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How fixed indexed annuities can help take the sting out of health care costs

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According to the Centers for Medicare & Medicaid Services, Americans' health care expenditures totaled $4.3 trillion in 2021 and are expected to rise to over $4.4 trillion in 2022. That's $13,261 per person.

With prices increasing year to year, managing health care expenses can be one of the biggest challenges to a financially secure retirement. Fixed indexed annuities can help, because they can provide a predictable source of income to pay health insurance premiums or other costs.

Any way you look at it, a person's future health is one of retirement's biggest unknowns, making it hard to estimate how much money to budget for health care expenses. Because these costs also rise at different rates, there's not a single inflation rate that applies to all of them. In addition, how much retirees pay for insurance premiums, deductibles, prescription drug coverage and nursing care is affected by other variables, including their:

  • Health coverage
  • Age
  • Gender
  • Health conditions
  • Retirement income
  • State where individual retires

However, one thing is certain. Health care will continue getting more expensive. According to HealthView Services, a maker of health care cost projection software, the cost of health care is expected to continue its historical trend, rising 2 to 2.5 times the rate of U.S. inflation. Consider these projected health care costs couples retiring in 2021 could pay out-of-pocket during their retirement years.


Total projected lifetime out-of-pocket health care costs

Retiring at age 65  Total Cost Future Value
65-year-old couple $662,156
55-year-old couple $1,035,980
45-year-old couple $1,718,977

Health care cost projections include Medicare Parts B and D, Medicare Supplement Insurance Premiums, Dental Premiums, out-of-pocket expenses and inflation. Calculations assume that a healthy male and female, both aged 55, will live to 87 and 89 respectively, and take into consideration a combined future modified adjusted gross income.

Fixed indexed annuities can help manage the rising cost of care

Managing health care costs without depleting assets can be a challenge for some retirees. Fixed indexed annuities can help people manage expenses they know they'll have while giving them the flexibility to meet future needs.

A "retirement paycheck" that's guaranteed for life
Lifetime withdrawals from an income or benefit rider can provide a guaranteed stream of income for predictable expenses like premiums, copays, dental and vision care. Keep in mind that rider payout factors increase with age, and the value of the benefit base used to calculate withdrawal amounts typically increases the longer the contract is held.1

Protection and growth potential
A fixed indexed annuity's indexed crediting strategies earn interest based in part on the upward movement of a stock market index.2 The annuity's Accumulated Value is protected from loss due to market downturns. This combination of protection and growth potential can be important when considering costs that are likely to increase regardless of economic conditions.

Access to money with annual free withdrawals
Most fixed indexed annuities allow a yearly free withdrawal amount.3 Required Minimum Distributions are IRS mandatory withdrawals and are generally considered part of the free withdrawal. Keep in mind that withdrawals in excess of the free amount will be subject to a Withdrawal Charge and Market Value Adjustment where applicable, and will reduce a rider's Lifetime Income Withdrawal amount. 

Confinement provisions
Most fixed indexed annuities offer confinement provisions, either as a waiver of withdrawal charges in the base contract or as a rider benefit. Rider benefits typically provide a significant increase in the Lifetime Withdrawal amount for a set period if certain conditions are met. While not the same as long-term care insurance, these provisions can help defray the cost of care in a nursing home or other Qualified Care Facility. Hybrid annuities that offer long-term care benefits are also available.

It's important to consider all expenses as well as income and retirement goals. Fixed indexed annuities can help people retire confidently to the dream they've nurtured for years.

This information is brought to you by Athene — where innovative annuity solutions and unique interest crediting strategies are powered by unconventional thinking.