Annuities and healthcare costs in retirement

In a recent Nationwide Retirement Institute^®1 survey, 71% percent of people said that one of their biggest fears in retirement is their healthcare costs getting out of control. Yet only 38% reported having a plan in place to save for those expenses. 

When we retire, many of us will lose the employer-paid health insurance we rely on during our working years. Because of the complex nature of Medicare and the gaps in coverage that can exist, we may need to have an alternative way to cover these expenses as we age. One possible strategy is to use an annuity to create a stream of income in retirement that can be earmarked especially for healthcare costs.

An annuity is a long-term contract from an insurance company where you invest your money. In return for your investment, you get income in the form of regular payments through annuitization or a guaranteed lifetime income benefit that is available for an additional cost.

You can choose from a variety of annuity types to best meet your planning needs and investment style, including:

• Variable annuities offering long-term opportunity for growth if you’re comfortable with the risks that come with the market’s ups and downs²
• Registered indexed-linked annuities offering growth potential through index strategies which follow market performance while limiting exposure to downside risk²
• Fixed indexed annuities offering protection for your principal as well as the opportunity for gains through market index performance²
• Fixed annuities offering a guaranteed interest rate for modest growth without market participation
• Immediate annuities offering guaranteed income for the rest of your life or a set period, plus the option to withdrawal money in the first year

Using an annuity to cover retirement healthcare

The same income stream that can make annuities useful for retirement can also be used to cover your healthcare needs. In this case, you would earmark the income for your healthcare expenses, and either save or reallocate those funds for other expenses in years where they’re not needed.