Building healthcare costs into retirement planning

Health care is expected to be one of, if not, the largest expense a retiree can have, hence why many put off health care planning.

It can also be a mentally and financially draining topic for those who haven't retired yet. Given rising expenses that are driven by a number of factors, every retirement plan is only complete when it's made room for health care needs. As more individuals consider lifelong work in order to stay afloat, health concerns and health-care costs should be an agenda item at each year's meeting with your financial adviser - no matter how old you are.

This means these conversations should be happening with a financial adviser years before you feel like it's a necessity.

In order to make your planning experience as seamless as possible, here are some guidelines and resources for estimating your needs and expenses, and provide you the opportunity to weigh all of your options.

You must first be aware of all of the issues that are surrounding health-care costs. These issues include but are not limited to: what issues you could potentially face before retiring, how you can prepare for costs and what adjustments you may need to make regarding your spending during retirement. While some people may think they can depend solely on Social Security benefits, it's important to remember that they are only meant to be additional to what you've already saved.

When retirement nears, it will be up to you to decide when exactly you want to retire, begin using your Social Security and how you will obtain cash flow throughout retirement.

Whether you are in good health or not is also a very important step toward your health care planning goals. For those who may have poor health, discretionary spending on items or experiences, like vacations may have to be sacrificed in order to take care of sudden health care expenses, an outcome that can be prevented in most cases.

A useful tool to determine the current state of your health would be the MedicareNewsWatch.com website. It defines your health in three states - excellent, fair, or poor - in terms of number of doctors' visits per year, number of hospital admissions, and number of prescriptions. Determining how large of an impact your health will have on your insurance is great for preparing and budgeting for unexpected costs.

As you get older and finally reach retirement, it's normal for your health care costs to continue to increase. You may need new or more medications, get sicker and have to visit the hospital more than anticipated. While it's true that the healthier you are going into retirement means that you'll spend less on health care, your life expectancy will also increase which will result in paying for health care longer.

Although, once you turn 63 it's time to focus on projecting the actual costs. Since there are no health care discounts for couples, the costs are doubled. Topics worth reviewing are Medicare, including premiums and copays, out-of-pocket costs for items Medicare doesn't cover and costs for unexpected events like a major health crisis such as a life-threatening illness.

Turning 63 is the perfect time to start researching which Medicare plan would best fit you. Consider creating a step-by-step calendar of the dates involved in the signup process for various parts of Medicare.

Medical expenses can be as expensive as $6,500 per person once they begin their retirement. Some experts believe that a 65-year-old couple will need as much as $315,000 for overall medical expenses in retirement without including long-term care.

The plan you make now is not a plan you'll have for the rest of your life as variables are constantly changing. But it's a step in the right direction and into ensuring that you have gifted yourself a peaceful retirement.

• Craig Bolanos is CEO and Founding Partner of Wealth Management Group in Inverness and Downers Grove.