides the added benefit of the companion Health Savings Account. This tax-advantaged savings account can serve as an invaluable tool in building a tax-efficient nest egg for future health care costs.
If your employer offers a Roth option for 401(k) savings, you should consider the benefits. Rather than deferring taxes on assets, a Roth allows the holder tax-free withdrawals of assets in retirement. For younger workers the tax savings on compounding returns can be significant. In addition, using tax-free withdrawals from your Roth 401(k) or IRA will help reduce your taxable income used in determining Medicare premiums.
Protecting your human capital, the present value of your future wages, becomes an important factor as you build wealth and start a family. An early death or disability can be devastating to families who are unprotected. One in four of today’s 20-year-olds will become disabled before they retire.2 For working-age adults, especially those with specialized skills (physicians, pilots, nurses, athletes), a disability can be catastrophic, interrupting your paycheck and permanently altering your long-term wealth. Employer-provided group life and disability insurance options are often a smart choice in your younger years.
Heightened privacy concerns make it nearly impossible to help a loved one who is incapacitated or dealing with an unexpected death without proper legal documents such as a health care directive, durable power of attorney and a will. Even young adults still on their parents’ health care plan should have a health care directive starting at age 18. Young adults with simple estates and young families just starting out can often benefit from employer-provided legal services to establish these basic legal documents.
Read more from our RBC Wealth Insights report Taking control of health care in retirement
1. HealthView Services, 2017. 2. Fact Sheet, U.S. Social Security Administration, 2013.
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