Create a plan to supplement Social Security and Medicare
Social Security and Medicare are important benefits. They provide a good foundation for your retirement — but by no means will they take care of all your financial needs.
One suggestion is that you may need 85 percent of your pre-retirement income to maintain your current standard of living while in retirement.1
Considering that Social Security benefits will likely provide only a portion of your income, you'll need other sources to make up the rest.
And while Medicare covers some of the cost of healthcare, you're still responsible for the remainder. Expenses not covered by Medicare include:
- Vision and dental care
- Long-term care
These types of out-of-pocket healthcare expenses could be substantial. According to one study by the Employee Benefits Research Institute, for a couple who retired at age 65 in 2012 to have a 75 percent chance of meeting all of their out-of-pocket healthcare costs during retirement, they may need $227,000.2
Find out where you stand
Are you on track to meet your retirement goals? Or are you at risk of falling short? Use our online calculator to find out. The calculator will estimate your Social Security income and show you approximately how much monthly income you'll have when you retire.
Fortunately, you have time before retirement to start making up any shortfall. For instance, you can increase your retirement plan contributions now to help cover your costs later.3 You can also consider other ways to help yourself. Health savings accounts and long-term care insurance are two options.
More from this issue of The Principal Retirement NewsletterSM:
1 Assuming pre-retirement gross income of $40,000. Aon Consulting 2008 Replacement Ratio Study.
2 Savings needed for Medigap premiums, Medicare Part B and Part D premiums and out-of-pocket prescription drug expenses. Assumes median drug expenses and excludes long-term care. Employee Benefit Research Institute, “Savings Needed for Health Expenses for People Eligible for Medicare,” October 2012.
3Online contribution changes are not allowed for all retirement plans. If you are not able to update your contribution at principal.com, see your human resources contact.